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Informist, Wednesday, Aug 7, 2024

By Kabir Sharma

MUMBAI – The rupee ended at a record closing low against the dollar on the back of persistent dollar purchases by banks for importers, dealers said. Some banks also bought dollars for foreign fund outflows from Indian equities, which also weighed on the Indian unit, they said. However, the Reserve Bank of India intervened by selling dollars to keep the rupee from falling to the psychologically crucial level of 84.00 a dollar, dealers said.

"There were a lot of importers today, also some more outflows from equities even though it has stabilised a little," a dealer at a state-owned bank said. After moving in a range of 10 paise and falling to a lifetime low of 83.9725 a dollar today, the Indian currency ended at 83.9550 a dollar. The rupee had closed at 83.9525 to a dollar on Tuesday. 

Before the onshore trading opened today, the Reserve Bank of India likely intervened in the offshore non-deliverable forwards market to curb runaway depreciation in the Indian unit, dealers said. 

The Indian unit rose slightly against the dollar in early trade today as risk appetite improved amongst investors as fears of a potential recession in the US receded following comments by several officials, dealers said.

San Francisco Fed President Mary Daly on Monday said the jobs report leaves "a little more room for confidence that we're slowing but not falling off a cliff." However, she said it was "extremely important" to keep the jobs market from falling over, according to reports. Chicago Federal Reserve President Austan Goolsbee cautioned against taking too much of a signal from the global market sell-off, saying it emanated in part from the Bank of Japan's decision last week to raise interest rates, as well as increasing geopolitical tensions in West Asia.

A sharply lower-than-expected US non-farm payroll data last week triggered fears of a potential recession in the world's largest economy, coupled with market participants aggressively repricing their rate cut expectations by the US Fed. The economic data led to the expectation of a 50-basis-point rate cut by the Fed in September, instead of the expectation of a 25-bps rate cut earlier.
 

Expectations of the 50 bps rate cut were slightly doused as data showed that the goods and services trade deficit in the US narrowed to $73.1 bln in June from $75.0 bln in May. 

The Fed fund futures traders are now pricing in a nearly 67.5% chance of a 50-bps rate cut in September, down from 85% on Monday, according to the CME FedWatch tool.

The Indian unit was under pressure throughout the day by the constant demand for dollars from importers and for foreign fund outflows, dealers said. This demand took the rupee to its all-time low of 83.9725 a dollar. At this point, the Reserve Bank of India intervened by selling dollars to prevent the rupee from touching the 84.00 a dollar level, dealers said. Dealers said some exporters sold dollars around the record low level of 83.97 a dollar, which also supported the Indian unit.

A slight recovery in local share indices supported the rupee, whereas a recovery in the dollar index weighed, dealers said. The Sensex and the Nifty 50 ended 1.1% and 1.3% higher respectively, today. The dollar index, which fell to a near seven-month low on Monday, gained ground after falling to a near seven-month low on Monday, on fading expectations of a possible recession in the US.

FORWARDS

Premium on the one-year dollar/rupee forward contract fell, tracking a rise in the benchmark US Treasury yields, dealers said. Yields on the 10-year US Treasury note rose Tuesday as fears of a recession faded.

With the market pricing in a 50 basis point rate cut by the US Federal Open Market Committee in September, RBI Governor Shaktikanta Das' comments on Thursday would be eagerly watched for any cues on the domestic rate trajectory. 

Most market participants don't expect the RBI to cut rates before December. Dealers said with the RBI likely to delay rate cuts, the interest rate differential between the US and India will rise, which will drive the dollar/rupee forward premiums higher.

With traders' increasing their focus on the interest rate differential between the US and India, the impact of the huge surplus liquidity in the banking system diminished, even for short-term forward premiums, dealers said. The liquidity surplus in the banking system was at 2.79 trln rupees on Tuesday, data from the RBI showed.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 169.06 paise, compared to 172.09 paise on Tuesday. On an annualised basis, the premium was 2.00% compared to 2.05% on Tuesday.

OUTLOOK

On Thursday, the rupee may open near its record low due to persistent demand for greenback from importers, dealers said. Outflows from Indian equities and movement in crude oil prices may also weigh on the Indian unit, they said. 

Market participants await the outcome of the RBI's Monetary Policy Committee, scheduled at 1000 IST on Thursday. 

The RBI's rate-setting panel is expected to keep the repo rate and the policy stance unchanged this week, with inflation still running above the central bank's target and growth staying robust, according to an Informist poll. 

During the day, the rupee is seen at 83.80-84.10 a dollar, with strong technical support pegged at 84.00.

India Rupee - World FX:Yen dn; BoJ official cautions on rate hike view

MUMBAI – The Japanese yen fell 2.1% against the dollar after Bank of Japan Deputy Governor Shinichi Uchida said the central bank would be more cautious about the timing of the next rate hike, given the sharp volatility in financial markets. The Japanese unit also fell as the unwinding of yen carry trades slowed. Unwinding of carry trades started when the Japanese unit rose sharply against the dollar as investors anticipated a further rate hike by the Japanese central bank.

