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Informist, Monday, Jul 29, 2024

By Sourabh Kumar

MUMBAI – The rupee ended the day unchanged from Friday's close against the dollar as the Reserve Bank of India again entered the market, selling dollars to offset the downward pressure on the currency from importers' purchase of the greenback, dealers said.

"It is the same day again, the central bank was there, that is why we did not see any movement," a dealer with a private bank said. After moving in a range of just under 4 paise, the rupee settled at 83.7275 a dollar, the same as Friday.

Today, the rupee was under constant pressure from importers' purchases of the greenback, which was met with the central bank's determination to not allow the rupee to fall, dealers said. Despite the RBI's dollar sales, however, the rupee closed at a record low of 83.7275 a dollar, same as Friday.

Soon after opening steady, the rupee came under pressure as importers demanded the greenback for their month-end payments, dealers said. Oil-marketing companies were also present to purchase dollars as they saw crude oil prices falling. While lower oil prices support the Indian currency, given that crude oil is a major component of India's imports, the rise in dollar demand from oil-marketing companies looking to stock up on the commodity at lower rates proved negative for the rupee, dealers said.

The September Brent Crude contract on the Intercontinental Exchange was at $81.03 per bbl at 1603 IST, compared with $81.13 per bbl on Friday and $82.37 per bbl on Thursday. While oil prices remained lower due to concerns around demand, traders remained cautious of a possible spillover of Israel's continuing war with Hamas, to other countries in the region such as Lebanon.

Seeing importers' persistent demand for the greenback, the central bank entered the market quickly after opening and kept selling dollars through the day to restrict the rupee from falling, dealers said.

A few exporters' dollar sales also supported the rupee, dealers said. They, however, said the majority of exporters were waiting for the rupee to fall below 83.75 a dollar before placing large bets.

The dollar index remained steady today. Dealers said that while the rupee was largely detached from the movement in the dollar index, it still enjoyed some support as the index has remained steady for about a week now. The index, which measures the strength of the greenback against a basket of six major currencies, was at 104.47 at 1553 IST, after opening at 104.32 today. The index was at 104.33 on Friday and 104.40 on Thursday. 

After the release of the US Personal Consumption Expenditures Price Index, which rose 0.1% on month and 2.5% on year in June, in line with the market consensus, participants now eye the outcome of the US Federal Open Market Committee's meeting on Wednesday to see a decisive move in the dollar index.

"While everyone knows that the Fed is going to keep rates unchanged, we are waiting for any commentary by Fed officials to see when they are going to cut rates," a dealer with a state-owned bank said.

PREMIUMS

Premiums on the one-year dollar/rupee forward contract ended near a six-month high, tracking a fall in the 10-year benchmark US Treasury yield Friday, as the market was certain of a rate cut by the US Federal Reserve in September, dealers said. Forward premiums touched a high of 1.83% today, the highest level since Feb 5.

With the Fed expected to cut rates, and India expected by the market to delay a rate cut, the interest rate differential between the US and India is likely to rise, driving dollar/rupee forward premiums higher. Premiums on forwards of a currency pair are reflective of the interest rate differential between the countries involved.

The RBI's dollar purchases for forward delivery also gave a boost to the dollar/rupee premium, dealers said. A few banks sold the greenback in the forward market to take advantage of the higher dollar/rupee forward premium, thus restricting the upward movement in premiums, dealers said.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 153.00 paise, compared with 150.14 paise on Friday. On an annualised basis, the premium was 1.83%, up from Friday's close of 1.79%.

OUTLOOK

On Tuesday, market participants will take cues from the movement of the dollar index and crude oil prices, dealers said. They expect importers' demand for dollars to continue for their month-end payment needs. "The market is expected to be similar until the Fed decision is out, while some demand from importers will continue," the dealer with the state-owned bank quoted earlier said.

Most exporters are likely to remain on the sidelines, in the hope of a further fall in the rupee, dealers said. They expect the RBI to continue intervening in the market through dollar sales to prevent runaway depreciation in the Indian unit.

