Today, the Indian rupee jumped against the US dollar while sovereign bonds rose after the US currency changed. The Federal Reserve may slow increasing interest rates. The US dollar closed at 82.7250 while 10-year bond yields fell to 7.376 as the rupee increased to 82.20. The prices of bonds are inversely related to yields. The yield fell seven basis points, ending at 7.4424 per cent on 25 October 2022.
At about 109.75, the dollar index hovered near its lowest level in September. The dollar’s decline has been fuelled by wagers that the weakening US economy. Recently, the Fed’s efforts to cool the economy seem to bear fruit as reading showed a contraction in services and manufacturing and fewer new home sales. Also, the recent high US Treasury yield went down to a 10-year yield at 4.02 per cent, about 30 basis points.
“Weak US data has raised prospects of a Fed pivot, resulting in risk on moves across assets. ECB rate decision and US Q3 preliminary GDP estimate will be in focus today,” IFA Global said in a note.
“There is a near-term undercurrent of ‘risk-on’ in equity markets globally triggered by expectations that the central banks will start moderating their rate hikes. The cue has come from Canada, where their central bank raised rates only by 50 bps against expectations of 75 bps. Markets expect the Fed to moderate rate hikes starting in December. Consequently, the dollar index has fallen below 110, and the 10-year US bond yield has dipped to 4.03%. This might nudge FPIs to turn buyers imparting strength to the market. Nifty’s recent range of 17500-17800 looks set to be decisively broken on the upper-end today. Financials, select autos and capital goods are well set to continue their recent rally,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
