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Informist, Friday, Jul 19, 2024

By Kabir Sharma and Pratiksha

NEW DELHI – The rupee ended at a record closing low against the dollar today due to a strong dollar index and a sharp fall in domestic share indices, dealers said. This was despite the Reserve Bank of India's likely intervention through dollar sales, they said.

After moving in a tight range of 7 paise throughout the day, the rupee closed at 83.6625 a dollar against 83.6500 on Thursday. The Indian currency hit a low of 83.6650 a dollar during the day, just shy of its lifetime low of 83.6675 hit on Jun 20.

After touching 83.6900 a dollar in the offshore non-deliverable forwards market, the Indian unit opened at 83.6250 a dollar as the central bank stepped in to sell the greenback in the offshore NDF market, dealers said. The RBI likely sold the US unit in the offshore NDF market to keep the Indian unit from hitting a record low at the open, dealers said.

"They (RBI) sold (dollars) in the offshore market aggressively, and after that they sold in the spot too after the market opened," a dealer with a big state-owned bank said.

The rupee was under pressure throughout the day because of the dollar's rise and demand for the greenback from oil marketing companies, dealers said. The dollar surged after comments from US Federal Reserve officials and manufacturing data from the US.

Federal Reserve Bank of San Francisco President Mary Daly said she would look for more confidence that inflation was moving towards the Fed's 2% target before batting for an interest rate cut. "We don't have price stability right now," Daly said at a Dallas Fed event. "We've had some really good incoming data, but even with the incoming data on inflation being positive and good data after earlier this year, we're not there yet," she said.

The dollar was also supported by better-than-expected manufacturing data from the US. The latest Philadelphia Fed manufacturing index reading was up for the sixth straight month as manufacturing activity expanded overall. In July, the index rose to 13.9 from 1.3 in June, coming in significantly above the forecast of 2.7.

Further supporting the dollar was a global cyber outage which caused panic and led to safe haven demand for the greenback, dealers said. There have been reports of worldwide outages in information technology systems of airlines and other sectors today due to US technology giant Microsoft, and Crowdstrike, offering cyber security solutions.

Some banks bought the greenback on behalf of oil marketing companies who were looking to take advantage of comparatively lower crude oil prices, dealers said. Oil prices fell due to concerns over demand from top importer China. China's economy grew at a slower than expected pace of 4.7% in the Apr-Jun quarter, official data showed, giving way to concerns about the country's oil demand. The reading was significantly lower than the 5.1% expected by financial markets.

The data from China also dampened sentiment across equity markets in Asia, which further weighed on Asian currencies. Hong Kong's Hang Seng fell 2.03%, China's Shanghai Composite Index was down 0.33%, and Japan's Nikkei was lower by 0.07%. Following the trend, Indian shares also closed lower, weighing on the Indian currency. The Nifty 50 index closed lower by 1.09% and the Sensex was down 0.92%.

On the other hand, exporters sold the greenback as they expected the Reserve Bank of India to continue intervening in the foreign exchange market by way of dollar sales to prevent the Indian unit from breaching the record low, dealers said.

Some banks likely sold dollars on behalf of the RBI around 83.66 a dollar level, which also supported the Indian unit, dealers said.

PREMIUMS

Premiums on the one-year dollar/rupee forward contract were steady today as the impact of a rise in US Treasury yields was offset by importers' dollar purchases for forward delivery, dealers said.

US Treasury yields rose on Thursday as investors assessed comments by US Federal Reserve officials. This weighed on the premiums, dealers said. Although the view of a rate cut in September remained intact, at the same time the officials focused on seeing continued progress on the inflation front.

Premiums have risen steadily over the past two weeks as expectations of a rate cut in the US have risen significantly. Fed funds futures traders now see about 98% chance of at least a 25-basis-point cut in September.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 147.69 paise, compared to 147.18 paise on Thursday. On an annualised basis, the premium was 1.77%, against Thursday's close of 1.76%.

OUTLOOK

On Monday, the rupee will track movement in the dollar index and crude oil prices over the weekend. Market participants expect the RBI to keep up its intervention in the foreign exchange market by way of dollar sales to prevent runaway depreciation of the Indian unit.

