More Stories

Informist, Friday, Jul 26, 2024

By Sourabh Kumar

MUMBAI – The rupee ended at a record closing low notwithstanding intervention by the Reserve Bank of India, as banks persistently purchased the greenback on behalf of importers, dealers said. "There was pressure from importers, as they thought the rupee might fall further, and this prompted the central bank to intervene," a dealer with a brokerage firm said.

After touching a lifetime low of 83.7300 a dollar during the day, the Indian currency settled at 83.7275 a dollar. On Thursday, the rupee settled at 83.6975 a dollar. Persistent demand for dollars by importers today weighed on the rupee, dealers said.

While the rupee opened steady, it quickly fell to a record low against the dollar due to a fall in the offshore Chinese yuan, dealers said. The offshore yuan fell on foreign fund outflows from the region on a bleak economic outlook, they said.

Apart from the falling yuan, importers' demand for the greenback put pressure on the rupee, dealers said, with importers keen to buy the US unit in anticipation of a rise in the dollar/rupee pair. Banks also purchased the greenback for their clients' month-end payment needs, adding to the pressure on the rupee. For the first half of the day, state-owned banks were major buyers of dollars, with foreign banks entering the market with substantial dollar purchases in the second half, dealers said. "Volume was one of the best in this month today," a dealer at a private bank said.

Taking note of the downward pressure on the rupee, the RBI kept intervening by selling dollars throughout the day, dealers said. This saved the currency from falling further. Apart from the central bank, some exporters also sold the greenback, which limited the rupee's losses, dealers said. However, exporters largely waited for the rupee to drift lower before placing large bets, they said.

A slight fall in the dollar index also supported the rupee, dealers said. The index remained relatively low even after the higher-than-expected Apr-Jun advance estimate of US GDP. The world's largest economy expanded 2.8% in Apr-Jun, against the 2% expansion that economists had forecast in a Reuters poll.

Even after the higher GDP reading, Fed funds future traders see 100% chance of a rate cut in September, according to the CME Group's FedWatch tool. The US GDP figures failed to make any impact on the dollar index as market participants waited for the release of the US personal consumption expenditures data today, dealers said.

The dollar index remained lower primarily because of strength in the Japanese yen, dealers said. The index is expected to remain strong in the coming days on the back of likely higher demand for safe-haven currency. "There are many events lined up around the world, such as the Bank of Japan's likely move, Fed meeting, Fed rate-cut expectations, and the US election, to name a few," a dealer with a state-owned bank said. "These are likely to push up demand for dollars, and that is why I think the dollar index will remain high."

Market participants are now keeping an eye on the BoJ policy meeting outcome on Wednesday, where they expect the Japanese central bank to raise the overnight call rate. Currently, the benchmark interest rate in Japan is 0.0-0.1%.

On Wednesday, the US Federal Open Market Committee is also expected to announce its decision on the Fed funds rate. While the market largely expects rates to remain unchanged, they would be watching out for any cues on when the Fed will start cutting rates. Currently, the market expects the Fed to cut rates at its next meeting in September.

"I expect the rupee to break away from the current level and trade in a band comfortably only after the Fed meeting," a dealer with a state-owned bank said.

PREMIUMS

Premiums on the one-year dollar/rupee forward contract ended largely steady as a few banks sold the greenback to take advantage of a relatively higher forward premium level, dealers said. Premiums remained higher as market participants cemented expectations of a rate cut by the Fed at its September meeting, dealers said.

With the FOMC expected to cut rates in September and the RBI likely to delay a rate cut, the interest rate differential between the US and India is likely to rise, driving the dollar/rupee forward premiums higher. Dealers said, however, that with the RBI active in forwards, changes in liquidity have little effect.

A rise in premiums to an over five-month high of 1.80% again today invited dollar bids from banks, capping gains in premiums, dealers said. Dealers said some of the RBI's buy/sell contracts matured in the near-term forwards, which led to a rise in dollar liquidity in the market, aiding forward premiums. The contracts matured in one-month or two-month tenures, dealers said.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 150.24 paise, compared with 149.98 paise on Thursday. On an annualised basis, the premium was 1.79%, similar to Thursday's close.

OUTLOOK

The market is shut Saturday. On Monday, participants will take cues from the movement of the dollar index and crude oil prices, dealers said. They will also take cues from the US personal consumption expenditures data released today. The headline Personal Consumption Expenditures Price Index increased 0.1% on month while the core index rose 0.2% on month, in line with expectations in a Dow Jones poll.

Most exporters are likely to remain on the sidelines, in the hope of a further fall in the rupee, dealers said. Importers are expected to indulge in panic-buying if the rupee falls sharply, they said. However, dealers expect the RBI to continue intervening in the market through dollar sales to prevent runaway depreciation in the Indian unit.

