Rupee seen weakening due to month-end dollar demand

The buck had traded in a narrow range against most of its rivals during the past week as investors waited for the Fed’s decision, even as many expected the central bank to hold off Thursday, said Mark McCormick, global FX strategist based in New York. However, following the Fed’s decision there has been a relief rally. The S&P 500 index rose 0.9% to 1,995.31, its highest close in nearly a month.

The SWISS FRANC (currency: CHF) has endured a hard few weeks and the Pound Sterling Swiss Franc exchange rate has settled above the 1.5000 threshold during the past 24hrs.

“Although Yellen said that October remains a possibility, we doubt that the economic data between now and then will be sufficient to hike“, they said in a note to clients.

The USA currency touched three-week lows versus the euro and two-week troughs against the Swiss franc, with the greenback’s outlook darkening after revisions in the interest rate trajectory for the world’s largest economy.

While the decision itself was not a surprise, the Fed’s softly-softly tone now has markets pricing in less than a 50 per cent chance of it raising rates this year.

After much debate, analysis and consternation the Feds (The Board of Governors of the Federal Reserve) decided to hold off on doing anything to the Federal Reserve rate.

The rupee settled at 65.67/68 per USA <strong>dollarstrong>, from its 66.4550/66.4650, its strongest performance since August 20 this year.

New Zealand’s kiwi fell after a report showed the nation’s gross domestic product grew 0.4 percent from the first quarter, compared with the median forecast of 0.6 percent from 16 economists surveyed by Bloomberg. Along with global economic uncertainty and a high USA dollar, U.S. Fed Chair Janet Yellen pointed to lower oil prices as another reason for holding rates steady.

Thursday’s decision came amid concerns among investors that a hasty rate hike would stir further turmoil in financial markets by causing an outflow of funds from emerging economies, while worries about the slowing Chinese economy remain in place. “The gains in rupee also helped government bonds as a result of which yields fell”, said N S Venkatesh, executive director and head of treasury at IDBI Bank.

The prospect of loose monetary conditions for longer reignited investors’ appetite for risk, and high-yielding riskier currencies such as the Australian and Kiwi dollars gained sharply.