The rupee ended lower as a rise in crude oil prices coupled with strength in the US$ weighed. It is expected to open lower today while a continued surge in oil prices could see the rupee testing new lows • The US$ continued to consolidate against major currencies as investors remain cautious ahead of the Fed’s September monetary policy meeting . The Fed is expected to raise interest rates by 25 bps in this meeting. Gains over JPY were countered by losses against the GBP and Euro. We expect the Euro to continue to remain strong against the US$ while any dovish hint from FOMC could see further sharp gains in common currency.
Government bonds declined as yields rose amid a decline in the rupee. Crude oil has breached $ 80 / bl and is currently trading at highest levels since November 2014 • US treasury yields rose to 3. 10 % due to a rise in crude oil prices coupled with expectation of rising costs in the US due to import tariff. However, any dovish signal by the Fed could see a sharp reversal in yields as well as.
Currency futures on NSE
The dollar - rupee October contract on the NSE was at 73. 01 in the previous session. October contract open interest increased 66. 81 % in the previous session • We expect the US$INR to find supports at lower levels. Utilise downsides in pair to initiate long positions.