The rupee was traded with a weaker undertone on Monday and registered a low of 75.39 as the dollar moved up sharply against the Japanese Yen and investors are of the view that the US Federal Reserve may likely begin tapering the massive asset purchases from November. The yen fell to a low of 113.49 in early Asian trades today, the lowest since December 2018. The sentiment for the rupee has significantly weakened after the price of rose sharply on Monday, because a global energy crunch boosted US oil prices with economic activity rebounding from the covid-19 pandemic globally. The yield on the benchmark 10-year Treasury note is trading mostly unchanged at 1.61%.
The single currency clocked a fresh 2021 low of 1.1526 on Wednesday last week. Euro can be expected to post further losses by another bout of buying pressures in the greenback propelled by US yields. Euro is poised to test the 1.1500 level in the near future. The firmer tone in the greenback along with higher US yields continue to undermine the weakness in the euro against the dollar. Euro against the rupee shall remain mostly stable as both the currencies are in a depreciating trend against the dollar.
In the first 9 months of 2021, the rupee has performed better than the other Asian peers. The market expected the rupee’s steady trend to continue till such time, the tapering announcement is made by the Fed. The rising US inflation and tapering concerns sparked the US yields to rise and combined with a steep increase in global oil prices, the huge oversold dollar positions hit the market on breach of 74.50 support to drive the domestic sharply lower and it tested a low of 75.39 on Monday. In the absence of any determined intervention from RBI to stem the rupee’s decline, the currency outlook has turned bearish in the short term. The huge IPOs, portfolio and divestment dollar inflows are expected to come in the next 2 months timeframe and a good recovery can possibly be seen at that point in time. A wide range between 74.00 to 75.80 is our forecast upto the end of December 2021.
UK 10-year bond yield rose more than 1.2175% yesterday, a 2-1/2-year high, its highest level since May 2019 as investors are worried about mounting price pressures in the global economy as well as expectations that major Central Banks might start tightening monetary policy soon.