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Informist, Friday, Aug 2, 2024

By Sourabh Kumar

MUMBAI – The rupee settled at a record closing low of 83.7500 a dollar despite intervention by the Reserve Bank of India as oil marketing companies persistently purchased the greenback, dealers said. Foreign fund outflows from the domestic equities market also weighed on the rupee, they said.

"Looking at West Asia's geopolitical situation, oilers were mostly buying dollars today," a dealer with a private bank said. Though oil prices were steady, oil marketing companies demanded dollars, anticipating an escalation of the conflict in West Asia. 

The rupee moved in a range of less than 4 paise and settled at 83.75 a dollar compared with 83.7175 a dollar on Thursday.

"While rate cut expectations are being factored in by the market, there would still be demand for dollars due to geopolitical tensions," a dealer with a state-owned bank said. Moreover, safe-haven demand for the greenback weighed on the rupee, dealers said. 

Oil prices were steady despite signs of escalation in West Asia as traders were worried about the commodity's demand outlook. Data from China showed that its manufacturing activity shrunk for the first time in nine months, indicating a lower demand in the world's largest importer of crude. At 1557 IST, the October Brent crude contract on the Intercontinental Exchange was at $79.64 per bbl compared with $79.52 per bbl on Thursday and $80.84 per bbl on Wednesday. 

A fall in domestic equities also weighed on the rupee, dealers said. Today, the Nifty 50 and BSE Sensex ended 1.2% and 1.1% down, respectively.

In early trade, however, some banks sold dollars for foreign fund inflows into initial public offerings, which supported the rupee briefly, dealers said. The IPO of Ola Electric opened for subscription today and will close on Aug 6. 

While the dollar index was firm for the first half of the day, it fell slightly in early European trade, which supported the Indian unit, dealers said. The dollar index came under pressure ahead of the release of US non-farm payrolls data for July, due later today. Payrolls are expected to increase by 185,000 after gaining 206,000 in June, according to a poll by Dow Jones. 

Expectations of a rate cut by the US Federal Open Market Committee in September strengthened after US purchasing managers index and jobless claims data on Thursday showed that the world's largest economy may be slowing more than anticipated, dealers said.

If today's data shows a slowing US labour market, the odds of a 50-basis-point rate cut in September are likely to increase, thus putting downward pressure on the dollar index. It could act as a supporting factor for the Indian unit, dealers said. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.03 at 1712 IST. The index was at 104.34 on Thursday and 104.02 on Wednesday. 

PREMIUMS

Premiums on the one-year dollar/rupee forward contract surged and ended near a seven-month high of 1.91% as the expectation of the Fed cutting rates by more than 25 basis points this year increased, dealers said.

US Treasury yields fell 10 basis points to close at 3.99% on Thursday after the softer-than-expected PMI jobless claims data. Odds of a 50-bps rate cut in September more than doubled to about 27% from Wednesday, according to CME FedWatch tool.

Initial jobless claims increased by 14,000 to 249,000 in the week ended Jul 27, as against the median forecast of 236,000 in a Bloomberg survey. Further, the Institute for Supply Management's manufacturing purchasing managers' index fell to 46.8 in July from 48.5 a month ago. A poll by Reuters had seen PMI rising to 48.8. A PMI reading below 50 indicates a contraction.

Premiums on forwards of a currency pair reflect the interest rate differential between the two countries. 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.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 159.79 paise, compared with 155.95 paise on Thursday. On an annualised basis, the premium was 1.91%, up from Thursday's close of 1.86%.

OUTLOOK

The market is shut on Saturday. On Monday, the rupee will take cues from movement in the dollar index and crude oil prices. The dollar index is expected to weaken if today's non-farm payrolls data indicates a slowing US labour sector, dealers said.

Demand for dollars from importers is expected to continue, thus weighing on the rupee, dealers said. The rupee is expected to touch 83.80 a dollar next week, which may further drive up the demand for the greenback, dealers said.

While some foreign fund inflows are expected into currently open IPOs, the RBI is likely to absorb inflows, thus neutralising its positive effect on the rupee, dealers said.

