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Informist, Wednesday, Jul 24, 2024

By Sourabh Kumar

MUMBAI – The rupee settled at a record closing low against the dollar, despite the Reserve Bank of India's intervention, as importers' dollar purchases weighed on the Indian unit, dealers said.

"There were some oilers (oil marketing companies), and some gold buyers in the market, but largely the volume was less," a dealer with a state-owned bank said. "The central bank was present. That is why it (rupee) could not go below 72 (83.72 a dollar)."

The rupee traded in an extremely narrow range of 4 paise and hit a record low of 83.7200 a dollar, before closing at 83.7175 a dollar today. On Tuesday, the Indian unit had settled at 83.6875 a dollar.

Today, the Indian unit opened steady against the greenback. However, since it was trading near the record low, the RBI was seen active early during the day, dealers said.

Today, some importers, including some oil marketing companies and gold importers, were buying the greenback, dealers said. This weighed on the rupee. The majority of importers, however, waited for lower dollar/rupee levels and did not come into the market for large amounts as they had already covered their positions on Tuesday at lower dollar/rupee levels, dealers said.

While oil prices were relatively low in the morning, they rose towards the end of the day, which weighed on the rupee, dealers said. A demand for the greenback from oil marketing companies, amidst low volumes, also weighed on the Indian unit, dealers said. Oil prices fell Tuesday on rising hopes of a ceasefire in Gaza between Israel and Hamas. 

Since crude oil is a major commodity that India imports, a fall in its price reduces India's import bill, thus benefitting the domestic currency. The September Brent crude contract on the Intercontinental Exchange was at $81.55 per bbl at 1602 IST, compared with $81.01 per bbl on Tuesday and $82.40 on Monday. Today, prices touched a low of $81.12 per bbl.

Apart from importers, some foreign portfolio investors also bought the greenback as they took funds out of the domestic equites market, which weighed on the Indian currency, dealers said. Today, the Nifty 50 and the BSE Sensex ended 0.3% and 0.4% lower, respectively.

To manage pressure from importers and some foreign portfolio investors, the RBI persistently intervened in the market, dealers said. A few exporters also sold the greenback, which aided the efforts of the central bank, they said. Since the rupee was trading near its record low, most of the exporters were hopeful of a further fall in the Indian currency, and thus decided to wait for higher dollar/rupee levels before placing large bets, dealers said.

Dealers expect the rupee to fall sharply once it goes below 83.72 a dollar. They said, while some support is expected from exporters' dollar sales at 83.74 a dollar, the rupee is expected to hit multiple stop losses at such levels, which may drive it down near to 84.00 a dollar level.

The dollar index was steady for the better part of the day, and dealers expect the index to move decisively only after the release of the US personal consumption expenditure data. The index, which measures the strength of the greenback against a basket of six major currencies, was at 104.39 at 1624 IST, as compared with 104.47 on Tuesday and 104.28 on Monday.

Dealers expect the dollar index to remain firm despite the data expected to show a cooling US economy. It is because of a broad weakening in the Euro, they said.

PREMIUMS

Premiums on the one-year dollar/rupee forward contract ended higher today, ahead of the release of multiple economic data from the US, as a few banks were buying the greenback for forward delivery, taking into account the increased possibility of a rate cut by the US Federal Reserve at its meeting in September, dealers said. Volumes in the forward market, however, were lower, they said.

Some banks sold dollars in the forward market to take advantage of the higher dollar/rupee forward premium which hovered near a five-month high of 1.77%, dealers said. 

If the US Federal Reserve 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 keeping premiums higher.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 148.73 paise, compared to 146.70 paise on Tuesday. On an annualised basis, the premium was 1.77%, against Tuesday's close of 1.75%.

OUTLOOK

On Thursday, market participants will take cues from the movement of the dollar index and crude oil prices, dealers said. Market participants expect the RBI to continue intervening in the market through dollar sales to prevent runaway depreciation of the Indian unit.

