Thursday, May 23, 2024

UAE: Opening trade sees the Indian rupee fall versus the dirham.

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Due to the strengthening of the dollar index and a loss in Asian rivals, the Indian rupee fell during the opening hours of trading on Tuesday.

Around 8 a.m., the South Asian currency was down from Monday’s closing price of 82.74 to the US dollar (22.54 to the UAE dirham).

Through public sector banks, the Reserve Bank of India has regularly intervened to stop the rupee from falling below 82.80-83.

It goes without saying that the entire 82.80–83.00 zone is crucial. We’ll have a round of significant stop losses if you remove 83, the trader warned.

The Fed Governor Michelle Bowman’s remarks that possibly further interest rate increases will be required to bring inflation down to the US Federal Reserve’s 2% target helped to support the dollar.

For the Fed’s view, the US inflation data due on Thursday is crucial. Reuters polled economists, and their predictions for the core consumer price index were 0.2% higher month over month and 4.8% higher year over year.

The Fed is mindful of upside risks to rising inflation given the continued excess demand for labor, and most policymakers believe that keeping the policy rate restrictive for some time will be necessary to bring inflation back to target, according to a note from ANZ.

Risks suggest that the Federal Reserve’s work is still incomplete.

On Monday, Moody’s lowered the credit ratings of a number of small to mid-sized US banks and hinted that it may also lower those of some of the biggest lenders in the country, warning that funding problems and declining profitability would likely put the sector’s credit standing to the test.

Ten banks had their ratings downgraded by one rating point by Moody’s, which also put six of the biggest banks—including Bank of New York Mellon, US Bancorp, State Street, and Truist Financial—under scrutiny for possible downgrades.

“This comes at a time when a minor US recession is expected to start in early 2024 and asset quality appears to be declining, with particular risks in some banks’ commercial real estate,”

According to Moody excessive CRE exposures are a key worry because of high interest rates, a decline in office demand as a result of remote work, and a drop in the availability of CRE credit.

Eleven prominent lenders, including Fifth Third Bancorp, Citizens Financial, and Capital One, have changed from a favorable outlook to a negative outlook.

Despite regulators implementing emergency efforts to shore up confidence, the failure of Silicon Valley Bank and Signature Bank earlier this year caused a crisis of confidence in the U.S.

However Moody issued a warning that banks with sizeable unrealized losses that are not reflected in their regulatory capital ratios are susceptible to losing customers in the present high rate environment.

The comprehensive analysis comes amid tightening monetary circumstances as a result of the Federal Reserve raising interest rates at their quickest rate in decades which has slowed demand and borrowing.

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