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Informist, Thursday, Aug 1, 2024

By Sourabh Kumar

MUMBAI – The rupee ended the day steady against the dollar after rising to a one-week high as banks purchased the greenback throughout the day on behalf of importers, dealers said. The Reserve Bank of India sold dollars to limit the fall in the rupee, they said.

"In the morning, the rupee was up, but soon importers including oil companies came in, which weighed on the rupee," a dealer with a state-owned bank said.

The Indian currency settled at 83.7175 a dollar, after moving in a range of less than 11 paise. Today, the rupee opened slightly higher at 83.6775 a dollar against Wednesday's close of 83.7200 a dollar.

In early trade, the rupee rose to a high of 83.6475 a dollar. Dealers said this was due to a fall in the dollar index and some foreign fund inflows into domestic equities. 

As the rupee rose, importers purchased the greenback in large amounts, putting pressure on the domestic currency, dealers said. Some oil marketing companies also bought the greenback, anticipating a further rise in crude oil prices, they said. 

"Soon after the rupee touched 65 (83.65 a dollar), oilers and importers came in very aggressively," a dealer with a state-owned bank said. "Oil companies demanded dollars as they thought oil prices could rise given the volatile situation in West Asia."

Crude futures rose after an escalation of tension in West Asia with reports saying that Iran's supreme leader, Ayatollah Ali Khamenei, issued an order to strike Israel to avenge the killing of Hamas leader Ismail Haniyeh in Tehran. Iran had accused Israel of killing Haniyeh.

Traders anticipated the volatile situation in West Asia may spread to the other countries in the region, and hamper the supply of crude oil, thus pushing up prices. As India is a major importer of crude, a rise in prices leads to a higher import bill, thus putting pressure on the currency. The October Brent crude contract on the Intercontinental Exchange was at $81.33 per bbl at 1600 IST, compared with $80.72 per bbl on Wednesday and $78.63 per bbl on Tuesday.

The dollar index, which fell in the morning, rebounded in the early European trading hours, weighing on the Indian currency, dealers said. The dollar index strengthened on account of a fall in the euro against the dollar. The euro fell as bets on the European Central Bank cutting rates rose after unemployment in June rose more than expected. The joblessness rate came in at 6.5%, higher than the expectations of a 6.4% rise.

The dollar index had fallen on Wednesday after US Federal Reserve chair, Jerome Powell, indicated the possibility of a rate cut in September. On Wednesday, the US Federal Open Market Committee kept the Fed Funds rate steady at 5.25-5.50%. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.34 at 1623 IST after falling to 103.86 earlier today. The index was at 104.02 on Wednesday and 104.45 on Tuesday.

With pressure from importers, and then a recovery in the dollar index, a few dealers speculated that the Reserve Bank of India might have intervened by way of dollar sales at 83.75 a dollar, to prevent the Indian unit from falling further. Some exporters also sold the greenback when the rupee touched 83.75 a dollar, a level which exporters were eyeing for a long time, dealers said. 

Dealers also said some foreign fund inflows into Adanai Energy Solutions Ltd aided the rupee. The company launched a qualified institutional placement at a floor price of 1,027.11 rupees a share. While the company did not specify the amount to be raised through the QIP, media reports said it could be around 60 bln rupees.

PREMIUMS

Premiums on the one-year dollar/rupee forward contract ended at a 6-month high of 1.86% today, tracking a fall in US Treasury yields after the US Federal Reserve chair hinted at a possible rate cut in September.

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. And, with the Fed widely 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 the dollar/rupee forward premiums higher. Fed Funds futures traders see a 100% chance of a rate cut at the Federal Open Market Committee's meeting in September.

Widening in liquidity surplus limited a rise in premiums, dealers said. The liquidity surplus in the banking system widened to 1.56 trln rupees on Wednesday, the highest since Apr 4, data from the RBI showed.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 155.95 paise, compared with 154.58 paise on Wednesday. On an annualised basis, the premium was 1.86%, up from Wednesday's close of 1.84%.

OUTLOOK

On Friday, the rupee will take cues from movement in the dollar index and crude oil prices. Demand for dollars from importers is expected to continue, thus weighing on the rupee, they said. 

