rupee rate today: Rupee sheds gains to end steady as equities slide, dollar strengthens; all eyes on Fed statement

NEW DELHI: Mirroring the move in domestic equity indices, the rupee surrendered early gains and settled flat against the US dollar on Monday as traders squared off existing bets on the Indian currency ahead of the Federal Reserve’s monetary policy statement on Wednesday, dealers said.

Global strengthening of the US dollar ahead of the all-important policy statement also turned domestic currency traders risk-averse.

The partially convertible rupee settled at 75.7650 to a dollar on Monday, unchanged from the previous close. The Indian currency had notched up some gains earlier in the day, opening at 75.6350/$1 and then moving in a band of 75.6275-75.7675 per dollar.

With inflationary pressures showing no signs of abating in the world’s largest economy, the US Federal Reserve is expected to signal a tighter monetary policy at the end of its two-day meet on Wednesday.

Consumer price inflation — one of the key metrics used by the Fed while determining the course of monetary policy — jumped to a near 40-year high in November, printing at 6.8 per cent YoY. The data was released after Indian trading hours on Friday.

A hawkish tilt by the US central bank would likely lead to higher bond yields and a stronger currency in the country, diminishing the appeal of riskier emerging market currencies such as the rupee.

Foreign portfolio investors have already begun to express jitters about the impact that a stronger dollar may have on the rupee by embarking on a large-scale selling spree in domestic equities. FPIs have net sold over Rs 60,000 crores in October and November, and so far in December, the momentum does not seem to be fading.

The dollar index, which measures the greenback against a basket of six major rival currencies, strengthened to a high of 96.45 on Monday as against the previous close of 96.10.

“There is no conviction about holding on to existing positions in the rupee,” a dealer with a foreign bank said on condition of anonymity.

“If you look at the movement in stocks and rupee, you can understand exactly what is happening. The clear-cut global theme is higher US interest rates – the inflation momentum is too strong to ignore. FPIs are already selling, and if we go back to a situation of low domestic growth and a stronger US dollar, we will see a quicker-than-expected depreciation in the rupee. The only factor that can stem that will be inclusion in a global bond index,” he said.

On Monday, the 30-share pack Sensex tanked points or 503.25 per cent to close at 58,283.42. Its broader peer Nifty50 bled 143.05 points or 0.82 per cent to 17,368.25.

Sovereign bonds ended steady on Monday as traders stayed on the sidelines ahead of the release of domestic CPI inflation data. The data is scheduled for 5:30 pm Monday.

The 10-year benchmark 6.10 per cent 2031 paper settled unchanged from the previous close at 6.37 per cent yield.

The retail price gauge is seen around 5.0-5.2 per cent in November, up from 4.48 per cent in October and higher than the Reserve Bank of India’s medium-term target of 4.00%. The central bank’s mandated range for CPI inflation is 2-6 per cent.

A combination of factors such as an unfavourable base effect and a hardening of global commodity prices over the last few months are seen pushing up India’s CPI inflation in the coming months.

The RBI, however, has reiterated its commitment to reviving economic growth sustainably while projecting an easing of retail inflation from the start of the next financial year.

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