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Informist, Friday, Aug 9, 2024

By Pratiksha

MUMBAI – The rupee gave up almost all of its gains and ended just shy of its record closing low against the dollar as importers continuously purchased the greenback, dealers said.

"It (the rupee) is back to the old levels. The rise was very short-lived," a dealer at a private bank said. "Since the rupee has been sustainably below 83.90 (a dollar) in the last few days, importers are naturally buying (dollars) around whatever levels they are getting."

After rising to a high of 83.8700 a dollar during the day, the Indian currency settled at 83.9550 a dollar, just a whisker away from Thursday's record closing low of 83.9625 a dollar. The rupee moved in a range of 8 paise throughout the day.

The rupee opened at 83.9400 a dollar and shortly afterwards rose above 83.90 a dollar due to dollar sales by banks for foreign fund inflows into corporates and domestic equities, dealers said.

A portion of foreign fund inflows were likely on account of Japan Bank for International Cooperation inking a 25.5 bln yen, or $173.4 mln, loan agreement with Power Finance Corp, dealers said.

Foreign banks also sold dollars on behalf of foreign portfolio investors looking to invest in domestic equities, dealers said. Risk sentiment of investors improved after the lower-than-expected weekly US unemployment claims data eased fears of a recession in the US, dealers said. In the US, initial claims for state unemployment benefits fell 17,000 to a seasonally-adjusted 233,000 in the week ended Saturday, the largest drop in about 11 months. Economists polled by Reuters had forecast 240,000 claims for the latest week.

"Initially, there was selling (of dollars) for the PFC inflows, but it was not much and was absorbed quite quickly," said a dealer with a state-owned bank.

Importers aggressively purchased the greenback, to make the most of the relatively lower dollar/rupee levels, dealers said. The successive record lows hit by the rupee this week have prompted importers to purchase dollars, as they now expect the Indian unit to fall more in the coming days. The rupee fell to a lifetime low against the dollar thrice this week. 

Dealers said that the element of 'panic' amongst importers, which was seen prevailing after the global equity sell-off on Monday, has somewhat subsided now. However, the demand for the US unit still remains robust, they said.

Some dealers speculated that the Reserve Bank of India might have sold dollars around 83.95 a dollar, to prevent the Indian unit from hitting a record low and falling to the psychologically-crucial level of 84 per dollar.

Dealers said volatility in the exchange rate remained low today and is expected to remain so in the near term as well. "The volatility that was happening from Monday was normal, what was happening before that was not normal," said Ritesh Bhansali, director, Mecklai Financial Services. "The current volatility is also barely normal."

The dollar index hovered near the one-week high it touched on Thursday, which weighed on the Indian unit, dealers said. The dollar index jumped to a near one-week high on Thursday after lower-than-expected weekly US unemployment claims data allayed fears of a recession in the US and reduced expectations of aggressive interest rate cuts by the US Federal Reserve this year.

The odds of the US Fed slashing interest rates by 50 basis points at its September policy meeting fell to 57% from 69% on Wednesday, with a 25-bps cut now seen as having a 43% probability, as per the CME FedWatch Tool.

At 1625 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.20 compared with 103.24 on Thursday and 103.19 on Wednesday. The index had risen to a near one-week high of 103.55 on Thursday.

A sharp rise in domestic share indices supported the Indian unit, dealers said. Both the Nifty 50 and the BSE Sensex ended 1% higher.

Dealers expect exporters to remain absent from the market, and may only let go of their dollar holdings when the rupee sustainably falls below 84-per-dollar. 

FORWARDS

Premiums on the one-year dollar/rupee forward contract ended lower due to a rise in the benchmark US Treasury yield after the initial claims for US state unemployment benefits for last week came in lower-than-expected, reducing expectations of a 50 bps rate cut by the US Federal Reserve in September, dealers said.

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. With the US Federal Reserve expected to cut policy rates by more than 25 bps at its meeting in September, and the RBI expected to delay rate cuts, the interest rate differential between the US and India is likely to rise, thus driving the dollar/rupee forward premiums higher.

Further, some exporters sold dollars for forward delivery, noting the above 2% forward premium level. This weighed on the premiums, dealers said. The one-year dollar/rupee forward premium had risen to 2.09% on Monday, its highest level in over 14 months. 

"The overnight rise in US yields is the main cue for the market. Levels have somewhat consolidated after the volatility this week," said a dealer with a private bank. "There is some exporter activity around these levels."

At 1530 IST, premium on the one-year exact-period dollar/rupee contract was 171.47 paise, compared to 173.35 paise on Thursday. On an annualised basis, the premium was 2.04% compared to 2.06% on Thursday.

OUTLOOK

On Monday, the rupee will track movement of the dollar index and crude oil prices, dealers said. Traders will keep a close watch on the US CPI inflation data, which is due next week.

