Finance
The Indian rupee fell against the US dollar on Thursday as concerns about a European lender weighed on risk sentiment, but it managed to stay above a previous resistance level of 82.80. The rupee finished at 82.73 per dollar, up from 82.5950 at the previous close. Traders reported that foreign and state-owned banks sold dollars near the 82.80 level.
Some speculated that the Reserve Bank of India may have intervened to stop the rupee’s depreciation, as the central bank has previously protected those levels. Despite the currency’s failure to fall below 82.80-83, traders added more long positions in USD/INR futures as risk sentiment remained fragile.
”There are higher chances of 83 getting breached and the rupee weakening now,” said Jigar Trivedi, senior research analyst, currencies and commodities at Reliance Securities.
There is likely going to be a lot of safe-haven dollar demand due to the turmoil in global markets, Trivedi added. Asian shares declined, while the Chinese yuan and the Indonesian rupiah eased on fears of a banking crisis in U.S. and Europe. Swiss lender Credit Suisse tanked on Wednesday after its largest shareholder said it could not provide further support to the bank. The Swiss central bank had to come to the rescue to prevent a wider contagion. This came on the heels of U.S lender Silicon Valley Bank’s collapse.
These market events have caused investors to reconsider the magnitude of rate hikes expected from European and American central banks at their upcoming meetings. Later in the day, ECB policymakers meet, and earlier bets of a 50 basis point (bps) increase have been scaled back. Meanwhile, bond yields in the United States have recovered, with the 2-year yield trading at around 4.024% after falling to 3.9750% overnight. Rupee premiums increased, with the 1-year yield rising to a six-week high of 2.40%.
Source:FE
