The Indian rupee opened strong on Monday, August 29, 2011 tracking a firm rebound in domestic equities as well as surge in the European single currency versus the US dollar overnight. The domestic currency commenced higher by around 21 paise at Rs. 45.95 per dollar, slipped to a low of 45.99, before hitting a high of 45.78 so far during the day. However, month end dollar demand could cap gains in the local unit. In the spot currency market, the Indian unit was last seen trading at 45.82, higher by around 34 paise or 0.74% as compared to previous close at 46.16.
Firm Asian shares triggered a recovery in battered Indian shares in early trade. The end of the standoff between the government and anti-corruption activist Anna Hazare during the week-end aided initial rally as the barometer index BSE regained the psychological 16,000 mark. Most Asian stock markets also gained after Federal Reserve Chairman Ben Bernanke on Friday said that the US economic recovery will accelerate and the central bank has more means to prop up growth if appropriate.
Foreign institutional investors (FIIs) provisionally sold Indian shares worth net Rs. 226.25 crore on Friday, with total FII in August 2011 registering a massive outflow of Rs. 12393.44 crore (till 26 August 2011), as per data from the stock exchanges. At the time of writing, India's key benchmark BSE Sensex surged around 411 points at 16259.88 while S&P CNX Nifty is higher by almost 121 points at 4868.50.
The euro climbed to its highest level in almost seven weeks in early hours of Asian trades today, extending its rally post investors slowly digesting Bernanke's speech at Jackson Hole on Friday. Fed Chairman Ben Bernanke said that the economy is not performing badly enough to warrant any additional stimulus at present, while further adding that the central bank has a range of tools to stimulate the economic recovery. He did not directly signal a QE3 during the Jackson Hole Symposium, but instead noted that the upcoming September FOMC meeting will be extended to 2-days instead of 1-day in order to have 'detailed discussion' on the economy. The Greenback came under considerable pressure against the basket of currencies as appetite for high-yielding currencies gained pace after the Bernanke speech was gradually digested. US dollar tumbled to be currently quoting at 1.4534 versus the euro, having rallied 1.4328 immediately after Bernanke failed to announce a QE3 that could depresses Treasury yields.
The US dollar index which measures the performance of the U.S. unit against a basket of six currencies is down by 0.13% at 73.72. Among Asian currencies, the Taiwan dollar gained 0.12% at 29.02 while the South Korean won is up by 0.74% at 1073.80 and the Indonesian Rupiah is higher 0.30% at 8538.75 as against the US dollar.
In commodities, gold regained more than half of its early week plunge as it rallied to as high as $1827.79 an ounce on Friday, bolstered by Dollar weakness against the majors. Meanwhile, Crude oil climbed over 3.2% from its low of $82.96 to a high of $85.68, supported by strong cues from Wall Street. The key economic releases scheduled for today's session include German Prelim CPI and USD Personal Spending, Personal Income, Pending Home Sales.
In the domestic currency futures market on the NSE, the 26 August-2011 contract expired on Friday. The contract at settlement was at 46.05, higher by around 29 paise or 0.6% versus previous Friday's close at 45.76. Meanwhile, the front month 27th September 2011 contract opened on Monday at 46.18, higher than spot market rupee. The contract hit an intra day high at 46.18 and registered a low at around 45.91 so far during the day. Meanwhile, euro- rupee contract remained almost unchanged from 66.65 in the previous session. The JPY/INR contract is down 0.37% at 59.76 from 59.98 while the GBP/INR contract lost 0.17% at 75.19 from 75.32 at close on Friday. At the time of writing, the NSE as well as MCX September 2011 USD/INR contract, was trading at around 45.93, lower by around 34 paise or 0.73% as compared to previous close at 46.26.