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 - World FX: Yen down ahead of US data; sterling up

MUMBAI – The yen was down 0.4% against the dollar ahead of the release of personal consumption expenditures data in the US, due later today. The US Core Personal Consumption Expenditures Price Index is expected to rise 2.5% on year, against the previous reading of 2.6% in May.

The Japanese currency has had a wild month in July, starting off at a 38-year low of 161.96 per dollar. However, the yen recovered and how. On Thursday, the yen touched a three-month high against the dollar as market participants braced for central bank policy meetings in both major economies next week.

The Bank of Japan, in a historic move, is expected to raise its benchmark policy rate whereas its US counterpart is expected to stay on pause for one last meeting before going for a 25-basis-point rate cut in September.

The dollar index was steady after the release of US GDP data on Thursday. The US GDP grew at an annualised rate of 2.8% in Apr-Jun, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday. Economists polled by Reuters had expected GDP to rise by 2%. The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.38 at 1658 IST, compared with Thursday's close of 104.40 and Wednesday's close of 104.33.

The pound sterling was up 0.2% against the dollar as investors shift focus to the Bank of England’s monetary policy meeting, which is scheduled for Thursday. A Reuters poll showed that more than 80% of economists expect the central bank to announce a rate cut at its August meeting for the first time in more than four years. 

The euro was up 0.2% against the dollar and the Australian dollar was up 0.1%.  (Kabir Sharma)

India Rupee: Premiums steady; banks' dollar sales offset Fed rate-cut bets

MUMBAI – Premiums on the one-year dollar/rupee forward contract were steady as a few banks sold the greenback to take advantage of a relatively higher forward premium level, dealers said.

"Some banks are receiving in forwards as levels are very good," a dealer with a private bank said. "The IRD (interest rate differential) is expected to increase, given the rate outlook (of US Fed), and that is driving the premiums higher." 

Rise in premiums to an over five-month high of 1.80% again today invited dollar bids from banks, capping gains in premiums, dealers said. Dealers said some of the RBI's buy/sell contracts matured in the near-term forwards, which led to rise in dollar liquidity in the market, aiding forward premiums. The contracts matured in one-month or two-month tenures, dealers said.

With the US Federal Open Market Committee expected to cut rates at its meeting in September, and the RBI likely to delay a rate cut, the interest rate differential between the US and India is likely to rise, driving the dollar/rupee forward premiums higher. Fed funds future traders see a 100% chance of a rate cut in September, according to the CME Group's FedWatch tool.

US Treasury yields were largely steady on Thursday. Investors were unfazed by a higher-than-expected US GDP advance estimate for Apr-Jun. The US GDP increased at a 2.8% annualised rate in Apr-Jun, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday. Economists polled by Reuters had forecast GDP rising 2%. 

The focus is now on US personal consumption expenditures data for June, due today. The price index is expected to rise 2.5% on year, against the previous reading of 2.6%. The core price index is expected to rise 2.5% on year against 2.6% earlier.

At 1513 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 150.74 paise, compared with 149.98 paise on Thursday. On an annualised basis, the premium was 1.80%, up from Thursday's close of 1.79%.  (Sourabh Kumar)

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

MUMBAI – The rupee was steady against the dollar as dollar sales by banks, likely on behalf of the Reserve Bank of India, offset downward pressure from dollar purchases by importers, dealers said.

"Some importers are there as they fear the rupee may go further down, and that is putting pressure on the rupee," a dealer with a state-owned bank said. "The central bank is present on the upside, which is keeping it (rupee) capped."

As the rupee kept trading near 83.70 a dollar for the third day in a row, importers anticipated a fall in the Indian currency going ahead, dealers said. This drove demand for dollars, which weighed on the rupee, they said. A few dealers said a rise in demand from gold importers also weighed on the rupee. The demand from gold importers rose after the Budget announced a cut in gold import duty to 6% from 15%.

The Reserve Bank of India intervened in the market by selling the dollar at 83.73 to prevent the rupee from going down against the greenback, dealers said.

A slight fall in the dollar index supported the rupee, dealers said. The dollar weakened as bets of a rate cut in the US in September remained firm after the release of US GDP data. US GDP grew 2.8% in Apr-Jun, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday.

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: Steady as RBI's dollar sales offset fall in Chinese yuan

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 a falling Chinese yuan, dealers said.

"A few banks were selling for central bank, and that is keeping it range-bound," a dealer with a state-owned bank said. "Mainly, traders are not coming into the market right now, and are waiting for this level to break on either side, before making any move."

