More Stories

Informist, Monday, Jul 22, 2024

By Sourabh Kumar and Kabir Sharma

NEW DELHI – After hitting a record low, the rupee closed steady against the dollar as the Reserve Bank of India sold the greenback, dealers said. The Indian unit hit a lifetime low of 83.6750 a dollar during the day.

"There was pressure from importers, especially from oil companies, and that is why the rupee hit a record low," a dealer with a private bank said. "I don't think the RBI intervened that aggressively."

The rupee moved in a very narrow range of 4 paise today and settled at 83.6575 a dollar. On Friday, the Indian unit had closed at 83.6625 a dollar. Throughout the day, the Indian currency was under downward pressure from importers, including oil marketing companies, dealers said.

Since the rupee opened near the previous record low of 83.6675 a dollar, which it touched on Jun 20, dealers said importers were pessimistic about the currency's performance. Given that the rupee ended at a record closing low of 83.6625 a dollar on Friday, this led to a rise in demand for the greenback from importers in anticipation of the unit falling towards 83.70 a dollar, dealers said.

Apart from general importers, oil marketing companies also bought dollars due to lower crude oil prices and fear that the rupee may drift down against the dollar, dealers said. Given that India is a major importer of crude oil, a fall in prices of the commodity lowers the country's import bill, thereby affecting the domestic currency positively. However, dealers said, demand for dollars from oil marketing companies overshadowed the positive effect of lower oil prices.

Offsetting the downward pressure from importers was the intervention by the RBI. The central bank sold the greenback to restrict a fall in the rupee, dealers said. While the action limited the fall in the Indian unit, it was not enough to save the currency from hitting a record low, they said.

The rupee was also under pressure from weakness in other Asian currencies, especially the offshore Chinese yuan, which weakened to a two-week low of 7.2750 a dollar after the People's Bank of China cut its key interest rate. The markets were taken by surprise as China's central bank cut a key short-term policy rate to support the real economy. The bank said it would cut the seven-day reverse repo rate to 1.7% from 1.8% earlier, and also improve the mechanism of open market operations.

Following the announcement, the offshore Chinese yuan dropped to a near two-week low of 7.2750 per dollar, which weighed on other Asian currencies and subsequently on the rupee.

Dealers said the uncertainty around the US elections in November after President Joe Biden withdrew from the race also fuelled demand for the dollar. Biden on Sunday ended his bid for re-election and endorsed Vice-President Kamala Harris for the Democratic nomination to face former president Donald Trump.

Dealers said market participants' eyes are now on the Union Budget for 2024-25 (Apr-Mar), which will be presented in Parliament by Finance Minister Sitharaman on Tuesday.

PREMIUMS

Premiums on the one-year dollar/rupee forward contract ended steady after touching a five-month high of 1.77%, a level last seen in February, dealers said. Forward dollar sales by a few banks offset forward dollar buys for Indian companies, they said. Demand for forward dollars rose as market participants were nearly certain of a rate cut by the US Federal Reserve at its September meeting. However, some banks sold forward dollars to take advantage of the higher premiums.
 

Odds of a rate cut by the Fed at its September meeting were close to 100%, according to the CME FedWatch tool, after New York Federal Reserve President John Williams Friday said an interest rate cut could be warranted in the coming months, but not at the central bank's July policy meeting, fuelling hopes of a rate cut in September.

If the Fed does cut interest rates in September and the Reserve Bank of India keeps its policy rate unchanged, the interest rate differential between the countries will rise, expectations of which are pushing premiums upwards.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 147.19 paise, compared to 147.69 paise on Friday. On an annualised basis, the premium was 1.76%, against Friday's close of 1.77%.

OUTLOOK

On Tuesday, market participants will take cues from the Union Budget Scheduled for Tuesday. "If we see a populist Budget, the rupee may depreciate further to 70 (83.70 a dollar)," a dealer with a state-owned bank said.

Market participants will look out for the fiscal deficit and capital expenditure numbers. The government is likely to lower its fiscal deficit target for 2024-25 (Apr-Mar) to 5.0% of GDP from 5.1% projected in the Interim Budget, according to an Informist poll of 21 economists and bond market participants.

The rupee will also track movement in the dollar index and crude oil prices. 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 83.70 a dollar.

India Rupee: At record low on importers' dollar buys; RBI's dollar sales aid

NEW DELHI – The rupee fell to a record low of 83.6750 against the dollar today as banks persistently bought the greenback on behalf of oil marketing companies and other importers, and also as other Asian currencies weakened against the greenback, dealers said. 

"There is a combination of factors at play here; there is dollar demand and then the news about the presidential election (US). Also, other Asian currencies are weakening," a dealer at a big state-owned bank said. "However, there is strong resistance on the other side."  

Dealers said the uncertainty around the US election after President Biden withdrew from the race has also fuelled demand for the dollar. Also weighing on the Indian unit is the weakness in other Asian currencies following a rate cut from the People's Bank of China, they said. 

Markets were taken by surprise as the People's Bank of China cut a key short-term policy rate to support the real economy. The bank said it would cut the seven-day reverse repo rate to 1.7% from 1.8% earlier, and will also improve the mechanism of open market operations.

Following the rate cut announcement, the offshore Chinese yuan dropped to a near two-week low of 7.2750 per dollar, which weighed on other Asian currencies and subsequently on the rupee. 