During the day, the rupee is seen at 83.50-83.70 a dollar, with key technical support pegged at 83.65 a dollar.

India Rupee: Premium steady; importers' fwd dlr buys offset US yld rise

NEW DELHI – Premiums on the one-year dollar/rupee forward contract were steady today as the impact of a rise in US Treasury yields was offset by importers' dollar purchases for forward delivery, dealers said.

"It should have eased a bit, but paying is happening at any shortfall right now, it's a pay at dips market," a dealer at a private bank said.  

US Treasury yields rose on Thursday as investors assessed comments by US Federal Reserve officials. This weighed on the premiums, dealers said. Although the view of a rate cut in September remained intact, at the same time the officials focused on seeing continued progress on the inflation front. 

Premiums have risen steadily over the past two weeks as expectations of a rate cut in the US have risen significantly. Fed funds futures traders now see about 98% chances of at least a 25-basis-point cut in September.

Some banks sold forward dollars for profit-taking citing attractive levels which limited the upward movement in premiums, dealers said.

At 1420 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 147.25 paise, compared to 147.17 paise on Thursday. On an annualised basis, the premium was 1.76%, same as Thursday's close. (Kabir Sharma)

India Rupee - World FX: Sterling down as UK retail sales below view

NEW DELHI – The pound sterling was down against the dollar as data from the UK showed retail sales in the region were lower than expected. A report from the UK Office for National Statistics showed that monthly retail sales contracted at a pace of 1.2%. Economists had estimated a decline of 0.4%. 

A recovery in the dollar index also weighed on the sterling and other currencies. The dollar index recovered sharply after hitting a four-month low on Thursday as the president of the Federal Reserve Bank of San Francisco, Mary Daly, said she would look for more confidence that inflation was moving towards the Fed's 2% target before batting for an interest rate cut.

"We don't have price stability right now," Daly said at a Dallas Fed event. "We've had some really good incoming data, but even with the incoming data on inflation being positive and good data after earlier this year, we're not there yet," she said.

The dollar was also supported by better-than-expected manufacturing data from the US. The latest Philadelphia Fed manufacturing index reading remained in positive territory for the sixth straight month as manufacturing activity expanded overall. In July, the index rose to 13.9 from 1.3 in June, coming in significantly above the forecast of 2.7.

The euro was down 0.2% against the US unit after European Central Bank Governing Council member Gediminas imkus said, "I agree with markets which see two more rate cuts this year...Interest rates will keep getting lower, and quite significantly."

The Swiss franc, the Japanese yen and the Canadian dollar were down 0.1% each against the greenback. The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.34 at 1357 IST, compared with Thursday's close of 104.18 and Wednesday's close of 103.75. (Kabir Sharma)

India Rupee: In thin band; exporters' dlr sales offset oil cos' buys

NEW DELHI – The rupee was in a narrow range against the dollar as the impact of banks' dollar buys on behalf of oil marketing companies was offset by their dollar sales for exporters, dealers said. 

"They have given a hint that 66-67 (83.66-83.67) is the new hard stop, so exporters are now selling at that level," a dealer at a private bank said. 

Dealers said there was constant demand for dollars from oil marketing companies and other importers as they feared further appreciation in the greenback. This weighed on the rupee. Oil marketing companies were also looking to take advantage of comparatively lower crude oil prices, they said. 

Oil prices fell due to concerns over demand from top importer China. China's economy grew at a slower than expected 4.7% pace in the Apr-Jun quarter, official data showed, giving way to concerns about the country's oil demand. The reading was significantly lower than the 5.1% expected by financial markets.

The September Brent crude contract on the Intercontinental Exchange was at $84.52 per bbl at 1307 IST, compared with $85.11 per bbl on Thursday and $85.08 on Wednesday. 

A recovery in the greenback continued to weigh on the Indian unit, dealers said. The dollar recovered as the president of the Federal Reserve Bank of San Francisco, Mary Daly, said she would look for more confidence that inflation was moving towards the Fed's 2% target before batting for an interest rate cut.