Further this week, dealers expect some foreign fund inflows related to initial public offers to support the rupee. However, they said, the RBI is also likely to absorb such flows by purchasing the greenback, therefore offsetting any positive effect on the Indian currency. Ola Electric Mobility's initial public offer is set to open for subscription on Friday and close on Aug 8.

During the day, the rupee is seen at 83.55-83.75 a dollar, with key technical support pegged at 83.75 a dollar.

India Rupee - World FX: Sterling down as BoE may cut rates by 25 bps

MUMBAI – The pound sterling fell 0.3% against the greenback ahead of the outcome of the Bank of England's monetary policy meeting on Thursday. Over 80% of the economists polled by Reuters expect the UK central bank to cut rates by 25 basis points from the current 5.25%.

The euro fell 0.2% against the dollar as investors remained cautious ahead of the release of the eurozone inflation numbers Wednesday. The data are expected to show inflation rising 2.5%, according to a forecast by economists in a Bloomberg poll. After the European Central Bank held its rates steady this month, the market expects that the ECB may cut rates in September if the data show a cooling economy.

The Japanese yen rose 0.1% against the dollar ahead of the outcome of the Bank of Japan's two-day monetary policy meeting ending Wednesday. Market participants expect the Japanese central bank to raise its overnight call rate. The current rate stands at 0.0-0.1%.

The Australian dollar and the Canadian dollar were steady against the US unit.

The dollar index remained largely steady. The index, which measures the strength of the greenback against a basket of six major currencies, was at 104.47 at 1553 IST, after opening at 104.32 today. The index was at 104.33 on Friday and 104.40 on Thursday.

After the release of the US Personal Consumption Expenditures Price Index, which rose 0.1% on month and 2.5% on year in June, in line with the market consensus, participants now eye the outcome of the US Federal Open Market Committee's meeting Wednesday to see a decisive move in the dollar index.  (Sourabh Kumar)

India Rupee: Premiums near 6-month high as US data affirm rate-cut view

MUMBAI – Premiums on the one-year dollar/rupee forward contract rose to a near six-month high today, tracking a fall in the benchmark 10-year US Treasury yields on Friday, as the market was certain of a rate cut by the US Federal Reserve in September, dealers said. Forward premiums touched a high of 1.83% today, the most since Feb 5.

"Forwards, if you see, has finally moved," a dealer with a state-owned bank said. "It's moving up as the market has completely priced in rate cuts."

The personal consumption expenditures price index--the US Federal Reserve's preferred gauge for inflation--rose 0.1% last month after staying unchanged in May, the Commerce Department's Bureau of Economic Analysis reported on Friday. The increase in personal consumption expenditures was in line with economists' expectations. On the yearly basis, personal consumption expenditures inflation advanced 2.5%, a tad lower than 2.6% in May. Core inflation saw a 2.6% rise on an annualised basis, similar to the previous month.

Fed Funds futures traders see 100% chance of a rate cut at the Federal Open Market Committee’s September meeting, with the majority of investors expecting a 25 bps cut.

With the Fed expected to cut rates, and India delaying a rate cut, as expected by the market, the interest rate differential between the US and India is likely to rise, thus, driving dollar/rupee forward premiums higher. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Moreover, the Reserve Bank of India's dollar purchases for forward delivery also gave a boost to the dollar/rupee premium, dealers said.

A few banks sold the greenback in the forward market to take advantage of a higher dollar/rupee forward premium, thus restricting the upward movement in premiums, dealers said.

At 1425 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 153.00 paise, compared with 150.24 paise on Friday. On an annualised basis, the premium was 1.83%, up from Friday's close of 1.79%.  (Sourabh Kumar)

India Rupee: Record low on importers' dlr buys despite RBI dlr sales

MUMBAI – The rupee fell to a record low of 83.7350 a dollar against the greenback, due to persistent dollar demand from importers and oil marketing companies, dealers said. 

"Importers are covering their shorts and slightly more than usual oil demand is there," a dealer at a state-owned bank said. "There is strong resistance near 73 (83.73), if that breaks we can see 80 (83.80)," he said. 

