Rupee Weakens To 1-Month Low On Risk Aversion, Dollar Gains Momentum

The US dollar traded near its highest level of the year after driving higher with the U.S. yields and also benefiting from investor's nervousness after the Federal Reserve meet

Rupee Weakens To 1-Month Low On Risk Aversion, Dollar Gains Momentum

The benchmark 10-year bond yield was down two basis points at 6.21 per cent

The rupee weakened to its lowest level on Wednesday, September 29, and bonds rose amid expectations of the US Federal Reserve starting to unwind bond purchases - that boosted the momentum of the American currency.

In the recently held Federal Reserve meeting, top officials concluded that the US economy is exhibiting progress as it continues to show signs of recovery. This indicated that a moderation in bond buying purchase might soon be announced. 

Federal Reserve Chairman Jerome Powell warned that the latest increase in inflation could last longer than expected, according to news agency Reuters. 

The US dollar traded near its highest level of the year after driving higher with the U.S. yields and also benefiting from investor's nervousness after the Federal Reserve hinted a hike in interest rates much sooner than expected. 

The benchmark 10-year bond yield was down two basis points at 6.21 per cent, supported by a decline in global crude oil prices and tracking the U.S. yields, according to Reuters.

Also, oil prices fell for the second straight session as doubts grew over the demand, with COVID-19 cases continuing to rise across the world and reported shortage of petrol in a few regions.
 

Kshitij Purohit, Lead International & Commodities at CapitalVia Global Research Limited:

''The USD/INR pair started the day slightly lower at 73.7950, down 4.50 paise/USD from Monday's close. Rising US rates kept the currency pair confined to the 73.80 barrier level. 

If labor markets strengthen as projected, the Fed may begin hiking interest rates by the end of 2022.

On the domestic front, USD/INR September opened on a flat note and tested resistance around yesterday's high (73.84-73.86), after which we witnessed a minor fall in the prices. But during the second half of the session, prices trimmed all the losses and even closed on a higher note, just below our major resistance level of 73.98-74.00.

If this momentum gets continued in the upcoming session and the currency pair succeeds in closing above 74.00 mark, we may see a continued rally till 74.13-74.15. On the contrary, if prices face rejection from higher levels, we may see support levels get tested in 73.87-73.85 as this zone was earlier acting as a major supply zone.''

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