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Informist, Tuesday, Jul 16, 2024

By Sourabh Kumar

MUMBAI – After moving in a narrow range of five paise, the rupee closed steady against the dollar today as the Reserve Bank of India stepped in to support the currency against the downward pressure from dollar purchases by oil marketing companies, dealers said.

"Oil companies bought heavily today, apart from some buying from general importers, but 60 (83.60 a dollar) was a hard stop for the rupee," a dealer with a state-owned bank said. The rupee settled at 83.5825 a dollar, little changed from Monday's close of 83.5925 a dollar.

The Indian unit opened flat at 83.5925 a dollar. As it was near the weaker end of the rupee's recent trading range, some importers stepped in to purchase the greenback, anticipating a decline in the rupee during the day, dealers said. This weighed on the rupee, they said.

Among importers, oil-marketing companies purchased the greenback throughout the day, which put pressure on the rupee, dealers said. They said the oil companies bought dollars to buy crude oil, which was at a relatively lower price today. Oil prices fell on demand concerns as China's economy grew at a slower-than-expected pace. The world's second-largest economy grew 4.7% in Apr-Jun, lower than the forecast of 5.1% in a Reuters poll.

As China is the world's largest importer of crude oil, the rate of growth of the Chinese economy affects crude oil prices. The September Brent Crude contract on the Intercontinental Exchange was at $84.21 per bbl at 1557 IST, compared with $84.85 per bbl on Monday and $85.03 on Friday.

Oil companies also purchased the greenback as the financial markets will be closed on Wednesday for Muharram, dealers said.

Due to the constant downward push on the rupee, the RBI stepped in to sell the greenback at 83.60 a dollar to prevent the Indian currency from hitting another record low, dealers said. The rupee hit a record low of 83.67 a dollar on Jun 20.

Intervention by the RBI also prompted exporters, who were waiting for the dollar/rupee to rise past 83.60 a dollar, to sell the greenback, dealers said. 

As the dollar index recovered slightly from the over-one-month low of 104.03 it hit on Monday, it weighed on the rupee, dealers said. The index recovered as investors weighed the odds of former US president and Republican Party candidate Donald Trump winning the Nov 5 US elections after surviving an assassination attempt Sunday. Trump's victory would be negative for emerging market currencies because of his focus on protectionist policies and tax cuts.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.26 at 1610 IST, after closing at 104.26 on Monday and 104.08 on Friday.

However, comments by US Federal Reserve Chair Jerome Powell on Monday weighed on the dollar. Powell said the US economy had made some progress towards controlling inflation after recent softer economic data. This heightened expectations that the Fed may cut its funds rate in September. After Powell's comments, the probability of a rate cut of at least 25 basis points in September, as measured by the CME Group's FedWatch tool, rose to 100%, from 96% on Friday, marking it as a certainty.

FORWARDS

Premiums on the one-year dollar/rupee forward contract ended higher today after US Treasury yields fell to about 4.19% from 4.23% at the close of the US market on Monday, dealers said.

US yields inched lower after Powell's comments on Monday, which raised expectations of a rate cut by the Fed in September. Market participants see the interest rate differential between the US and India rising, and hence an increase in the dollar/rupee forward premiums, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

However, after the one-year dollar/rupee premium hit a near-three-month high of 1.73% today, some banks sold forward dollars to take advantage of lucrative forward rates, dealers said. This restricted a rise in the premiums, they said.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 144.25 paise, as compared to 141.86 paise on Monday. On an annualised basis, the premium was 1.73%, up from Monday's close of 1.70%.

OUTLOOK

The market is shut on Wednesday. On Thursday, the rupee will track the movement of the dollar index and crude oil prices, dealers said. The RBI is expected to sell the greenback to save the Indian unit from touching a record low, dealers said. A few exporters are also likely to sell dollars, noting higher dollar/rupee levels.

Market participants would also keep an eye on the movement of crude oil prices, dealers said. A rise in crude oil prices may weigh on the rupee. Also, an increase in demand for the greenback from oil-marketing companies may weigh on the rupee, they said.

During the day, the rupee is seen at 83.40-83.60 a dollar, with key technical support pegged at 83.60 a dollar.

