USD rises on safe haven flows
USD & UST yields rose last week as the U.S. Federal Reserve hinted at an earlier-than-expected rate hike. USD finds additional support as risk sentiment weakened amid uncertainty over beleaguered Chinese property developer Evergrande.
The Federal Reserve left policy unchanged on Wednesday, as expected, and also decided against announcing the beginning of asset purchase tapering. However, the Fed said "a moderation in the pace of asset purchases may soon be warranted", with Chairman Jerome Powell adding that board members believed tapering could conclude around mid-2022, opening the way for interest rate hikes after that.
China Evergrande Group owes USD 305 billion and has run short on cash, missing a Thursday deadline for paying USD 83.5 million and leaving investors questioning whether it will make the payment before a 30-day grace period expires. A collapse of the company could create systemic risks to China's financial system.
However, on Friday risk sentiment improved after Beijing injected new cash into the financial system and Evergrande announced it would make interest payments on an onshore bond, boosting risk sentiment.
INR weakened as ADB warned on covid outlook
INR ended lower amid broad USD strength and as the Asian Development Bank unnerved investors with a warning that developing Asia’s economic rebound could be dampened by the rapid spread of Delta variant.
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