Indian rupee: the rupee is ahead of major US data; the absence of OMO disappoints the gilts; MPC minutes in sight
The rupee stood at $ 74.89 / 1 on Friday against 74.8600 to the US dollar on Thursday. The partially convertible rupee started the day at $ 74.81 / 1 and then traded in a range of $ 74.69 / 1 to $ 74.94 / 1.
The rupee had strengthened at the start of trade due to an overnight drop in crude oil prices; the first drop in the price of the commodity after six consecutive days of gains.
Crude oil for December delivery on the New York Mercantile Exchange fell $ 0.92 or 1.1% on Thursday to $ 82.50 a barrel. Brent crude, the global benchmark, also fell, with the December contract closing down $ 1.21 to $ 86.41 a barrel.
International oil prices surged in October, with Brent prices hitting more than three-year highs amid concerns over global demand exceeding supply, especially amid a coal and gas shortage natural.
As India is the world’s third largest importer and consumer of crude oil, the tightening in the price of the raw material has raised fears of higher domestic inflation and a worsening trade deficit.
The national currency was spared on Friday, however, as the Dollar Index, which had strengthened sharply earlier in the day, was off its highs.
After peaking at 93.79 earlier today, the dollar index, which measures the US currency against a basket of six major rival currencies, fell to 93.61.
“The USDINR spot has been on a bearish note this week, following the drop in the dollar index and a higher risk appetite. Consolidation could continue even into next week as the focus will be on PMI data Tonight’s US Flash, Reuters expects Flash PMI to be mixed. But if next week’s US PCE data shows price growth is stable, then they will advocate for inflation to be transient, limiting everything. DXY rally. USDINR ATM volatility has been below 5% this week, and the maximum option pain is at 74.50 strike. So even next week we expect the spot oscillates between 74.50 and 75.25. A break of 74.50 could push the spot into the 74.10-74 zone “,
Government bond yields rose today, with the yield on the 6.10% 2031 10-year benchmark paper coming in 2 basis points to 6.36% as traders were disappointed that the Reserve Bank of India has not announced a new round of open market bond purchases, especially after recent bouts of volatility in the market.
Traders also reduced the exposure of their portfolios ahead of the release of the minutes of the October 5-8 Monetary Policy Committee meeting scheduled for later Friday.