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Informist, Wednesday, Jul 31, 2024

By Sourabh Kumar

MUMBAI – The rupee settled steady against the dollar as some exporters' dollar sales after the rupee touched a lifetime low during the day offset the impact of importers' persistent dollar purchases, dealers said. Some dealers speculated that the Reserve Bank of India may also have sold the greenback to support the Indian unit. 

"Apart from some exporters, we had some Ola IPO (initial public offering) related flows as well, but then importers came in to buy dollars for their month-end payment obligations," a dealer with a state-owned bank said.

The rupee moved in a range of 6 paise, against Tuesday's 2-paise range. This gave traders leg-room to trade, dealers said. After touching a record low of 83.7475 a dollar, the Indian unit closed at 83.7200 a dollar. On Tuesday, the rupee had settled at 83.7275 a dollar.

The rupee was steady in the morning as some foreign portfolio investors' dollar sales for overseas investment into the upcoming initial public offer of Ola Electric Mobility offset the downward pressure from importers' dollar buys, dealers said. Subscription for Ola Electric Mobility's initial public offer will open on Friday and close on Tuesday. 

Noting the spate of record lows the rupee has hit since last week, importers also stepped in to purchase the greenback on expectation of further depreciation in the local unit, dealers said. The rupee has established six fresh record lows since last week. 

A few exporters stepped in to sell US dollars, noting higher dollar/rupee levels, which provided support to the Indian currency, dealers said. Dealers said exporters sold the greenback as they expected the rupee may rise on Thursday, if the US Federal Reserve indicates multiple rate cuts this year, starting in September. 

Apart from exporters, a fall in the dollar index also aided the Indian unit. The index fell due to a sharp rise in the Japanese yen. The yen accounts for 13.6% of the weight of the dollar index. While the Japanese yen remained steady even after a rate hike by the Bank of Japan, it surged 1.5% after the Japanese central bank governor Kazuo Ueda, in his press conference, left the door open for further rate hikes this year. The Bank of Japan today raised the overnight call rate to 0.25% from the earlier 0-0.1%.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 104.13 at 1628 IST, after closing at 104.45 on Tuesday and 104.57 on Monday.

Meanwhile, a rise in demand for the greenback from oil marketing companies weighed on the local unit, dealers said. Oil companies continued stocking up on the commodity due to a sustained fall in crude oil prices throughout this week, dealers said. On Tuesday, oil prices fell about 1%, reaching a seven-week low. 

The September Brent crude contract on the Intercontinental Exchange was at $80.57 per bbl at 1629 IST, after touching a low of 79.02 earlier today. Crude futures closed at $78.63 per bbl on Tuesday and $79.78 per bbl on Monday.

Dealers speculated that the RBI may have intervened through sales of the greenback at around 83.7475 a dollar to keep the rupee from falling sharply. They see strong support for the rupee at 83.75 a dollar. Since last week, the central bank has been actively intervening in the domestic spot market and offshore non-deliverable forwards market to keep the rupee from depreciating sharply.

PREMIUMS

Premiums on the one-year dollar/rupee forward contract ended largely steady after rising to a near six-month high during the day, as some banks sold the greenback for forward delivery to take advantage of higher premiums, dealers said. However, most traders refrained from placing large bets ahead of the outcome of the US Federal Open Market Committee meeting, due later today, they said.

With the Fed expected to cut rates in September and India expected 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.

While the Fed is widely expected to stand pat on rates at today's FOMC meeting outcome, market participants expect some forward guidance from officials about the rate outlook, dealers said. They said one-year dollar/rupee forward premiums may rise to 1.90% if the Fed indicates multiple rate cuts this year, starting September.

Fed Funds futures traders see a 100% chance of a rate cut at the FOMC's meeting in September, according to the CME FedWatch tool. Premiums rose to a near-six-month high of 1.84% during the day, tracking a fall in US Treasury yields ahead of the Fed's policy outcome, dealers said. 

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 153.77 paise, compared with 153.77 paise on Tuesday. On an annualised basis, the premium was 1.84%, similar to Tuesday's close.