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

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: Euro up as dlr eases on weak US labour data

MUMBAI – The euro was up 0.3% against the dollar as the dollar index fell during the European trading hours on the back of weaker-than-expected data from the US. The data cemented bets of a rate cut by the US Federal Reserve in its September meeting.  

Initial jobless claims increased 14,000 to 249,000 in the week ended Saturday, according to US Labor Department data released on Thursday. The median forecast in a Bloomberg survey of economists called for 236,000 applications. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.11 at 1537 IST. The index was at 104.34 on Thursday and 104.02 on Wednesday.

Further, The Institute for Supply Management's manufacturing purchasing managers index fell to 46.8 last month from 48.5 in June. A poll of economists by Reuters forecast the purchasing managers index to rise to 48.8. A reading below 50 suggests that the sector is in contraction, with the reading above it signifying an expansion. 

Market participants now await US non-farm payrolls data for July, which will be published later today. Economists estimate that 175,000 new workers were hired in July, lower than the former addition of 206,000. The Unemployment Rate is expected to remain steady at 4.1%. 

The Japanese yen was up 0.4% against the dollar. The yen has received support, following the Bank of Japan's decision to raise its policy rate to a 16-year high of 0.25%. The pound sterling was largely unchanged against the dollar, following a 25 bps rate cut by the Bank of England on Thursday. (Kabir Sharma)

India Rupee: Premiums near 7-mo high as US data spurs rate cut bets

MUMBAI – Premiums on the one-year dollar/rupee forward contract surged to touch a near seven-month high of 1.91% as market participants' expectations of at least a 25-basis-point rate cut in the US in September increased, dealers said. This was after the US purchasing managers index and jobless claims data showed that the world's largest economy may be slowing more than anticipated, dealers said. US Treasury yields fell 10 basis points to close at 3.99% on Thursday after the softer-than-expected data.

"The US Treasury (yields) fell to under 4%, so that is a major development, and its effect is seen on forwards," a dealer with a private bank said. A few banks also sold the greenback for forward delivery, which limited a rise in premiums, dealers said.

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.

Investors' expectations of a rate cut in the US Federal Open Market Committee's September meeting strengthened after Thursday's data, dealers said. Further, expectations of a 50-bps rate cut at the September meeting more than doubled to about 27% from Wednesday's expectation, as shown by CME FedWatch tool.

Weekly jobless claims in the US rose to an 11-month-high of 249,000 jobs, compared to a forecast of 236,000 claims in a Reuters poll. This indicated that the US labour market might be slowing down, aiding efforts in bringing inflation down to the US Federal Reserve's 2% target. 

Another data from the US showed that manufacturing activity in the US fell to an eight-month low in July. The Institute for Supply Management's manufacturing purchasing managers index fell to 46.8 last month from 48.5 in June. A poll of economists by Reuters had forecast the purchasing managers index to rise to 48.8.

At 1411 IST, premiums on the one-year exact-period dollar/rupee contract were 159.79, compared to 155.95 on Thursday. On an annualised basis, the premiums were 1.91% as compared to 1.86% on Thursday.  (Sourabh Kumar)

India Rupee: Steady as bks' dollar sales for RBI offset oil cos' buys

MUMBAI – The rupee remained steady against the dollar as a few banks sold the greenback on behalf of the Reserve Bank of India, which offset the downward pressure from oil marketing companies buying the dollar, dealers said.

"Yes, the central bank is there to protect the 74 (83.74) and 75 (83.75) levels," a dealer with a private bank said. "We were expecting the rupee to go till 83.78 a dollar, but seems good resistance at lower levels itself." Dealers said banks sold the greenback for foreign fund inflows in the initial public offering of Ola Electric, which supported the rupee. The subscription opened today and will close on Aug 6.

Oil marketing companies purchased the greenback. Some of these purchased for their daily demand, while others did due to apprehensions about oil prices going higher, dealers said. Oil prices remained largely steady as traders were cautious amid worries of weakening demand globally and a volatile situation in West Asia. The October Brent crude contract on the Intercontinental Exchange was at $80.04 per bbl at 1123 IST compared with $79.52 per bbl on Thursday and $80.84 per bbl on Wednesday. 

