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Informist, Thursday, Jul 18, 2024

By Sourabh Kumar

MUMBAI – The rupee settled near one-month low against the dollar today because of purchases of the greenback by importers, dealers said. However, the Indian unit managed to dodge headlines of a record closing low, thanks to the intervention by the Reserve Bank of India, dealers added. 

The rupee closed at 83.6500 a dollar today, as against 83.5825 a dollar on Tuesday. The market was closed on Wednesday on account of Muharram. After a steady opening, the Indian currency came under pressure from oil marketing companies' demand for the greenback early in the day, dealers said. 

"The central bank was present at 60 (83.60 a dollar), but panic buying by importers broke that level," a dealer with a state-owned bank said.

A rise in crude oil prices prompted oil marketing companies to step up their purchases due to fear of a further rise in the price of the commodity. Given that India is a major importer of the commodity, a rise in oil prices increases its import bill, thus hurting the domestic currency, dealers said.

Oil prices rose about 2% on Wednesday due to a bigger-than-expected fall in US crude stocks last week. Data from the US Energy Information Administration showed a fall of 4.9 mln barrels of crude in the week ended Friday. This was way higher than the 30,000 bbl forecast by analysts in a Reuters poll. Oil prices also rose due to a weaker greenback.

The September Brent Crude contract on the Intercontinental Exchange was at $84.92 per bbl at 1525 IST, compared with $85.08 per bbl on Wednesday and $83.73 on Tuesday. Prices touched a high of $85.81 bbl today.

As the Indian unit continued to trade near 83.60 a dollar, the weaker end of its recent trading range, importers other than oil companies also stepped in to buy dollars, anticipating a further fall in the rupee, dealers said. That ended up weighing on the Indian unit, they said. 

A few dealers said some defence-related dollar purchases also weighed on the rupee. Observing the constant pressure on the Indian unit, the Reserve Bank of India intervened in the market, first to prevent the rupee from falling past 83.60 a dollar, and then to prevent it from hitting another record low. The rupee had touched a lifetime low of 83.67 a dollar on Jun 20. 

After the rupee fell past 83.60 a dollar despite the RBI's intervention, exporters took advantage of a relatively higher dollar/rupee, and sold the greenback. This provided some support to the rupee.

Apart from intervention in the spot market, a few dealers speculated that the central bank might have also sold the greenback in the offshore market.

Further, a fall in the dollar index also supported the rupee, dealers said. The dollar index slumped after several US Federal Reserve officials indicated that the central bank may soon cut interest rates. The index, which measures the strength in the greenback against a basket of six major currencies, was at 103.77 at 1628 IST, compared with Wednesday's close of 103.75 and Tuesday's close of 104.24.

Christopher Waller, a member of the US Federal Reserve's board of governors, said Wednesday that recent economic data were consistent with achieving a 'soft landing', and that the US central bank is getting closer to cutting rates. New York Federal Reserve President John Williams also said an interest rate cut is expected in the coming months. However, no rate cut is expected at the Jul 30-31 policy meeting, he said in an interview with The Wall Street Journal on Wednesday. Fed funds futures traders now see about 96% chances of at least a 25-basis-point cut in September.

FORWARDS

Premiums on the one-year dollar/rupee forward contract ended near a five-month low as market participants were certain the US Federal Reserve would cut rates at its September meeting, dealers said. Today, the one-year dollar/rupee forward premium rose to 1.76%, a level last seen in February.

With increasing expectations of a rate cut, market participants see the interest rate differential between the US and India rising, and hence the increase in the dollar/rupee forward premiums, dealers said. Fed funds futures traders now see about 96% chances of at least a 25-basis-point cut in September.

The dollar purchases of a few foreign banks for forward delivery also pushed premiums higher, dealers said. "We saw paying by some other foreign banks on account of their bond inflows-related selling in spot," a dealer with a foreign bank said.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 147.18 paise, as compared to 144.25 paise on Tuesday. On an annualised basis, the premium was 1.76%, against Tuesday's close of 1.73%.

OUTLOOK

On Friday, the rupee will track the movement of the dollar index and crude oil prices, dealers said. Market participants would also analyse the US weekly unemployment report, which is due later today, they said. This data is forecast to show 229,000 jobless claims for the week ended Saturday.

Also, the RBI might sell the greenback to save the Indian unit from touching a record low, dealers said. They said a few exporters are also likely to sell the greenback, noting higher dollar/rupee levels.