OUTLOOK

On Thursday, the rupee will take cues from movement in the dollar index after the Fed policy outcome today, dealers said. They expect the index to weaken once Fed officials indicate the rate-cut trajectory in the US this year.

While the demand from importers for dollars is likely to continue, the RBI is expected to keep up with its dollar sales, which is likely to keep the rupee in a thin band, they 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, they said.

During the day, the rupee is seen at 83.65-83.80 a dollar, with key technical support pegged at 83.75 a dollar.

India Rupee - World FX: Yen jumps on BoJ Ueda's remarks; Fed meet eyed

NEW DELHI – The Japanese yen surged 1.5% against the dollar, rising to its highest level in over four months, after Bank of Japan Governor Kazuo Ueda's comments today hinted at further rate hikes by the central bank this year. The Bank of Japan today hiked its benchmark interest rate to 0.25% from its previous range of 0-0.1%. 

"If the economy and prices move in line with our projection, we will continue to raise interest rates. We don't see 0.5% as any key barrier when raising rates," Ueda said at a post-policy conference. At its policy meeting, the Bank of Japan also decided to reduce the amount of its monthly outright purchases of Japanese government bonds to about 3 trln yen per month in Jan-Mar 2026. 

The euro rose 0.2% against the dollar after data today showed that Eurozone inflation unexpectedly rose in July. The eurozone's annual rate of inflation edged up in July to 2.6% from 2.5% in June, due to rising energy costs. 

Meanwhile, the Australian dollar fell 0.6% against the US unit after data today showed that core inflation in the country fell more than expected in the June quarter, leading to expectations that the Reserve Bank of Australia will not hike interest rates any more. The Australian central bank will hold its policy meeting next week.

The Australian Bureau of Statistics reported a 1.0% increase in the consumer price index for the June quarter, in line with expectations. The annual CPI inflation rate hit 3.8%. Core CPI inflation grew 0.8%, less than expectations of 1%. 

The dollar index edged lower, tracking a surge in the Japanese yen and ahead of the outcome of the US Federal Open Market Committee's meeting later today. The US Federal Reserve is widely expected to keep interest rates in the current range of 5.25-5.50% at today's meeting. Traders will watch out for guidance on the Fed's interest rate outlook. Fed Fund futures, however, are seeing a 100% chance of a rate cut at the US Fed's September meeting, according to the CME FedWatch tool.

At 1632 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.12. The index was at 104.45 on Tuesday and 104.57 on Monday.  (Pratiksha)

India Rupee: Premiums steady ahead of US FOMC meet outcome today

MUMBAI – Premiums on the one-year dollar/rupee forward contract were largely steady today as traders refrained from placing large bets ahead of the outcome of the US Federal Open Market Committee meeting, due later today, dealers said.

"People are waiting for the Fed (Federal Reserve) outcome, and we expect some dovish comments from Fed (officials)," a dealer with a state-owned bank said.

While the US Fed is widely expected to stand pat on rates at this meeting, market participants expect some forward guidance from Fed officials regarding the rate outlook, dealers said. They said one-year dollar/rupee forward premiums may rise to 1.90% if the Fed indicates multiple rate cuts this year, starting in September.

Fed Funds futures traders see a 100% chance of a rate cut at the Federal Open Market Committee's meeting in September, according to the CME FedWatch Tool. 

Premiums rose to a near six-month high of 1.84% during the day, tracking a fall in US Treasury yields ahead of the US Fed policy outcome, dealers said. Noting the relatively higher premium level, a few banks sold the greenback for forward delivery to take advantage of the levels, dealers said. This capped the rise in premiums. 

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 soon and India expected to delay a rate cut, the interest rate differential between the US and India is likely to rise, which could drive the dollar/rupee forward premiums higher.