India Rupee - World FX: Euro up as industrial data better than view

MUMBAI – The euro rose 0.1% against the US dollar after data showed a faster-than-expected pace of industrial production in eurozone in May. Industrial output in the eurozone declined 0.6% in May, performing better than the forecast of a 1.0% fall. The European Central Bank is expected to hold key policy rates steady at its rate decision on Thursday.

The pound sterling was steady ahead of the release of June inflation data from the UK on Wednesday. UK consumer prices are expected to have risen 1.9% last month after rising 2% in May, according to a poll by Dow Jones. If inflation in the UK falls below the Bank of England's target of 2%, chances of the central bank cutting rates by 25 basis points at its August meeting will strengthen, which is expected to weigh on the pound sterling.

The Australian dollar fell 0.4% against the greenback, weighed down by a fall in Australia's stock index. The Canadian dollar was steady against the greenback ahead of the release of consumer price inflation data for June later today. On a yearly basis, inflation is expected to rise 2.8% after rising 2.9% the month before. 

The dollar index remained largely weak, albeit recovering slightly from an over one-month low of 104.03 on Monday. The index, which measures the strength of the greenback against a basket of six major currencies, was at 104.31 at 1346 IST, after closing at 104.26 on Monday and 104.08 on Friday.

The dollar index was able to recover slightly because investors weighed the odds of former US president and Republican candidate Donald Trump winning the Nov 5 US elections, after he survived an assassination attempt on Sunday. His victory raised the demand for the greenback as a safe-haven currency as the focus shifted to his protectionist policies.  (Sourabh Kumar)

India Rupee: Premiums rise as Powell's speech spurs US rate cut bets

MUMBAI – Premiums on the one-year dollar/rupee forward contract were up as the latest remarks by US Federal Reserve Chair Jerome Powell heightened expectations of a rate cut by the US Federal Reserve in September, dealers said. However, a few banks sold dollars to take advantage of a higher forward premium, they said.

Powell said on Monday that the US economy had made some progress towards controlling inflation after recent softer economic data. Inflation in the US rose less-than-expected, which raised investors' confidence of a rate cut in September. After Powell's comments, Fed funds futures now reflect a 100% probability of at least a 25-basis-point rate cut in September from about 73% chance seen a week ago, according to CME Group's FedWatch tool.

Market participants see the interest rate differential between the US and India rising, and thus an increase in the dollar/rupee forward premiums, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

"Some paying was seen in the morning, probably after Powell's (US Federal Reserve chair Jerome Powell) comments, but then people are receiving at higher levels as well," a dealer with a state-owned bank said. 

After the one-year dollar/rupee premium hit a near three-month high of 1.73% today, some banks sold forward dollars to take advantage of lucrative forward rates, dealers said. This restricted a rise in the premiums, they said.

At 1524 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 144.25 paise, as compared to 141.86 paise on Monday. On an annualised basis, the premium was 1.72%, as compared to Monday's close of 1.70%.  (Sourabh Kumar)

India Rupee: In thin band as RBI's dollar sales offset importers' buys

MUMBAI – The rupee traded in a narrow range of 4 paise after banks sold the greenback on behalf of the Reserve Bank of India, which offset pressure from some importers' dollar buys, dealers said.

"At 60 (83.60 a dollar) the central bank is present, and they are not allowing it to go past that level," a dealer with a foreign bank said. 

After the rupee opened flat at 83.5925 a dollar today, near the weaker end of its recent trading range, some importers stepped in buy dollars, anticipating a decline in the domestic currency. Oil marketing companies bought dollars to purchase crude oil after an overnight fall in prices of the commodity. Oil companies bought the greenback also because the Indian market is closed on Wednesday on account of Muharram.

The September Brent crude contract on the Intercontinental Exchange was at $84.22 per bbl at 1346 IST, compared with $84.85 per bbl on Monday and $85.03 on Friday.

Apart from importers, putting pressure on the rupee was a slight recovery in the dollar index. The index recovered from an over one-month low of 104.03 on Monday, as investors still weighed the odds of former US president and Republican candidate Donald Trump winning the Nov 5 US elections, after he survived an assassination attempt on Sunday. Trump's victory would be negative for emerging market currencies because of his focus on protectionist policies and tax cuts.  

