Indian Rupee: Improving Risk Sentiment Could Limit Losses

Indian Rupee: Improving Risk Sentiment Could Limit Losses

Dec 03, 2020 03:12 IST capital market

Hopes of start of COVID-19 vaccinations and investors betting on more economic stimulus from Washington is likely to keep risk sentiment optimistic. Dollar floating at multi year lows is also likely to support the Indian unit.

On Wednesday, rupee pared its initial gains to close 13 paise lower at 73.81 against the US dollar. At the interbank forex market, the domestic unit witnessed a highly volatile trading session. It opened at 73.45, pared the gains and finally closed at 73.81 against the greenback, registering a decline of 13 paise over its previous close of 73.68. During the session, the local unit saw an intra-day high of 73.42 and a low of 73.82 against the American currency.

Domestic equity indices ended almost flat after a volatile sessions on Wednesday. The Nifty managed to end above the 13,100 mark and attain record closing high level. While banks and financial shares witnessed profit selling, metal, auto and realty shares were in demand. The barometer index, the S&P BSE Sensex, lost 37.40 points or 0.08% to 44,618.04. The Nifty 50 index rose 4.70 points or 0.04% at 13,113.75, its record closing high. Foreign portfolio investors (FPIs) bought shares worth Rs 357.35 crore, while domestic institutional investors (DIIs) were net sellers to the tune of Rs 1,635.97 crore in the Indian equity market on 2 December 2020, provisional data showed.

Overseas, most Asian stocks advanced on Thursday as investors reacted to the release of a private survey on Chinas services sector activity in November. Investors also monitored developments on US coronavirus stimulus negotiations, as lawmakers race to pass a pandemic relief package before the end of the year. US stock benchmarks finished the session slightly higher on Wednesday. The Dow and S&P 500 gained 0.2%, while the Nasdaq Composite slipped 0.05%. The slight move higher for the S&P 500 resulted in a new record high.

Markets turned positive late in the session after Democratic congressional leaders threw their weight behind a coronavirus fiscal stimulus proposal that has bipartisan support in both chambers of Congress on Wednesday. On Wednesday evening, the House of Representatives unanimously passed a bill that would require Chinese companies to adhere to U.S. auditing standards if they want their stocks to be to be listed on exchanges in the United States. The bill now goes to President Donald Trump, who is expected sign it into law.

Meanwhile, the dollar index which tracks the greenbacks value against a basket of currencies slipped to 2 1/2-year low of 90.987 on Wednesday and last stood at 91.040. The dollar licked wounds at the sharply low levels against a basket of major currencies on Thursday as investors bet that more economic stimulus from Washington and the expected start of COVID-19 vaccinations would support riskier assets.

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