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.26 at 1310 IST, compared with Thursday's close of 104.18 and Wednesday's close of 103.75.

For the rest of the day, the rupee is seen in a range of 83.50-83.70 against the dollar, dealers said. They peg immediate key technical support for the Indian currency at 83.65 a dollar.  (Kabir Sharma)

India Rupee: Technical Levels for rupee - Jul 19

MUMBAI – At 0900 IST, the rupee was at 83.6250 a dollar, against 83.6500 from the previous close. At 1012 IST, the rupee was at 83.6300 per dollar.

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

(Kabir Sharma)

India Rupee: Steady; RBI's dlr sales in offshore mkt avert record low

NEW DELHI – The rupee was steady against the dollar as banks' dollar sales, likely on behalf of the Reserve Bank of India in the non deliverables offshore market, offset the impact of a strong recovery in the dollar index, dealers said. 

"They have been active since yesterday, and now in the morning we could see where it was and where they brought it down to," a dealer at a state-owned bank said. The dollar/rupee pair traded at 83.70 a dollar before onshore markets opened but dollar sales by banks on behalf of the RBI brought the pair down to 83.62 a dollar level at opening, dealers said. 

Dealers expect the RBI to continue intervening in the foreign exchange market by way of dollar sales to prevent the rupee from depreciating beyond the record low level of 83.67 a dollar, touched in June. 

The dollar index recovered sharply after hitting a four-month low on Thursday, which weighed on the Indian unit, dealers said. The dollar recovered as the President of the Federal Reserve Bank of San Francisco Mary Daly said she would look for more confidence that inflation was moving towards the Fed's 2% target before batting for an interest rate cut.

"We don't have price stability right now," Daly said at a Dallas Fed event. "We've had some really good incoming data, but even with the incoming data on inflation being positive and good data after earlier this year, we're not there yet," she said.

The dollar was also supported by better-than-expected manufacturing data from the US. The latest Philadelphia Fed manufacturing index reading remained in positive territory for the sixth straight month as manufacturing activity expanded overall. In July, the index rose to 13.9 from 1.3 in June, coming in significantly above the forecast of 2.7.

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.26 at 0929 IST, compared with Thursday's close of 104.18 and Wednesday's close of 103.75.

For the rest of the day, the rupee is seen in a range of 83.50-83.70 against the dollar, dealers said. They peg immediate key technical support for the Indian currency at 83.65 a dollar.  (Kabir Sharma)

India Rupee - Asia FX:Most dn; dlr recovers on Fed officials' remarks

NEW DELHI – Most Asian currencies were down against the dollar as the dollar index recovered sharply on the back of comments from Federal Reserve officials and stronger-than-expected manufacturing data from the US. Asian currencies also fell tracking a slump in Asian equities. 

The dollar index recovered sharply from a four-month low touched on Thursday after Federal Reserve Bank of San Francisco President Mary Daly said she would be looking for more confidence that inflation was moving back to the Fed's 2% target before batting for an interest rate cut. "We don't have price stability right now," Daly said at a Dallas Fed event. "We've had some really good incoming data, but even with the incoming data on inflation being positive and good data after earlier this year, we're not there yet," she said.

The dollar was also supported by better-than-expected manufacturing data from the US. The latest Philadelphia Fed manufacturing index reading remained in positive territory for the sixth straight month as manufacturing activity expanded overall. In July, the index rose to 13.9 from 1.3 in June, coming in significantly above the forecast of 2.7.

Currencies were also lower as Asian indices fell after investors continued to book profits and moved away from technology stocks. The move followed reports saying the US may impose severe trade restrictions on allies continuing to trade with China in the cutting-edge computer chip market. 

The Taiwan dollar headlined the losses and was down 0.5% against the dollar. The South Korean won followed suit and was down 0.3% against the greenback. 

The Indonesian rupiah, Malaysian ringgit, and the Philippines peso were down 0.2% each against the dollar. (Kabir Sharma) 

India Rupee: Expected range for rupee - Jul 19

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

(Kabir Sharma) 

End

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

Edited by Ashish Shirke

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