Some public sector banks sold the greenback on behalf of the Reserve Bank of India, which supported the Indian unit, dealers said. 

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 83.70 a dollar.  (Kabir Sharma)

India Rupee: Premiums up; market almost sure of Fed rate cut in Sep

NEW DELHI – Premiums on the one-year dollar/rupee forward contract were at a five-month high as banks bought dollars for forward delivery on behalf of Indian corporates, dealers said. Today, the one-year dollar/rupee forward premium rose to 1.77%, a level last seen in February.

"Some paying pressure from corporates is there, the levels at which they were receiving earlier, now they are paying at such levels," a dealer at a state-owned bank said. "It is largely because of expectation that the US Fed will cut rates, and India not, we are seeing a further rise in premiums," he said. 

Odds of a rate cut by the US Federal Reserve at its September meeting were close to 100%, according to the CME FedWatch tool after New York Federal Reserve President John Williams Friday said that an interest rate cut could be warranted in the coming months, but not at its July policy meeting, fuelling hopes of a rate cut in the September meeting. 

If the Fed cuts interest rates in September and the Reserve Bank of India keeps rates unchanged, the interest rate differential will increase, the expectation of which is leading to a rise in premiums. 

Dealers said market participants now look forward to the Union Budget for 2024-25 (Apr-Mar), which is scheduled to be presented in Parliament by Finance Minister Sitharaman on Tuesday.

At 1344 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 148.13 paise, compared to 147.17 paise on Friday. On an annualised basis, the premium was 1.77%, same as Friday's close.  (Kabir Sharma)

India Rupee: Touches record low; importers' dollar buys offset RBI's sales

MUMBAI – The rupee touched its record low against the US dollar despite the Reserve Bank of India's intervention by way of dollar sales, as the central bank's efforts were offset by persistent demand for the greenback from importers, dealers said.

"Importers are buying at this level, and we are expecting the rupee may breach 67 (83.67 a dollar) to go to 69 (83.69 a dollar) today, but that is expected to be a hard stop for it (rupee)," a dealer with a state-owned bank said.

Dealers said while the rupee is under constant pressure from importers due to fear that it may fall later today, only a few exporters sold the greenback, with most of them waiting for a higher dollar/rupee, and this provided only little support to the Indian unit.

Most exporters are of the view that the rupee may fall to 83.70 a dollar, dealers said. If it does slip below 83.67 a dollar, it is likely to fall further to 83.75 a dollar, they said.

The dollar index was slightly down today as US President Joe Biden ended his re-election campaign, clearing the way for another Democrat, Vice-President Kamala Harris, to face Republican challenger Donald Trump in the November elections. The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.29 at 1201 IST, compared with Friday's close of 104.37 and Thursday's close of 104.18.

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 83.70 a dollar.  (Sourabh Kumar)

India Rupee - Asia FX: Most down; People's Bank of China cuts key rate

NEW DELHI – Most Asian currencies were down against the dollar, tracking a fall in Asian share indices. Asian equities fell as investors digested news from the US that President Joe Biden dropped out of the presidential race, endorsing Vice President Kamala Harris as the Democratic nominee to face Republican Challenger Donald Trump in the elections. 

Markets were also taken by surprise as the People's Bank of China cut a key short-term policy rate in a surprise move to support the real economy. The bank said it would cut the seven-day reverse repo rate to 1.7% from 1.8% earlier, and will also improve the mechanism of open market operations.

The Taiwan dollar was at an 8-year low against the dollar, down 0.5% today, fuelled by an exodus of foreign funds from the country's equity markets. According to news reports, the central bank of Taiwan sold dollars in the foreign exchange market to prevent further depreciation in the currency. 

Asian currencies fell even as the dollar index weakened after Biden's announcement. The Philippines peso was down 0.3% against the dollar. The Thai Baht was down 0.2% against the greenback. Bucking the trend, the South Korean was 0.1% up against the greenback.  (Kabir Sharma)

India Rupee: Steady; banks' dollar sales for RBI offset oil cos' buys

NEW DELHI – The rupee was steady against the dollar as banks' dollar sales likely on behalf of the Reserve Bank of India offset the impact of their dollar buys for oil marketing companies, dealers said. 

"There is a possibility of the rupee testing new lows due to elevated pressure by weak Asian peers and dollar demand from oilers," a dealer at a brokerage firm said. "However, RBI intervention will curb the losses," he said. 

Dealers said the RBI intervened in the foreign exchange market to limit depreciation in the Indian unit and prevent it from touching a new record low. The current record low for the rupee is 83.6675 a dollar, touched in June. 

Some banks bought dollars on behalf of oil marketing companies who demanded the greenback fearing further appreciation in oil prices. Oil prices rose in early trade today as investors keep an eye out for hints of a rate-cut by the US Federal Reserve as soon as September.

New York Federal Reserve President John Williams said on Friday that an interest rate cut could be warranted in the coming months, but not at its July policy meeting, fuelling hopes of a rate cut in the September meeting. 

The Indian unit was also pressurised by a fall in Asian currencies across the board, dealers said. Asian currencies fell in early trade today, tracking losses in share indices as investors assessed the People's Bank of China's decision to cut its key policy rate. 

In a surprise move, the People's Bank of China cut its benchmark prime lending rate and short-term rate by 10 basis points each. 

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 83.70 a dollar.  (Kabir Sharma)

India Rupee: Expected range for rupee - Jul 22

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 Rajeev Pai

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.