Dealers said that due to a falling yuan, the rupee came under pressure, and that prompted the RBI to intervene by way of dollar sales. The offshore Chinese yuan fell in early trade today due to outflows from the region and dollar demand, dealers said.

A fall in the dollar index supported the rupee, dealers said. The dollar weakened as bets of a rate cut in the US in September remained firm after the release of US GDP data. US GDP grew at a 2.8% annualised rate in Apr-Jun, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday.

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.30 at 1045 IST, compared with Thursday's close of 104.40 and Wednesday's close of 104.33.

A slight increase in crude oil prices weighed on the rupee, dealers said. Oil prices rose due to expectations of higher oil demand from the world's largest consumer, the US, after the better-than-expected growth numbers. The September Brent crude contract on the Intercontinental Exchange was at $82.53 per bbl at 1043 IST, compared with $82.37 per bbl on Thursday and $81.71 on Wednesday.

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 26

MUMBAI – At 0900 IST, the rupee was at 83.7200 a dollar, against 83.6975 from the previous close. At 1036 IST, the rupee was at 83.7125 per dollar.

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

(Sourabh Kumar)

India Rupee: Hits record low tracking Chinese yuan fall; weak dollar aids

MUMBAI – The rupee fell to a record low against the dollar today, tracking a fall in the offshore Chinese yuan, dealers said. "It is tracking yuan. There is risk-off sentiment all around and some dollar demand is also there," a dealer at a brokerage firm said.  

The rupee fell to a record low of 83.7300 a dollar at open today. 

The offshore Chinese yuan fell in early trade today due to outflows from the region and persistent dollar demand, dealers said. Some dealers speculated that the Reserve Bank of India may sell dollars to keep the rupee from depreciating further. 

The dollar index fell today, which may support the rupee, dealers said. The dollar weakened as bets of a rate cut in the US in September remained firm after the release of US GDP data. US GDP grew at a 2.8% annualised rate in Apr-Jun, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday.

A slight increase in crude oil prices weighed on the rupee, dealers said. "Brent crude prices have stabilised above $80 per barrel and could also weigh on sentiments," a dealer at a state-owned bank said. 

Futures rose on the back of expectations of higher oil demand from the world's largest consumer, the US, after the better-than-expected growth numbers. Oil futures also rose on Thursday as traders covered short bets after a decline in US crude and fuel inventories.

Dealers said they expect volumes to remain on the lower side as they are awaiting the release of US personal expenditure data for June, due today, for further confidence about a rate cut by the Fed in September. Dow Jones expects personal income to rise 0.4% on month against a 0.5% rise the previous month. The price index is expected to rise 2.5% on year, against the previous reading of 2.6%. The core price index is expected to rise 2.5% on year against 2.6% in the previous reading.

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.  (Kabir Sharma)

India Rupee - Asia FX: Most up as dollar eases on higher-than-view US GDP

MUMBAI – Most Asian currencies were up against the dollar as the dollar index weakened after the release of stronger-than-expected GDP data from the US. However, bets of a rate cut in the US in September remained firm. US GDP increased at a 2.8% annualised rate in Apr-Jun, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday.

Economists polled by Reuters had forecast a 2% rise in GDP. Post the data, CME FedWatch Tool showed traders holding their expectations of certainty in rate cuts by September in the US. The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.32 at 0853 IST, compared with Thursday's close of 104.40 and Wednesday's close of 104.33.

The Singapore dollar was down 0.1% against the dollar after the Monetary Authority of Singapore today left its key interest rates unchanged. The central bank said the current policy settings remain appropriate and "will keep a restraining effect on imported inflation as well as domestic cost pressures, and ensure medium-term price stability.

The Taiwan dollar was down 0.1% against the dollar. Taiwan markets were closed for a second successive day because of bad weather. The Thai baht was down 0.2% against the dollar. 

Bucking the trend, the Indonesia rupiah was up 0.3% against the dollar. Indonesia has adopted a new approach by preparing a de-dollarisation task force to promote the usage of local currencies and limit the usage of the dollar in its trade procedures. The rupiah has fallen nearly 5% against the dollar since the start of 2024 as a broad rally in the greenback triggered capital outflows. 

Market participants assessed Tokyo's CPI data for July, which rose 2.2% against a 2.1% rise the previous month. The core-core index, which strips away the effects of both fresh food and fuel costs and is closely watched by the Bank of Japan as a broader price trend indicator, rose 1.5% in July from a year earlier after a 1.8% rise in June. They now await the release of US personal consumption expenditure data, due later today. The Japanese yen was up 0.1% against the dollar today.  (Kabir Sharma)

India Rupee: Expected range for rupee - Jul 26

MUMBAI – 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.