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Market Commentary
Rupee Wrap - May 4, 2022 - Reliance Securities
Posted On : 2022-05-04 19:10:11( TIMEZONE : IST )
Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities
The Indian Rupee appreciated against the U.S. Dollar on Wednesday as RBI's surprised the markets by a rate hike.
The Rupee ended at 76.41 a dollar compared with 76.52 close on Monday.
In a surprise meeting between May 02 and May 04, the RBI raised the policy repo rate by 40 basis points to 4.4% and CRR will be hikes by 50 basis points to 4.5% effective May 21.
The CRR hike would withdraw Rs.87000 crore ($11.4 billion) from the local banking system.
The bank governor said in a statement that the decision comes while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.
The Rupee was also supported amid foreign funds flows into the local assets through the LIC IPO which opened for subscription today.
NDF is currently trading at 76.34/39 this Wednesday evening vs. a close at 76.39 on Tuesday.
However, investors remained cautious ahead of Fed's decision tonight. Asian and EM peers remained mixed this Wednesday evening.
Technically, the USDINR Spot pair closed marginally above an important pivot of 76.40 level and sustained trade above could push the pair to the resistance zone at 76.60-76.75 levels. However, a trade back below could pull the pair to the support zone at 76.22-76.03 levels.
Indian government bond yields surged higher, with the 10-year yield posting its biggest single-day jump in over five years, after the central bank surprised markets today by hiking the key policy rate while also raising banks' Cash Reserve Ratio in an unscheduled monetary policy meeting.
The benchmark 6.54% bond ended at yielding 7.38%, its highest since May 13, 2019, against 7.12% on Monday.
The U.S. Dollar is trading flat to marginally weaker, while the Euro, the Sterling and the Yen have is trading flat to marginally stronger Wednesday evening in Asian trade ahead of the fed meeting tonight.
Technically, if the Dollar Index continues to sustain above an important pivot at $103.50 then the greenback could continue it upside momentum up to the resistance zone at $103.80-$104.05. However, a break down below the pivot could pull the greenback back to the support zone at $103.15-$102.80.
