USD/INR: Rupee Falls Tracing Equities Lower, Reliance Halts Deal

  • Indian Rupee (INR) falls versus stronger US
  • Indian equities drop 1%
  • US Dollar (USD) rises on hawkish Fed speak
  • US PMIs due tomorrow

The US Dollar Indian Rupee (USD/INR) exchange rate is heading higher after a flat finish to the previous week. The pair closed last week at 74.33 approximately the same level that it had started the week. At 11:00 UTC, USD/INR trades +0.14% at 74.43.

The Rupee trades under pressure as domestic equities fall lower. Indian shares drop over 1% dragged lower by Reliance Industries. The heavyweight decided to pull the plug on a $15 billion stake sale in its oil to chemical business to Saudi Arabia’s Aramco. The stock fell as much as 4% in early trade. Also dragging the index lower was a 16% fall in Paytm on its second day of trading. The IPO last week was also a disaster with the stock tanking 27% on its debut.

Whilst equities are falling lower, oil prices are also weakening offering some support t o the Rupee. West Texas Intermediate fell 6% last week and trades 0.5% lower at the start of this week on as COVID cases rise in Europe and as global leaders discuss releasing strategic oil reserves.

The US Dollar is trading higher across the board on Monday. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.07% at the time of writing at 96.10 back up at the 16-month high.

The US Dollar is extending gains from the end of last week when Fed speakers suggested that the Fed could accelerate the pace at which it tapers bond purchases  as the US economic recovery gains pace. This would mean that US interest rates could be hiked sooner.

COVID cases in Europe are also on the rise boosting flows into the safe haven US Dollar. Austria has started its fourth lockdown and there are growing concerns that other countries could follow.

This week is holiday shortened week due to the US Thanksgiving holiday on Thursday. However, there is plenty of data events to keep investors attention earlier in the week. Whilst today is slow tomorrow sees the release of PMI numbers followed by inflation data and the minutes from the latest Fed meeting on Thursday.

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