Exporters are likely to remain on the sidelines, on hopes of a further fall in the rupee, dealers said. Importers are expected to indulge in panic-buying if the rupee falls sharply, they said. During the day, the rupee is seen at 83.55-83.75 a dollar, with key technical support pegged at 83.70 a dollar.

India Rupee: Premiums tad up before US data as Fed rate cut bets rise

MUMBAI – Premiums on the one-year dollar/rupee forward contract were slightly higher ahead of the release of multiple economic data from the US, as a few banks were buying the greenback for forward delivery, taking into account the increased possibility of a rate cut by the US Federal Reserve at its meeting in September, dealers said. Volumes in the forward market, however, were lower, they said.

"Premiums have not moved much today, but some upward movement is due to rising expectations of a rate cut," a dealer with a state-owned bank said. "But largely the market is waiting for PCE (personal consumption expenditures data)," a dealer with a state-owned bank said.

Dealers also said market participants would be waiting for the release of the US June flash Purchasing Managers' Index, due later today. Majorly, investors would be waiting for the release of US core personal consumption expenditures data to gauge if inflation in the world's largest economy is slowing sufficiently, they said. The key inflation figure is expected to rise 0.1% on a monthly basis, a Reuters poll showed.

If the US personal consumption expenditures data, the Fed's preferred measure of inflation, comes in as expected or lower, premiums may rise to 1.80%, dealers said, as expectations of a rate cut by the Fed at its September meeting will be strengthened. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. With the Fed expected to cut rates, and India likely to delay a rate cut, the interest rate differential between the US and India is likely to rise, driving dollar/rupee forward premiums higher.

Some banks sold dollars in the forward market to take advantage of the higher dollar/rupee forward premium which hovered near a five-month high of 1.77%, dealers said. 

Before the release of US inflation data on Friday, market participants will also look keenly at US GDP data to gauge the health of the economy, they said.

At 1435 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 148.23 paise, compared with 146.70 paise on Tuesday. On an annualised basis, the premium was 1.76%, up from Tuesday's close of 1.75%.  (Sourabh Kumar)

India Rupee: In thin band; RBI's likely dlr sales offset FX outflows

MUMBAI - The rupee traded in a very narrow range of 3 paise against the dollar as movement in the dollar/rupee pair was contained due to the Reserve Bank of India's likely intervention by way of dollar sales that offset the downward pressure on rupee from some foreign portfolio investors' dollar buys, dealers said. Overall volumes remained very low today, they said.

"Volumes are very low, and the central bank is there at 83.70 a dollar, to control any more depreciation," a dealer with a state-owned bank said. Dealers said some FPIs were purchasing the greenback as they exited the domestic equities market. At 1331 IST, the Nifty 50 and BSE Sensex were down 0.5% and 0.6%, respectively.

Since the rupee was trading near its record low of 83.7125 a dollar, which it touched on Tuesday, exporters were hopeful of a further fall in the Indian currency, and thus were waiting for higher dollar/rupee levels to place large bets, dealers said. On the other hand, importers waited for lower dollar/rupee levels and did not come into the market with big amounts today as they had covered their positions on Tuesday, dealers said.

A fall in crude oil prices supported the rupee, dealers said. Crude oil prices fell Tuesday on rising hope of a ceasefire in Gaza between Israel and Hamas. Since crude oil is a major commodity that India imports, a fall in its price reduces the country's import bill, thus benefitting the domestic currency. The September Brent crude contract on the Intercontinental Exchange was at $81.27 per bbl at 1320 IST compared with $81.01 per bbl on Tuesday and $82.40 on Monday.

The dollar index remained firm ahead of the US GDP data, due Thursday, and the personal consumption expenditures data due Friday. This weighed on the Indian unit, dealers said. The key inflation figure is expected to rise 0.1% on a monthly basis, a Reuters poll showed. The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.51 at 1321 IST, compared with Tuesday's close of 104.47 and Monday's close of 104.28. Market will also keep an eye on the US flash purchasing managers' index reading for July, which is due later today.

