By Anushka Trivedi
MUMBAI, March 13 (Reuters) - The Indian rupee declined
on Monday, paring back earlier advances as weak risk sentiment
owing to a U.S. lender's collapse saw equities fall and the
dollar index recover.
The rupee ended at 82.1225 per dollar, having
firmed up to 81.76 in initial trades. The currency closed at
82.04 on Friday.
The rupee, along with Asian currencies, had risen earlier on
bets of a less aggressive Federal Reserve in light of the
Silicon Valley Bank's (SVB) collapse.
However, the dollar index later recovered some lost
ground to trade above 104 levels, while global equities tumbled,
with Indian shares reversing earlier gains to fall 1.5%.
"While U.S. regulators have taken swift action to close the
(SVB) bank and protect depositors, the fear is that there may be
more casualties ahead as the Fed is not yet done with interest
rate hikes," said Jayaram Krishnamurthy, founding partner & COO
at Almus Risk Consulting.
These worries will keep risk sentiment in check and make
emerging market currencies vulnerable, with near-term inflows
likely affected, he added.
U.S. yields tumbled on Monday, with two-year down
30 basis points (bps) to 4.2781% and the 10-year down 13 bps to 3.5543% as bets of a half a percentage point rate
hike from the Fed faded. Futures are now pricing in a 25 bps hike at the U.S. central
bank's March 21-22 meeting, after the probability of a 50 bps
hike had jumped last week on Fed chair Jerome Powell's hawkish
comments.
Fed rate is seen peaking at just under 5%. As the banking crisis unfolds, Goldman Sachs analysts
predicted the Fed would not raise rates next week at all.
The rupee forward premiums jumped tracking a fall in U.S.
yields. The 1-year implied yield surged 15 bps
to 2.30%, its highest since Feb. 2.
(Reporting by Anushka Trivedi; Editing by Sohini Goswami)
anushka.trivedi.thomsonreuters.com@reuters.net))
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