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Informist, Tuesday, Jul 30, 2024

By Sourabh Kumar

MUMBAI – The rupee ended flat at the record closing low of 83.7275 a dollar as dollar purchases by importers for their month-end payments weighed on the Indian currency, dealers said. The rupee, which moved in a very narrow range of 2 paise, ended flat at the record closing level for the third consecutive day.

The Reserve Bank of India intervened to prevent the rupee from falling further, dealers said. "The central bank was present on both sides (buying and selling dollars), apart from some pressure from importers," a dealer with a private bank said.

The Indian currency opened steady and was constantly under downward pressure from importers, dealers said. This prompted the RBI to intervene in the market by selling dollars, they said.  

With the rupee ending flat for the third consecutive trading day, dealers said, they do not expect the Indian currency to move until the US Federal Open Market Committee meeting outcome on Wednesday. While the Fed is widely expected to stand pat on rates at this meeting, market participants expect some indication regarding the future course of action.

"The central bank is not allowing the rupee to move from this level as they are waiting for the Fed and BoJ outcome, to see where the global rates are heading," the dealer with the private bank said. 

Dealers said the majority of the demand today came from importers, especially oil marketing companies, who were purchasing the greenback to settle their month-end payment obligations. 

Dollar sales by a few exporters and a fall in crude oil prices also aided in containing the rupee's fall, dealers said. On Monday, oil prices dropped 2% following Israel's indication that its reaction to a Hezbollah rocket attack on Israeli-occupied Golan Heights would be measured to prevent the situation from escalating into a full-scale war in West Asia.

The September Brent crude contract on the Intercontinental Exchange was at $79.60 per bbl at 1600 IST, compared with $79.78 per bbl on Monday and $81.13 per bbl on Friday.

A firm dollar index weighed on the rupee, dealers said. The dollar index strengthened after the greenback recovered some ground against the Japanese yen. The US dollar rose 0.5% against the Japanese currency. The yen accounts for 13.6% of the weight of the dollar index. 

The Bank of Japan, at its policy meeting outcome on Wednesday morning, is expected to raise the key policy rate by 10 basis points, according to a Reuters poll. 

PREMIUMS

Premiums on the one-year dollar/rupee forward contract ended near a six-month-high, tracking a fall in US Treasury yields, dealers said. US Treasury yields were marginally lower on Monday ahead of the outcome of the two-day US Federal Open Market Committee's policy meeting that begins today.

With the Fed expected to cut rates in September 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 two countries.

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 153.77 paise, compared with 153.00 paise on Monday. On an annualised basis, the premium was 1.84%, up from Monday's close of 1.73%.

OUTLOOK

On Wednesday, market participants will take cues from the movement of the dollar index and crude oil prices, dealers said.

While the demand from importers for dollars is likely to continue, the intervention by the RBI will likely keep the rupee in a thin band, they said. Until there is clarity on the global rate trajectory, the central bank may not allow the Indian currency to move, they said.

Most exporters are likely to remain on the sidelines in the hope of a further fall in the rupee, dealers said. 

Dealers expect some foreign fund inflows related to initial public offers to support the rupee. However, the RBI is likely to absorb such flows, offsetting any positive effect on the Indian currency, they said. Ola Electric Mobility's initial public offer is set to open for subscription on Friday and close on Aug 6.

During the day, the rupee is seen at 83.65-83.75 a dollar, with key technical support pegged at 83.75 a dollar.

India Rupee - World FX: Yen slumps ahead of BoJ meet outcome Wed

MUMBAI – The Japanese yen was down 0.6% against the US dollar. Traders are exercising caution ahead of the outcome of Bank of Japan's policy meeting on Wednesday. Speculation is rife that BoJ might raise rates by 10 basis points to 0.1% and unveil plans to taper its bond purchases.

The euro was up 0.1% against the dollar. According to the initial estimate published by Eurostat, the Eurozone economy grew by 0.3% in Apr-Jun, maintaining the same growth rate as observed in the preceding quarter.

The pound sterling was down 0.1% against the dollar. The pound is losing strength due to market expectations that Bank of England may start lowering interest rates in its meeting on Thursday. Traders see over 58% probability that BoE will cut its main lending rates by 25 basis points to 5%, Reuters said.

The dollar index was firm ahead of the outcome of the US Federal Open Market Committee meeting on Wednesday. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.56 at 1630 IST. The index was at 104.57 on Monday and 104.33 on Friday.

Investors are waiting for US job openings data for June, scheduled for release at 1930 IST today. Analysts expect the report to show a decrease in new job openings to 8.03 mln from 8.14 mln earlier.  (Kabir Sharma)

India Rupee: Premiums near 6-month high as US ylds down; eyes on FOMC

MUMBAI – Premiums on the one-year dollar/rupee forward contract were near a six-month high, tracking a fall in US Treasury yields, dealers said. US Treasury yields were marginally lower on Monday ahead of the outcome of the two-day US Federal Open Market Committee's policy meeting that will begin today. The Fed will announce its decision late on Wednesday.