The Australian dollar rose 0.6% against the greenback as the latest imports to China, which is the leading destination for Australian exports, rose 7.2% on year in July, opposite to a decline of 2.3% in the month before. It was also way more than the expectation of a 3.5% rise, as per Reuters. 

The euro fell 0.1% after data showed exports from Germany, the eurozone's largest economy, in June fell more than what the market expected. Exports fell mainly on account of weak demand from the US, Germany's largest trading partner. On a monthly basis, exports from the country fell 3.4% in June, more than the expected decline of 1.5% in a Reuters poll.

The pound sterling was up 0.1% against the US unit, after the UK Office of National Statistics raised the country's economic growth in 2022 to 4.8%, up from the previous estimate of 4.3%.

The dollar index recovered slightly as investors' concerns around the US heading into a recession eased. Investors gained some confidence after the data on Tuesday showed that the US goods and services trade deficit decreased to $73.1 bln in June from $75.0 bln in May. At 1454 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.25, compared with 102.93 on Tuesday and 102.67 on Monday. The index fell to a near seven-month low of 102.67 on Monday.  (Sourabh Kumar)

India Rupee: Premiums fall as US yields up on improved risk appetite

MUMBAI – Premium on the one-year dollar/rupee forward contract was down, tracking a rise in the benchmark US Treasury yields, dealers said. Yields on the 10-year US Treasury note rose Tuesday, on the back of improved risk appetite among investors.

"Premiums are down because of a rise in US Treasury yields, and volumes are also not much today," a dealer with a private bank said. A few dealers said traders have refrained from placing large bets ahead of the outcome of the Reserve Bank of India's monetary policy committee meeting on Thursday.

With the market pricing in a 50 basis point rate cut by the US Federal Open Market Committee at its September meeting, the speech by the RBI governor Shaktikanta Das, tomorrow, would be eagerly watched to take any cues for the domestic rate trajectory. Fed funds futures traders now see about a 63% chance of a 50-basis-point rate cut at the Fed's September meeting, up from 11.8% seen a week ago. 

The RBI's rate-setting panel is expected to keep the repo rate and the policy stance unchanged this week, with inflation still running above the central bank's target and growth staying robust, according to an Informist poll. Also, an overwhelming majority of 26 respondents also see the committee continue with the 'withdrawal of accommodation' policy stance. 

Dealers said, in the case of India not following the Fed in the quantum of rate cuts, the interest rate differential between the US and India is likely to rise, and that could drive the dollar/rupee forward premiums further higher.

A few dealers said some importers purchased the greenback for forward delivery in a three-month tenure, noting the depreciation in the rupee in the domestic spot market this week. Premium on the three-month exact-period dollar/rupee contract rose to 28.47 paise at 1333 IST from Tuesday's close of 27.56 paise. On an annualised basis, the premium was 1.30% as compared to Tuesday's close of 1.31%.

With traders' increasing focus on the interest rate differential between the US and India, the impact of a change in liquidity diminished, even for short-term forward premiums, dealers said. The liquidity surplus in the banking system was at 2.79 trln rupees on Tuesday, against 2.86 trln rupees on Monday, data from the RBI showed.

At 1343 IST, premiums on the one-year exact-period dollar/rupee contract were 170.06, compared to 172.09 on Tuesday. On an annualised basis, the premiums were 2.01% compared to 2.05% on Tuesday.  (Sourabh Kumar)

India Rupee: Erases gains as importers buy dlrs; RBI lends support

MUMBAI – The rupee pared all its earlier gains against the dollar as banks persistently bought the greenback on behalf of importers who wanted to take advantage of the relatively lower dollar/rupee levels, dealers said. However, the Reserve Bank of India likely stepped in to sell the greenback to prevent the Indian unit from hitting a record low, they added. The rupee hit a record low of 83.9650 a dollar on Tuesday. 

Noting the recent successive record lows in the rupee, the 'panic' sentiment amongst importers may have subsided, but they are still actively buying the US unit at every dip in the dollar/rupee level, dealers said. "Since the RBI has not let it move to 84 (a dollar), importers are thinking it may not fall to that level soon," a dealer at a foreign bank said. "But we are seeing decent demand (of dollars)."

State-owned banks sold the greenback, likely for the RBI, around 83.95 a dollar, which supported the Indian unit, dealers said. "The range is narrow today, with equal buying and selling (of dollars) pressure from both sides," said a dealer at a state-owned bank. "We are expecting this narrow trade to persist unless the RBI decides to let it go beyond 83.95." The rupee has moved in a tight range of 8 paise so far today. 

Earlier in the day, the rupee rose to a high of 83.87 a dollar as the risk appetite amongst investors improved slightly after several US Federal Reserve officials' comments allayed fears of a potential recession in the US, dealers said.