Further, oil marketing companies' continued demand for the greenback may weigh on the rupee, dealers said. A further rise in crude oil prices may put downward pressure on the Indian unit, they said.

During the day, the rupee is seen at 83.40-83.60 a dollar, with key technical support pegged at 83.65 a dollar.

India Rupee - World FX: Euro dn before ECB meet outcome; dlr recovers

MUMBAI – The euro was down 0.1% against the dollar ahead of the outcome of the European Central Bank's monetary policy meeting later today. After reducing the policy rate by 25 basis points in June, the European Central Bank is set to leave key rates unchanged in the July policy meeting, according to FX Street. 

Currently, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility stand at 4.25%, 4.5%, and 3.75%, respectively.

The pound sterling was down 0.2% against the greenback as data showed UK average earnings, a key measure of wage growth that fuels inflation in the service sector, decelerated unexpectedly. 

The dollar recovered after it gained support from a slight improvement in US Treasury yields. The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.83 at 1539 IST, compared with Wednesday's close of 103.75 and Tuesday's close of 104.24.

The Japanese yen was down 0.2% against the dollar as the greenback recovered. Data released on Tuesday showed that the Bank of Japan entered the foreign exchange market on consecutive trading days – last Thursday and Friday. The current account balance data from the central bank, released on Tuesday, indicates an anticipated liquidity drain of about 2.74 trln yen or $17.3 bln from the financial system on Wednesday due to various government sector transactions, according to Nikkei Asia. (Kabir Sharma)

India Rupee: Premiums up as market sees Fed cutting rate in Sep

MUMBAI – Premiums on the one-year dollar/rupee forward contract rose close to a five-month high as market participants were certain the US Federal Reserve would cut rates at its September meeting, dealers said. Today, the one-year dollar/rupee forward premium rose to 1.76%, a level last seen in February.

Christopher Waller, a member of the US Federal Reserve's board of governors, said Wednesday that recent economic data were consistent with achieving a 'soft landing', and that the US central bank is getting closer to cutting rates. New York Federal Reserve President John Williams also said an interest rate cut is expected in the coming months. However, no rate cut is expected at the Jul 30-31 policy meeting, he said in an interview with The Wall Street Journal on Wednesday.

"Forwards were up as expected, because the September rate cut is almost completely priced in, and then a few Fed officials' comments were also dovish," a dealer with a state-owned bank said. "I think the market has priced in two rate cuts (by the Fed) in this calendar year, with the first coming up in September."
 

With increasing expectations of a rate cut, market participants see the interest rate differential between the US and India rising, and hence the increase in the dollar/rupee forward premiums, dealers said. Fed funds futures traders now see about 96% chances of at least a 25-basis-point cut in September.

The dollar purchases of a few foreign banks for forward delivery also pushed premiums higher, dealers said. "We saw paying by some other foreign banks on account of their bond inflows-related selling in spot," a dealer with a foreign bank said.

Indian government bonds are being included in JP Morgan's Global Bond Index–Emerging Markets suite over a 10-month period that began Jun 28. Market participants expect about $2 bln of foreign fund inflows every month during this 10-month period.

Some banks' forward dollar sales related to profit-taking limited the upward movement in premiums, dealers said.

At 1459 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 147.00 paise, as compared to 144.25 paise on Tuesday. On an annualised basis, the premium was 1.76%, as compared to Tuesday's close of 1.73%.  (Sourabh Kumar)

India Rupee: Steady as RBI's dollar sales offset oil cos' dollar buys

MUMBAI – The rupee remained steady against the dollar despite constant demand for the greenback from oil marketing companies, as banks sold dollars for the Reserve Bank of India to restrict the Indian unit from touching a record low, dealers said. The rupee had hit a lifetime low of 83.67 a dollar on Jun 20.

"60 (83.60 a dollar) is a protected level, and they (central bank) would not allow it to go down," a dealer with a foreign bank said, adding that despite a fall in the dollar index, the rupee has been under pressure since the morning due to oil marketing companies' demand for dollars. 

Crude oil prices rose, which weighed on the rupee. Given that India is a major importer of the commodity, a rise in oil prices increases its import bill, hurting the domestic currency, dealers said. 

Oil prices were up due to a more than expected fall in US crude stocks last week, and a weak dollar. The September Brent crude contract on the Intercontinental Exchange was at $85.46 per bbl at 1133 IST, compared with $85.08 per bbl on Wednesday and $83.73 on Tuesday. 