"Today, normal trading is there," a dealer with a state-owned bank said. "And since US treasury yields fell, so there is a slight boost to premiums." A few banks sold dollars for forward delivery to take advantage of higher premium levels, which limited the rise in premiums, dealers said.

Apart from the fall in US Treasury yields, certainty about the US Fed cutting rates at its meeting in September also drove premiums higher, dealers said. Fed Funds futures traders see a 100% chance of a rate cut at the Federal Open Market Committee's meeting in September, with majority of investors expecting a 25 bps cut.

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. And 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, which could drive the dollar/rupee forward premiums higher.

Investors will also take into account US job openings and labor turnover survey for June due later today.

At 1500 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 153.78 paise, compared with 153.00 paise on Monday. On an annualised basis, the premium was 1.84%, up from Monday's close of 1.83%.  (Sourabh Kumar)

India Rupee: Steady; RBI's dlr sales near 83.73/$ avert record low

MUMBAI – The rupee was steady against the dollar as banks' dollar buys for oil marketing companies were offset by their dollar sales on behalf of the Reserve Bank of India, dealers said. Dealers said the central bank sold dollars to prevent the Indian unit from breaching the record low of 83.7375 a dollar touched on Monday.

"You can see it is stuck in a range, of course, they are there. Oil buying is pressurising them," a dealer at a private bank said. Oil marketing companies were stocking up on the commodity, given the recent slump in prices, dealers said. On Monday, oil prices dropped 2% following Israel's indication that its reaction to a Hezbollah rocket attack in the Israeli-occupied Golan Heights would be measured to prevent the situation from escalating into a full-scale war. The September Brent crude contract on the Intercontinental Exchange was at $79.50 per bbl at 1111 IST compared with $79.78 per bbl on Monday and $80.51 per bbl on Friday.

Dealers said some month-end demand for dollars from corporates also weighed on the Indian unit. Market participants now await the outcome of the US Federal Open Market Committee's meeting and the Bank of Japan's monetary policy meeting on Wednesday. 

For the rest of the day, the rupee is seen in the range of 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: Steady; low crude offsets firm dlr before FOMC outcome

MUMBAI – The rupee was steady against the dollar as the effect of a firm dollar index was offset by a sharp fall in crude oil prices, dealers said. "It's marginally weaker as dollar is gaining ahead of FOMC. However, crude oil prices eased and could cap losses," a dealer at a brokerage firm said. 

Some dealers speculated that banks sold dollars on behalf of the Reserve Bank of India to prevent runaway depreciation in the Indian unit.

The dollar index rose on Monday and remained firm ahead of the outcome of two key policy meetings – the US Federal Open Market Committee's meeting and the Bank of Japan's monetary policy meeting, on Wednesday. 

The US Federal Reserve is widely expected to stand pat on rates at this meeting, but Fed Fund futures are projecting 100% chances of a rate cut at its September meeting, according to the CME FedWatch tool. Even though the Federal Reserve doesn't convene in August, Fed Chair Powell might use the Jackson Hole meeting of central bankers later in the month to ready the market for a rate reduction, allowing policymakers additional time to evaluate economic information.

The Bank of Japan is expected to raise its key policy rate by 10 basis points, according to a Reuters poll. The decision is expected to be aimed at protecting the yen from again falling to historic lows against the dollar. 

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.64 at 0815 IST. The index was at 104.57 on Monday and 104.33 on Friday. 

On Monday, oil prices dropped 2% following Israel's indication that its reaction to a Hezbollah rocket attack in the Israeli-occupied Golan Heights would be measured to prevent the situation from escalating into a full-scale war in West Asia. The September Brent crude contract on the Intercontinental Exchange was at $79.38 per bbl at 0927 IST, compared with $79.78 per bbl on Monday and $80.51 per bbl on Friday. 

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: Expected range for rupee - Jul 30

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)

India Rupee - Asia FX: Most dn as dlr firm before US FOMC outcome Wed

MUMBAI – Most Asian currencies were down against the dollar as the greenback strengthened ahead of the outcome of the US Federal Open Market Committee's meeting on Wednesday. The rate-setting panel is widely expected to stand pat on rates before going for a cut in September. 

Market participants also look forward to the outcome of the Bank of Japan's monetary policy meeting, due Wednesday. The bank is expected to raise its key policy rate by 10 basis points, according to a Reuters poll. The decision is expected to be aimed at protecting the yen from again falling to historic lows against the dollar. 

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.62 at 0834 IST. The index was at 104.57 on Monday and 104.33 on Friday. 

As per reports, Citi cut China's growth forecast, which also weighed on Asian currencies. Citi reduced China's growth prediction to 4.8% from 5% earlier due to growth falling short of analysts' expectations in Apr-Jun.

The Philippines peso was down 0.1% against the dollar. According to the country's budget ministry, the Philippines will allocate 256.1 bln pesos ($4.38 bln) for defence spending in 2025, up 6.4% from this year's budget, as it seeks to modernise and boost its external defences.

The Indonesian rupiah was down 0.3% against the dollar. The Malaysian ringgit and Thai baht were largely unchanged against the greenback. (Kabir Sharma)

End

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

Edited by Saji George Titus

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