Market Commentary on Forex …

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Indian rupee closed marginally higher on Friday, as heavy dollar demand from importers to meet month-end commitments was offset by greenback sales from custodian banks, continuing a pattern of largely range-bound trading.

The partially convertible rupee closed at 60.1025/1125 per dollar, compared with 60.12/13 on Thursday. The unit hit 59.98 on Thursday; it’s strongest since July 14. The rupee continues to be supported by good foreign buying in Indian shares and debt markets, although that was offset by importer demand for dollars.

In the offshore non-deliverable forwards, the one-month contract was at 60.26 while the three-month was at 60.74. The benchmark 10-year 2023 bond yield closed 2bps higher at 8.67%, compared with its previous close, as dealers prepared to shift to the new 10-year benchmark paper, while concerns remained about tight liquidity conditions.

The benchmark five-year swap rate closed up 2bps at 7.89%, while the one-year rate closed unchanged at 8.4%. In call money market, cash rate closed at 8.4/8.45% compared with Thursday’s close of 9/9.1%. The U.S. dollar traded firm against major currencies on Friday, on reports that U.S. demand for long-lasting goods and appliances was stronger in June than markets had expected, however geo-political concerns capped the greenback’s gains.

The Census Bureau reported earlier, that U.S. durable goods orders rose 0.7% in June, beating expectations for a 0.5% gain, after declining of 1% in May, whose figure was revised from a previously estimated 0.9% contraction.

The euro came under pressure in the early European session, after Ifo Institute for Economic Research reported that its German business climate index fell to a 9-month low of 108 this month, down from 109.7 in June.

The Pentagon said on early Friday, that Russia may be set to provide more sophisticated weapons to Ukrainian separatists, which spooked investors, sending them away from the dollar and stocks and into gold in search of safety.

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