The dollar index also remained steady despite weak data from the US on Thursday. The index had recovered on Thursday and remained steady in early trade today as demand for dollars continued amid the volatile geopolitical situation in West Asia. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.28 at 1124 IST. The index was at 104.34 on Thursday and 104.02 on Wednesday. 

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: Technical Levels for rupee - Aug 2

MUMBAI – At 0900 IST, the rupee was at 83.7275 a dollar, against 83.7175 from the previous close. At 1025 IST, the rupee was at 83.7225 per dollar.

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

(Kabir Sharma)

India Rupee: Steady as oil cos' dlr buys offset IPO-linked FX inflows

MUMBAI – The rupee was steady against the dollar as purchases of the greenback by oil marketing companies offset some banks' dollar sales for foreign fund inflows related to initial public offerings, dealers said.

"Some inflows we saw yesterday (Thursday) as well, and we are seeing some today," a dealer with a state-owned bank said. "While yesterday, it was mostly for Adani QIP (qualified institutional placement), some Ola IPO-related flows are seen today."

The IPO of Ola Electric opened for subscription today and will close on Aug 6, and Adanai Energy Solutions Ltd 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. 

Dealers said oil marketing companies were purchasing the greenback, some for their daily needs and others due to apprehension about oil prices going higher. "Some oil demand is there because of the weekend demand also," a dealer with another state-owned bank said. Oil prices remained largely steady as traders were cautious amid worries of weakening demand globally, and a volatile situation in West Asia.

The foreign fund inflows notwithstanding, dealers see the Indian currency moving down to about 83.78 a dollar, and touching another lifetime low. A few dealers said it was because the Reserve Bank of India was likely to absorb all foreign fund inflows.

The dollar index remained firm despite weak data from the US on Thursday. The index recovered on Thursday, and remained steady in early trade today as demand for dollars continued amid a volatile geopolitical situation in West Asia. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.35 at 0939 IST. The index was at 104.34 on Thursday and 104.02 on Wednesday. 

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 - Asia FX: Mixed; investors digest BoJ rate hike decision

MUMBAI – Asian currencies were mixed against the dollar as investors assessed the Bank of Japan's decision to increase its key policy rate. Indices in the region plummeted following the decision, which also weighed on the currencies. The Bank of Japan on Wednesday hiked its benchmark interest rate to 0.25% from its previous range of 0-0.1%. 

After rising beyond the key point of 150 a dollar, the Japanese yen was down 0.3% against the greenback. The Nikkei fell 5% today, tracking losses on the Wall Street, and on the back of a relatively strong Japanese yen. The Japanese currency has strengthened since the Bank of Japan raised its overnight call rate on Wednesday.

The South Korean won was down 0.3% against the dollar after touching a two-month high on Thursday. South Korea's consumer prices were slightly higher last month. However, it did not have much effect on the region's indices. Inflation rose 2.6% on year, slightly more than economists' prediction of a 2.5% rise in a poll by Reuters.

The Malaysian ringgit was at a one-year high against the dollar and rose 0.5%, tracking gains in the local share indices. Investors were optimistic about the potential conclusion of the US Federal Reserve's tight policy measures by September.

The Thai baht also rose 0.3% against the dollar, while the Taiwan dollar fell 0.2%. The dollar index remained firm despite weak data from the US, which also weighed on Asian currencies. Initial jobless claims increased by 14,000 to 249,000 in the week ended Jul 27, according to Labor Department data released Thursday. The median forecast in a Bloomberg survey of economists called for 236,000 applications. 

Further, The Institute for Supply Management's manufacturing purchasing managers index fell to 46.8 last month from 48.5 in June. A poll of economists by Reuters forecast the purchasing managers index to rise to 48.8. A reading below 50 suggests that the sector is in contraction, with the reading above it signifying an expansion.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.31 at 0818 IST. The index was at 104.34 on Thursday and 104.02 on Wednesday. (Kabir Sharma)

India Rupee: Expected range for rupee - Aug 2

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)

End

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

Edited by Saji George Titus

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