Dealers said most exporters were waiting for the rupee to fall below the 83.60 a dollar level, before placing large bets. This removed whatever support the rupee had from exporters' dollar sales, they said.

A fall in the dollar index supported the rupee, dealers said. The index fell after expectations of a rate cut by the US Federal Reserve in September rose. Market participants took cues from several Fed officials, including Fed Governor Christopher Waller and New York Fed President John Williams, who separately said on Wednesday that the central bank might cut rates soon, given the recent softer-than-expected economic data from the US.

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.76 at 1137 IST, compared with Wednesday's close of 103.75 and Tuesday's close of 104.24.

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 83.65 a dollar.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Jul 18

MUMBAI – At 0900 IST, the rupee was at 83.5775 a dollar, against 83.5825 from the previous close. At 1048 IST, the rupee was at 83.5950 per dollar.

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

(Sourabh Kumar)

India Rupee: Steady as rise in oil prices offsets fall in dlr index

MUMBAI – The rupee was steady against the dollar as a rise in crude oil prices offset the support received from a fall in the dollar index, dealers said. The dollar index fell to a near four-month low on Wednesday after several US Federal Reserve officials indicated that a rate cut was near.

"The dollar index is down, but the rupee is held here due to higher oil prices," a dealer with a state-owned bank said. A few dealers also speculated that the Reserve Bank of India sold the greenback in the offshore market to prevent the fall in the rupee, and provide some cushion to its movement.

With the rupee trading near its strong support of 83.60 a dollar, exporters sold the greenback to take advantage of a relatively higher dollar/rupee, dealers said. Exporters were also interested because they witnessed the RBI's intervention on Tuesday in the spot market which restricted the rupee's fall below the aforementioned level, they said.

The dollar index was down after Fed officials, including Fed Governor Christopher Waller and New York Fed President John Williams, separately said on Wednesday that the central bank may cut rates soon. After their comments, the dollar index plunged to a near four-month low of 103.65 on the same day. 

The index, which measures the strength in the greenback against a basket of six major currencies, was at 103.80 at 0932 IST, compared with Wednesday's close of 103.75 and Tuesday's close of 104.24.

A rise in crude oil prices weighed on the rupee, dealers said. The September Brent Crude contract on the Intercontinental Exchange was at $85.43 per bbl at 0933 IST, compared with $85.08 per bbl on Wednesday and $83.73 on Tuesday. A rise in crude increases India's import bill, given that it is a major importer of the commodity.

Oil prices went up about 2% on Wednesday due to a bigger-than-expected fall in US crude stocks last week. Prices also received a boost from a weak dollar.

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 steady; Indonesian rupiah falls 0.4%

MUMBAI – Most Asian currencies were steady against the dollar as traders awaited weekly unemployment data from the US, due later today, for more cues on the US Federal Reserve's rate path.

Market participants also await the European Central Bank's rate decision later today, with the ECB expected to hold key policy rates steady. In June, the ECB had cut its key policy interest rates by 25 basis points for the first time in nearly five years.

Notably, most Asian currencies were steady despite a sharp decline in the dollar index on Wednesday. The dollar index slumped after several US Federal Reserve officials indicated that the central bank might cut rates soon.

Fed Governor Christopher Waller said on Wednesday that recent economic data were consistent with achieving a "soft landing", and that the Fed was getting closer to cutting rates. New York Fed President John Williams also said that an interest rate cut was expected in the coming months. However, no rate cut is expected at the Jul 30-31 policy meeting, he said in an interview with The Wall Street Journal on Wednesday. 

According to the CME Fedwatch tool, the market factors in about a 98% probability of at least a 25-basis-point cut in the Fed funds target rate by September.

The index, which measures the strength of the greenback against a basket of six major currencies, was at 103.78 as compared to Wednesday's close of 103.75 and Tuesday's close of 104.24. The index fell to a near four-month low of 103.65 on Wednesday.

Apart from the Indonesian rupiah and the Thai baht, all other major Asian currencies were steady. The Indonesian rupiah fell 0.4% after Bank Indonesia kept its benchmark rates steady on Wednesday, as expected. It kept the seven-day reverse repo rate at 6.25%. The Thai baht fell 0.1%.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Jul 18

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 Deepshikha Bhardwaj

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