TODAY’S FOREX REPORT 26/JULY/2013

MARKET HEADLINES

Rupee hits 5-week peak, but off highs on importer dollar demand

The rupee strengthened to a five-week high on Thursday as the RBI’s
measures to drain liquidity started to show impact, although demand for the greenback from importers towards late trade meant the unit closed just marginally stronger.The rupee has now gained for a second session following the Reserve Bank of India’s additional cash draining measures on Tuesday, after its initial steps on July 15 to defend the rupee had failed to have much of an impact.The RBI also paid high yields in its Rs 5,200 crores sale of cash management bills on Thursday, which followed a Rs 12,000 crores sale of treasury bills on Wednesday, showing the central bank’s commitment to drain cash.The partially convertible rupee closed at 59.11/12 per dollar compared with 59.13/14 on Wednesday. The unit rose as high as 58.76, its strongest since June 19.

Sterling dips, UK gilts pare losses after in-line GDP data

Sterling dipped on Thursday while gilts pared losses after data showed the UK economy grew 0.6 per cent in the second quarter of the year, in line with expectations and disappointing some in the market who had positioned for a better number.The pound fell to $1.5331 against the dollar, down from around $1.5371 before the figures were released and staying below Tuesday’s one-month high of $1.5393.Traders also pointed to the fact that the data showed UK gross domestic product remains 3.3 per cent below its peak in the first quarter 2008.British government bond futures pared losses by 20 ticks after the data to stand 4 ticks down on the day at 122.22 at 0831 GMT, erasiing earlier underperformance versus the equivalent German Bund contract. Bund futures pared losses to last trade 5 ticks down on the day at 142.67 compared with 142.58 just before the data.

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