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Indian rupee closed slightly lower, retreating from a 3-week high hit last week, as the dollar gained after U.S. Federal Reserve chief Janet Yellen was more hawkish about the U.S. economy, than her European counterpart at the central bankers’ meeting.

Traders remained cautious ahead of gross domestic product data for the April-June quarter on Friday and expected current account deficit numbers sometime this week. The partially convertible rupee closed at 60.5650/5750 per dollar compared with 60.4650/4750 in the previous session.

The recent selling in the rupee came after, the U.S. dollar rose to near its 1-year high against a basket of six-major currencies. In the offshore non-deliverable forwards, the one-month contract was at 60.89, while the three-month was at 61.45.

The benchmark 10-year bond yield closed up 4bps at 8.56%, on continued profit-booking after recent strong gains and on concerns about the outlook for U.S. interest rates. The benchmark 5-year swap rate closed up 3bps at 8.04%, while the one-year rate closed up 1bp at 8.45%.

In call money market, cash rate closed higher at 8.5/8.55% against Friday’s close of 7.95/8%. The dollar traded firmly against major currencies, despite a weaker-than-expected data out of the U.S. housing sector and on rising bets that the Federal Reserve will tighten policy while its counterparts in Europe and Japan are likely to stay loose.

The euro came under pressure, after the Ifo research institute said its German Business Climate Index fell to a more than one-year low of 106.3 this month, missing forecasts for 107 and down from 108 in July. The U.S. Commerce Department said that the new home sales dropped by 2.4% to 412,000 units last month, compared to expectations for an increase of 5.7% to 430,000.

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