CURRENCY OVERVIEW

The Rupee closed weaker at its weakest closing level on record on Thursday, weighed down by strong dollar demand from foreign banks, likely due to outflows from equities, and the weakness in regional peers as the U.S. dollar rose to an eleven-week high. Two large U.S. headquartered banks and some state-run banks were bidding for dollars on Thursday, a trader at a state-run bank said. Foreign investors have pulled out $8.1 billion, on a net basis, from local stocks over October so far, a sharp reversal from inflows of nearly $7 billion in the previous month. Asian currencies were mostly weaker, with the Korean won down 0.5% and leading losses. The dollar index was a tad higher at 103.6, hovering close to its highest level since August. The dollar jumped to an 11-week high on Thursday after data showed that U.S. retail sales increased slightly more than expected in September, boosting confidence that the U.S. economy remains strong. It followed a relatively muted currency reaction to the European Central Bank's decision to cut rates by 25 basis points, as expected. The dollar index was last up 0.16% at 103.70, having risen as high as 103.87, its highest since August 2. The euro was down 0.25% at $1.0834, having earlier reached $1.0811, the lowest since August 2. The yen weakened 0.07% against the greenback to 149.76 per dollar and earlier traded at 150.08, the weakest since August 1. Traders are now pricing in 44 basis points of additional cuts by year-end, or a less than 100% chance of a 25 basis point cut at both of the Fed’s next two meetings. They had previously seen a further 50 basis point cut as likely at one of these meetings. The euro meanwhile has dipped as traders price for more dovish ECB policy as the region faces a weak economic outlook, while Europe could also face tariffs under a Trump presidency. The Aussie was last up 0.36% versus the greenback at $0.669. Oil prices were broadly flat on Thursday as investors waited on developments in the Middle East, the release of official U.S. oil inventory data and details on China's stimulus plans. Brent crude futures were down 4 cents to $74.18 a barrel at 1309 GMT, while U.S. West Texas Intermediate crude futures were at $70.37 a barrel, down 2 cents.

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