Dealers said importers were covering their short dollar bets, which weighed on the Indian unit. There was some month-end dollar demand too, they said. 

Oil companies were stocking up on the commodity citing attractive prices, dealers said. Crude oil prices fell over 1.5% on Friday, closing the week lower due to weak demand from China and optimism about a potential Gaza ceasefire deal that might alleviate tensions in West Asia and related supply worries.

The rupee fell against the dollar despite weakness in the dollar index and despite local equities climbing to record highs today. At 1144 IST, the Nifty 50 and the Sensex were up 0.6% and 0.7%, respectively. 

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.26 at 1144 IST, compared with Friday's close of 104.33 and Thursday's close of 104.40.

For the rest of the day, the rupee is seen at 83.60-83.80 against the dollar, dealers said. They peg immediate key technical support for the Indian currency at 83.75 a dollar.  (Kabir Sharma)

India Rupee: Technical Levels for rupee - Jul 29

MUMBAI – At 0900 IST, the rupee was at 83.7000 a dollar, against 83.7275 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:

(Kabir Sharma)

India Rupee: Steady; RBI dlr sales offset importers', oil cos' buys

MUMBAI – The rupee was steady against the dollar as oil companies' persistent dollar demand was offset by banks' dollar sales likely on behalf of the Reserve Bank of India, dealers said.

"NATS (state-owned banks) are selling for them to protect 73 (83.73), just like Friday, there is strong demand from oilers (oil companies) after the fall in prices and some importer covering is happening," a dealer at a state-owned bank said.

Dealers said the Reserve Bank of India sold the greenback to prevent runaway depreciation in the Indian unit and to prevent it from hitting new all-time lows. Oil marketing companies demanded the greenback which weighed on the Indian unit, dealers said. Oil companies wanted to stock up on the commodity given the attractive prices, they said. 

Crude oil prices fell over 1.5% on Friday, closing the week lower due to weak demand from China and optimism about a potential Gaza ceasefire deal that might alleviate tensions in West Asia and related supply worries. 

The September Brent crude contract on the Intercontinental Exchange was at $81.34 per bbl at 0952 IST, compared with $80.51 per bbl on Thursday and $82.37 per bbl on Thursday. 

A fall in the dollar index and a rise in local equities also supported the Indian unit, dealers said. At 0952 IST, the Nifty 50 and the Sensex were up 0.3% and 0.4%, respectively.

For the rest of the day, the rupee is seen at 83.60-83.80 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 dlr falls on US inflation data

MUMBAI – Most Asian currencies rose against the dollar as the greenback weakened after the release of US personal consumption expenditure data for June. The personal consumption price index increased 0.1% on month and was up 2.5% on year in June, in line with the market consensus, according to the Commerce Department. The year-on-year gain in May was 2.6%, while the monthly figure was unchanged.

Meanwhile, core personal consumption expenditure inflation, which excludes food and energy, rose to 0.2% in June from 0.1% in May. Annual core inflation rose to 2.6% in the same period from 2.5% in May. Both figures matched expectations. Investors are now pricing in nearly 90% odds of a Fed rate cut in September, followed by another cut in November and December, according to the CME FedWatch Tool. 

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.22 at 0916 IST, compared with Friday's close of 104.33 and Thursday's close of 104.40.

The South Korean won was up 0.2% against the dollar. The won has fallen almost 7% this year amid economic woes in China, the biggest trading partner of South Korea. However, the future looks bright for South Korean won as the country has attracted $2.5 bln inflows into bonds and stocks in July ahead of a potential inclusion into the FTSE Russell's World Government Bond Index in September.

The Indonesian rupiah was up 0.2% against the dollar. On Friday, a senior official told Reuters that Indonesia's central bank has taken action in the foreign exchange market due to the rupiah depreciating to its lowest point against the US dollar in over a fortnight.

The Thai baht and the Malaysian ringgit were up 0.2% and 0.4% against the dollar, respectively. Bucking the trend, the Taiwan dollar was down 0.2% against the dollar.  (Kabir Sharma)

India Rupee: Expected range for rupee - Jul 29

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

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