For the rest of the day, the rupee is seen in a range of 83.55-83.75 against the dollar, dealers said. They peg immediate key technical support for the Indian currency at 83.75 a dollar.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Jul 24

MUMBAI – At 0900 IST, the rupee was at 83.6900 a dollar, against 83.6875 from the previous close. At 1038 IST, the rupee was at 83.6900 per dollar.

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

(Sourabh Kumar)

India Rupee: Steady; RBI's likely dollar sales offset importers' buys

MUMBAI – The rupee was steady against the dollar as banks' dollar sales, likely on behalf of the Reserve Bank of India, offset downward pressure from importers' dollar purchases, dealers said. Dealers said the central bank likely sold the greenback to prevent the Indian unit from hitting a record low. The rupee hit a record low of 83.7125 a dollar on Tuesday. 

"Some importers are covering around these levels, but today, the central bank is active at 83.70," a dealer with a state-owned bank said. While a few dealers expect the rupee to fall past 83.75 a dollar, a crucial support level for the rupee, others were of the view that the Indian currency will likely be restricted to 83.72 a dollar thanks to RBI's intervention.

As the Indian rupee hit successive record lows in the last two days, importers stepped up their demand for dollars on fear of a further fall in the rupee, and that weighed on the Indian unit, dealers said.

Aiding the efforts of the RBI to protect the rupee from hitting a record low level, a few exporters also sold the greenback, dealers said. They, however, said most of them are waiting for the rupee to fall past 83.70 a dollar, before placing large bets.

Meanwhile, oil prices fell Tuesday on rising hopes of a ceasefire in Gaza between Israel and Hamas. Since crude oil is a major commodity that India imports, a fall in its price reduces its import bill, thus benefitting the domestic currency. The September Brent crude contract on the Intercontinental Exchange was at $81.32 per bbl at 0939 IST, compared with $81.01 per bbl on Tuesday and $82.40 on Monday.

Meanwhile, the dollar index remained firm ahead of the release of the US GDP data, due Thursday, and the personal consumption expenditures data due Friday. This weighed on the Indian unit, dealers said. The key inflation figure is expected to rise 0.1% on a monthly basis, a Reuters poll showed. The index, which measures the strength in the greenback against a basket of six major currencies, was at 104.47 at 0940 IST, compared with Tuesday's close of 104.47 and Monday's close of 104.28.

For the rest of the day, the rupee is seen in a range of 83.55-83.75 against the dollar, dealers said. They peg immediate key technical support for the Indian currency at 83.75 a dollar.  (Sourabh Kumar)

India Rupee - Asia FX: Most steady; Taiwan, Philippines markets shut

MUMBAI – Most Asian currencies were steady against the dollar as traders exercised caution ahead of key economic data releases in the US this week. Market participants await the economic data points to get more cues on the US central bank's rate trajectory. 

The US flash purchasing managers' index readings for July are due later today. US GDP data is due on Thursday, and the US Federal Reserve's preferred inflation gauge, the core personal consumption expenditure for June, is due on Friday.

The key US inflation figure is expected to rise 0.1% on a monthly basis, a poll by Reuters showed. The index, which measures the strength in the greenback against a basket of six major currencies, was at 104.49 at 0844 IST, compared with Tuesday's close of 104.47 and Monday's close of 104.28.

Financial markets in Taiwan and the Philippines are closed today due to Typhoon Gaemi, as per reports. The Thai baht rose 0.2% against the dollar as the country's finance minister, Pichai Chunhavajira, said the 'digital wallet' handout scheme was expected to boost the economy. According to news reports, the plan, was unveiled today, says that all citizens aged 16 years or more under a certain income threshold would be able to sign up to get 10,000 baht through a 'digital wallet' app.

The South Korean won was steady against the dollar as strength in the dollar index offset the support from data showing improved consumer sentiment in the country. The consumer sentiment, measured by the composite consumer sentiment index, came in at 103.6 in July, up from last month's reading of 100.9, a survey conducted by the Bank of Korea showed. A reading above 100 indicates optimism among consumers.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Jul 24

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 Saji George Titus

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