Traders will also keep a close tab on the developing situation in West Asia. If the situation worsens, oil prices may rise, dealers said. This can put pressure on the rupee.

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 83.70-83.80 a dollar, with key technical support pegged at 83.75 a dollar.

India Rupee - World FX: Sterling down 0.6% as BoE may cut rate today

MUMBAI – The pound sterling fell 0.6% against the greenback ahead of the outcome of the Bank of England's monetary policy meeting today. While there is still confusion over whether the UK's central bank will cut rates, over 80% of the economists polled by Reuters expect it to cut rates by 25 basis points from the current 5.25%.

The euro fell 0.4% against the US dollar as bets on the European Central Bank cutting rates rose after unemployment in June rose more than expected. The joblessness rate came in at 6.5%, higher than the expectations of a 6.4% rise. Further, the manufacturing purchasing managers' index for June came in at 45.8 against a forecast of 45.6. While the index was higher than expected, it was still below the mark of 50, indicating that the sector was contracting. A reading above 50 suggests the sector is expanding.

The Australian dollar was down 0.4% against the dollar after China's Purchasing Managers' Index fell to 49.8 last month, lower than the expectations of 51.5. Since the majority of Australian exports are destined for China, a slowdown in the Chinese economy affects Australian exports negatively, thus weighing on the Australian unit.

Bucking the trend, the Japanese yen was up 0.2% against the dollar. The Japanese currency has remained strong since the Bank of Japan decided to raise its overnight call rate to 0.25% from 0-0.1%.

The dollar index recovered slightly today, after falling on Wednesday after the US Federal Reserve rate decision. On Wednesday, the US Federal Open Market Committee kept the Fed Funds rate steady at 5.25-5.50%. The index, which measures the strength of the greenback against a basket of six major currencies, was at 104.38 at 1451 IST after falling to 103.86 earlier today. The index was at 104.02 on Wednesday and 104.45 on Tuesday.

Market participants now await the US July Purchasing Managers' Index, which is due later today.  (Sourabh Kumar)

India Rupee: Erases all gains; RBI's likely dlr sales avert record low

MUMBAI – The rupee erased all gains against the dollar today on account of dollar purchases by banks on behalf of oil marketing companies and other importers. However, sales of the greenback by banks, likely on behalf of the Reserve Bank of India, aided the rupee, dealers said. 

"Importers and oilers are putting some pressure, but there is strong resistance on the other side, unlikely it will break 75 (83.75)," a dealer at a state-owned bank said. Dealers said the RBI likely sold dollars to prevent runaway depreciation in the rupee and to protect it from breaching the record low of 83.7450 a dollar. 

Some banks sold dollars for foreign fund inflows into Indian equities, which also supported the Indian unit, dealers said. They said the rupee is expected to remain slightly higher throughout the day on account of constant foreign fund flows into Adani Energy Solutions Ltd. 

Oil marketing companies were stocking up on crude oil on fears of further appreciation in the price of the commodity. On Wednesday, oil prices surged almost 3% due to concerns among investors about the potential escalation of the West Asian conflict following the assassination of a Hamas leader in Iran. A significant decline in US crude inventories also supported oil prices.

The October Brent crude contract on the Intercontinental Exchange was at $81.45 per bbl at 1420 IST, compared with $80.72 per bbl on Wednesday and $78.63 per bbl on Tuesday. 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: Premiums at 6-month high as Fed Powell hints rate cut in Sep

MUMBAI – Premiums on the one-year dollar/rupee forward contract rose to a 6-month high of 1.88% today, tracking a fall in US Treasury yields after the US Federal Reserve chair hinted at a possible rate cut in September.

"US yield is the reason for forwards to rise, after Powell's comments, and we expect forwards to go till 2% in upcoming weeks," a dealer with a private bank said.

On Wednesday, the Federal Open Market Committee kept the Fed fund rate steady at 5.25-5.50%. Market participants gained confidence of a rate cut in September after Powell's speech. After that, yields on the 10-year US Treasury note fell to 4.09% on Wednesday from 4.15% on Tuesday.