At 1437 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 154.58 paise, compared with 153.77 paise on Tuesday. On an annualised basis, the premium was 1.84%, similar to Tuesday's close.  (Sourabh Kumar)

India Rupee: At record low on high dlr demand from importers, oil cos

MUMBAI – The rupee fell to a record low against the dollar due to persistent dollar demand from importers to fulfil their month-end needs, dealers said. Oil marketing companies' dollar purchases also weighed on the Indian unit, they said. The record low for the rupee is 83.7425 per dollar.

"There is constant demand for month-end and oilers are there too," a dealer with a state-owned bank said. "Some caution is there ahead of the FOMC (Federal Open Market Committee's meeting outcome), which is keeping volumes in check," he said. 

Dealers said oil marketing companies were looking to take advantage of lower crude oil prices this week, as they feared a spike in prices due to tensions in West Asia. 

Oil prices rose today after Palestinian militant group Hamas' leader Ismail Haniyeh was assassinated in Tehran. On Tuesday, crude prices fell over 1%, touching a seven-week low. Investors were concerned about potential weakening demand from China, as well as expectations that the Organization of the Petroleum Exporting Countries and allies would adhere to their decision to boost supplies. A fall in crude oil prices reduces India's import bill, which, in turn, supports the currency. 

The September Brent crude contract on the Intercontinental Exchange was at $79.62 per bbl at 1124 IST compared with $78.63 per bbl on Tuesday and $79.78 per bbl on Monday. 

Market participants now await the outcome of the Federal Open Market Committee's meeting, due later today. For the rest of the day, the rupee is seen in a 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; oil cos' dlr buys offset gains from BoJ rate hike

MUMBAI – The rupee was steady against the dollar today as positive cues from a rate hike by the Bank of Japan were offset by oil companies' dollar demand, dealers said. 

"Yuan (offshore Chinese yuan) rose tracking the rise in JPY (Japanese yen) after the rate hike, which is supporting the rupee. However, oilers are there on the other end," a dealer at a state-owned bank said.

Dealers said the offshore Chinese yuan gained support from a sharp rise in the Japanese yen after Bank of Japan hiked its key policy rate. Earlier today, the central bank raised its key interest rate to 0.25% from 0-0.1%, supporting the yen and weighing on the greenback. However, the yen quickly erased gains as the hike was widely expected by market participants. 

Oil marketing companies continued stocking up on the commodity due to a sustained fall in crude oil prices throughout this week, dealers said. On Tuesday, oil prices fell about 1%, reaching a seven-week low. Investors were concerned about potential weakening demand from China, as well as expectations that the Organization of the Petroleum Exporting Countries and its allies would adhere to their decision to boost supplies. A fall in crude oil prices reduces India's import bill, which in turn supports the currency. 

However, crude oil prices rose slightly today after Israel launched an air attack on Beirut in response to an attack on Israel-controlled Golan Heights on Saturday. The September Brent crude contract on the Intercontinental Exchange was at $79.42 per bbl at 0952 IST, compared with $78.63 per bbl on Tuesday and $79.78 per bbl on Monday. 

Market participants now await the outcome of the Federal Open Market Committee's meeting, due later today. For the rest of the day, the rupee is seen in a 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: Expected range for rupee - Jul 31

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 down on caution before US FOMC outcome

MUMBAI – Most Asian currencies were down against the dollar as market participants were cautious of placing large bets ahead of the outcome of the US Federal Open Market Committee meeting and the Bank of Japan monetary policy meeting, both due later today. 

The yen was 0.1% higher against the dollar today. 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 104.39 at 0832 IST. The index was at 104.45 on Tuesday and 104.57 on Monday. 

The Australian dollar fell 0.6% against the greenback. In the June quarter, the consumer price index in Australia increased to 3.8% compared with the same period a year ago, as reported by the Australian Bureau of Statistics on Wednesday. This figure aligned with the 3.8% prediction by economists and showed a slight rise from the 3.6% rate recorded in the March quarter.

The South Korean won was down 0.3% against the greenback. The Philippines peso was also 0.3% down against the dollar. The Malaysian ringgit and the Thai baht were down 0.3% and 0.2%, respectively, against the dollar.  (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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