For the rest of the day, the rupee is seen in a range of 83.80-84.10 against the dollar, dealers said. They peg key technical support for the Indian currency at 84.00 a dollar.  (Pratiksha)

India Rupee: Technical Levels for rupee - Aug 7

MUMBAI – At 0900 IST, the rupee was at 83.8800 a dollar, against 83.9525 from the previous close. At 1031 IST, the rupee was at 83.9125 per dollar.

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

(Sourabh Kumar)

India Rupee: Up as risk appetite improves; importers' dlr buys weighs

MUMBAI – The rupee was slightly higher against the dollar today as risk appetite among investors improved slightly after several US Federal Reserve officials' comments receded fears of a potential recession in the US, dealers said. "There has been a sort of turnaround in sentiment but not sure how long this will last," a dealer at a private bank said. "More US data will lead to more volatility in coming days. 84.00 (a dollar) should remain unbroken."  

Domestic and Asian equities rose today, tracking gains on Wall Street. At 0935 IST, both the Nifty 50 and Sensex were up 1.1% each.

San Francisco Fed President Mary Daly on Monday said the jobs report leaves "a little more room for confidence that we're slowing but not falling off a cliff." However, she said it was "extremely important" to keep the jobs market from falling over, according to reports. Also, Chicago Federal Reserve President Austan Goolsbee cautioned against taking too much of a signal from the global market sell-off, saying it emanated in part from the Bank of Japan's decision last week to raise interest rates, as well as increasing geopolitical tensions in West Asia, reports said.

A sharply lower-than-expected US non-farm payroll data last week triggered fears of a potential recession in the world's largest economy, coupled with market participants aggressively repricing their rate cut expectations by the US Fed. 

However, dealers said some banks purchased dollars on behalf of importers, who wanted to take advantage of the relatively lower dollar/rupee levels, which limited gains for the Indian unit. Importers are expected to continue purchasing dollars on every dip in dollar/rupee, considering the successive record lows the rupee has fallen to in the last few days, they said. The rupee fell to a record low of 83.9650 a dollar on Tuesday. 

Further, a recovery in the dollar index from the near seven-month low it hit on Monday also limited gains for the Indian currency, dealers said. At 0935 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.27, compared with 102.93 on Tuesday and 102.67 on Monday. The index fell to a near seven-month low of 102.16 on Monday.

For the rest of the day, the rupee is seen in a range of 83.80-84.10 against the dollar, dealers said. They peg key technical support for the Indian currency at 84.00 a dollar. (Pratiksha)

India Rupee - Asia FX: Mixed; traders reassess US recession worries

MUMBAI – Asian currencies moved on a mixed note today as traders reassessed the concerns related to a potential recession in the US after several US Federal Reserve officials' comments tried to calm the markets against the same. 

On Monday, San Francisco Fed President Mary Daly said the jobs report leaves "a little more room for confidence that we're slowing but not falling off a cliff." However, she said it was "extremely important" to keep the jobs market from falling over, according to reports. Also, Chicago Federal Reserve President Austan Goolsbee cautioned against taking too much of a signal from the global market sell-off, saying it emanated in part from the Bank of Japan's decision last week to raise interest rates, as well as increasing geopolitical tensions in West Asia, reports said.

Concerns of a recession in the US were widely triggered, leading to a decline in equities across the globe on Monday, after the sharply lower-than-expected US jobs data last week. The economic data also led to the expectation of a 50-basis-point rate cut by the Fed in September, instead of the expectation of a 25-bps rate cut earlier. However, now, Fed fund futures are pricing in a nearly 67.5% chance of a 50-bps rate cut in September, down from 85% on Monday, according to the CME FedWatch tool.

Market participants also assessed the recent US economic data from which showed that the =goods and services trade deficit decreased to $73.1 bln in June from $75.0 bln in May. This was due to a faster rise in exports than imports. The goods deficit narrowed $2.5 bln to $97.4 bln in June. The services sector surplus fell slightly by $0.6 bln to $24.2 bln.

Asian equities rose today due to gains on Wall Street, with concerns related to a potential recession in the US fading. This supported the Asian units. Meanwhile, the dollar index rebounded from the near seven-month low it hit on Monday after recent comments by several Fed officials, which weighed on the Asian currencies. 

At 0950 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.27, compared with 102.93 on Tuesday and 102.67 on Monday. The index fell to a near seven-month low of 102.16 on Monday.

The Thai baht and the Malaysian ringgit fell 0.5% and 0.4% against the dollar, respectively. The Indonesian rupiah rose 0.3% against the dollar, while both the South Korean won and the Philippine peso rose 0.2% against the US unit. Data today showed that South Korea's current account surplus for June reached $12.26 bln, marking the largest surplus in six years, on the back of strong semiconductor exports. (Pratiksha)

India Rupee: Expected range for rupee - Aug 7

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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