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. And, with the Fed widely 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 the dollar/rupee forward premiums higher. Fed Funds futures traders see a 100% chance of a rate cut at the Federal Open Market Committee's meeting in September.

Rise in liquidity surplus limited a rise in premiums, dealers said. The liquidity surplus in the banking system widened to 1.56 trln rupees on Wednesday, the highest since Apr 4, from 1.25 trln rupees on Tuesday, data from the RBI showed.

A few banks also sold the greenback for forward delivery, which limited premiums' rise, dealers said. At 1200 IST, premiums on the one-year exact-period dollar/rupee contract were 156.24, compared to 154.58 on Wednesday. On an annualised basis, the premiums was 1.87% as compared to 1.83% on Wednesday.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Aug 1

MUMBAI – At 0900 IST, the rupee was at 83.6775 a dollar, against 83.7200 from the previous close. At 1025 IST, the rupee was at 83.6925 per dollar.

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

(Kabir Sharma)

India Rupee: Tad up on fall in dollar index, FX flows into equities

MUMBAI – The rupee was slightly higher against the dollar as the dollar index fell after US Federal Reserve Chair Jerome Powell indicated that the Fed might cut rates in September, provided inflation cools down, dealers said. On Wednesday, the Federal Open Market Committee kept the Fed Funds rate steady at 5.25-5.50%.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.98 at 0930 IST. The index was at 104.02 on Wednesday and 104.45 on Tuesday.

"The dollar index is down, so some effect is seen, but more so from flows in Adani's QIP (qualified institutional placement) which is coming and is expected to remain throughout the day," a dealer with a state-owned bank said.

Dealers said that while the market had already priced in a rate cut by the Fed in September, they gained further confidence when Powell himself indicated the possibility of a rate cut. They said the rupee is expected to remain slightly higher throughout the day on account of constant foreign fund flows into Adanai Energy Solutions Ltd. 

The company launched a qualified institutional placement at a floor price of 1,027.11 rupees a share, as notified on Tuesday. While the company did not specify the amount to be raised through the QIP, various media reports suggest it could be around 60 bln rupees.

A few importers purchased the greenback to take advantage of a lower dollar/rupee level, which capped gains for the Indian currency, dealers said. With such demand for dollars coming from importers, dealers do not expect the Indian unit to rise past 83.62 a dollar. 

A rise in crude oil prices also limited the rise in the rupee, dealers said. On Wednesday, oil prices surged almost 3% due to concerns among investors about potential escalation of the West Asian conflict following the assassination of a Hamas leader in Iran. A significant decline in US crude inventories also supported oil prices.

The October Brent crude contract on the Intercontinental Exchange was at $81.30 per bbl at 0933 IST, compared with $80.72 per bbl on Wednesday and $78.63 per bbl on Tuesday.

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.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Aug 1

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)

India Rupee - Asia FX: Most up as dollar slumps after US FOMC outcome

MUMBAI – Most Asian currencies were up against the dollar as the greenback significantly weakened after the outcome of the US Federal Open Market Committee's meeting late Wednesday. The committee kept the federal funds target rate unchanged at 5.25-5.50% at its July meeting, as was widely expected. This is the eighth consecutive meeting in which the US central bank has kept the policy rate unchanged.

The change in commentary from the release also reflected a softer monetary policy outlook. "Job gains have moderated, and the unemployment rate has moved up but remains low," the FOMC said. In the previous policy meetings, it kept reiterating, "job gains have remained strong, and the unemployment rate has remained low".

Powell's remarks affirmed market participants' assessment of a rate cut in September. Even before Wednesday's rate decision, investors started seeing the Fed cutting rates in September, with the CME FedWatch tool showing Fed Funds futures traders seeing a 100% chance of a rate cut at its next meeting.

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.96 at 0835 IST. The index was at 104.02 on Wednesday and 104.45 on Tuesday. 

The Malaysian ringgit led gains and was up 0.5% against the greenback. The South Korean won was up 0.5% against the dollar. The Philippines peso and the Thai baht were up 0.2% each.  (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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