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.31 at 1346 IST, after closing at 104.26 on Monday and 104.08 on Friday.

To control the fall in the rupee, the RBI sold dollars at 83.60 a dollar, which also prompted exporters to sell the greenback, dealers said. They said the central bank intervened to prevent the rupee from hitting another record low. The Indian unit hit a lifetime low of 83.67 a dollar on Jun 20.

For the rest of the day, the rupee is seen in a range of 83.45-83.65 against the dollar, dealers said. They peg immediate key technical support for the Indian currency at 83.60 a dollar.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Jul 16

MUMBAI – At 0900 IST, the rupee was at 83.5925 a dollar, unchanged from the previous close. At 1040 IST, the rupee was at 83.5900 per dollar.

Following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar)

India Rupee: Steady as exporters' dollar sales offset dollar index recovery

MUMBAI – The rupee was steady against the dollar as a few banks sold the greenback, likely for exporters, which offset pressure from a rebound in the dollar index, dealers said.

"Some exporters are seen after we saw that 60 (83.60 a dollar) is protected," a dealer with a private bank said. Some dealers speculated that the central bank intervened through dollar sales around 83.60 a dollar to keep the rupee from hitting a record low. The rupee hit a record low of 83.67 on Jun 20. 

While some exporters sold the greenback, noting strong support at 83.60 a dollar, others waited for the rupee to fall below this level, dealers said.

After opening flat, the rupee came under pressure due to dollar purchases by a few importers on the expectation that the domestic unit might depreciate going ahead, dealers said.

Meanwhile, the dollar index recovered from the over one-month low of 104.03 it hit on Monday, which also put some pressure on the rupee, dealers said. The index recovered as investors weighed the odds of former US president and Republican candidate Donald Trump winning the Nov 5 US election, after he survived an assassination attempt on Sunday. The index, which measures the strength of the greenback against a basket of six major currencies, was at 104.33 at 0955 IST, after closing at 104.26 on Monday and 104.08 on Friday.

However, the recovery in the dollar index was contained as comments by US Federal Reserve chair Jerome Powell on Monday strengthened the confidence of investors in a rate cut in September. Fed funds futures traders now see a 100% chance of at least a 25-basis-point rate cut in September from about 96% on Friday, according to CME Group's FedWatch tool.

For the rest of the day, the rupee is seen in a range of 83.45-83.65 against the dollar, dealers said. They peg immediate key technical support for the Indian currency at 83.60 a dollar.  (Sourabh Kumar)

India Rupee - Asia FX: Most down as dollar index rebounds from 1-month low

MUMBAI – Most Asian currencies were down against the dollar due to a recovery in the dollar index from the over one-month low it hit on Monday, as investors assessed the increasing odds of Donald Trump, former US president and Republican candidate, winning the Nov 5 presidential elections after he survived an assassination attempt over the weekend.

However, comments by US Federal Reserve Chair Jerome Powell on Monday capped the recovery in the dollar index. Powell's remarks increased investors' confidence of a rate cut in the US in September. "We've had three better readings, and if you average them, that's a pretty good place," Powell said at an event at the Economic Club in Washington.

Fed funds futures traders now see a 100% chance of at least a 25-basis-point rate cut in September, against 96% on Friday, according to the CME Group's FedWatch tool.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.34 at 0926 IST after closing at 104.26 on Monday and 104.08 on Friday.

The Indonesian rupiah fell 0.2% ahead of the Bank Indonesia's rate decision on Wednesday, where it is expected to hold the rates steady at 6.25%. The South Korean won also fell 0.2% against the greenback.

The Malaysian ringgit and Thai baht fell 0.1% and 0.2%, respectively, against the greenback. A fall in Thailand's SET stock index also weighed on the Thai currency. The Taiwan dollar fell 0.1% against the dollar.

On the other hand, the Philippines peso was up 0.1% against the dollar after data showed that cash remittances to the country rose 3.6% on-year in May to $2.58 bln, according to the country's central bank on Monday, as per reports. (Sourabh Kumar)

India Rupee: Expected range for rupee - Jul 16

MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecast by leading banks and brokerages in an Informist poll:

(Sourabh Kumar)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Rajeev Pai

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