They will also monitor the evolving geopolitical developments in West Asia and its subsequent impact on crude oil prices. Dealers expect importers to continue buying dollars at every dip in the dollar/rupee level, which may keep the Indian unit under pressure.

The RBI is also expected to continue intervening through dollar sales, both in the offshore NDF and domestic spot market, to prevent a sharp fall in the rupee. "After all the movement we saw this week, they will now again keep the rupee in a tight range for some time," said a treasury head at a private bank. "They have loosened enough grip and that is it for now I think."

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: Dlr firm after US weekly jobless claims fall

MUMBAI – The dollar index was firm after US weekly jobless claims data released on Thursday showed that the labour market was cooling. Initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 233,000 for the week ended Saturday, against expectations of 240,000 claims by a Reuters poll.

This eased investor concerns about a possible recession in the US. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 103.18 at 1522 IST, compared with 103.24 on Thursday and 103.19 on Wednesday. The index rose to a near one-week high of 103.55 on Thursday after the jobs data was released.

However, some US Federal Reserve officials hinted that inflation is cooling enough to allow interest rate cuts. On Thursday, Kansas City Fed President Jeffrey Schmid stated that loosening monetary policy could be "appropriate" if inflation remains low. 

The Japanese yen was largely unchanged against the dollar. Japan's Finance Minister Shunichi Suzuki emphasised on Thursday that monetary policy decisions fall under the purview of the Bank of Japan, while they continue to monitor market developments closely.

The Australian dollar was up 0.1% against the dollar, supported by comments from Reserve Bank of Australia officials and hotter-than-expected inflation data from China. China's CPI rose 0.5% on-year in July, exceeding the expected 0.3% and previous 0.2% readings. Meanwhile, the monthly index also increased 0.5%, swinging from the previous decline of 0.2%. Any fluctuations in the Chinese economy may have repercussions on the Australian markets due to their strong trade partnership. 

Further, Reserve Bank of Australia Governor Michele Bullock highlighted the importance of remaining cautious regarding inflation risks and expressed readiness to raise interest rates if needed. The euro was largely unchanged against the greenback. (Kabir Sharma)

India Rupee: Premiums down on rise in US yields post US jobs data

MUMBAI – Premiums on the one-year dollar/rupee forward contract were lower due to a rise in the benchmark US Treasury yield after the release of US unemployment claims data on Thursday, dealers said. Initial claims for US state unemployment benefits for the last week came in lower-than-expected, allaying investor concerns about the country heading into a recession.

"Premiums are slightly down due to a rise in UST (US Treasury yield)," a dealer with a state-owned bank said. "While today, premiums are down, we expect forwards to touch 2.10% in coming days before reversing back to under 2%."

In the US, initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 233,000 for the week ended Saturday, data showed Thursday, compared with a forecast of 240,000 claims by a Reuters poll. This eased concerns of investors about the US economy possibly falling into a recession, while still maintaining their expectation of an imminent rate cut by the US Federal Reserve.

Currently, Fed funds futures traders see a 100% chance of a rate cut in September, according to CME FedWatch tool. However, odds of a 50 bps rate cut have decreased to 54.5% from 74% a week ago.

Some US Federal Reserve officials on Thursday said that inflation is cooling enough to allow interest rate cuts. However, they said the size and timing of such rate cuts would depend on economic data, and not stock market chaos. Stock markets across the globe fell sharply on Monday after last Friday's non-farm payrolls data.

After the non-farm payrolls data came lower than expected, investors started anticipating that the US economy might be heading into a recession, and that led to a fall in US yields, in turn leading to a sharp rise in dollar/rupee forward premiums, dealers said.

Dealers said one year dollar/rupee forward premium may rise further on importers' forward dollar purchases. They said importers' demand in the forward market may increase if the rupee falls below 84.00 a dollar. 

For the past two days, dealers said, importers had been purchasing the greenback for forward delivery, in anticipation that the rupee may fall below 84.00 a dollar. However, today, since the rupee rose to a high of 83.88 a dollar after opening at 83.94 a dollar, importers' demand for dollars in the forward market was muted. The rupee had closed at 83.9625 a dollar in the spot on Thursday.

At 1357 IST, premiums on the one-year exact-period dollar/rupee contract were 171.47, compared with 173.35 on Thursday. On an annualised basis, the premiums were 2.04% compared with 2.06% on Thursday.  (Sourabh Kumar)

India Rupee: Erases most gains as importers continuously buy dollars

MUMBAI – The rupee erased most of its earlier gains against the dollar as banks persistently purchased dollars on behalf of importers, dealers said. The rupee rose to a high of 83.8700 a dollar earlier in the day, owing to banks' dollar sales for foreign fund inflows into corporates and domestic equities, dealers said.

Importers rushed to purchase the greenback, in order to take advantage of the relatively lower dollar/rupee levels, dealers said. The successive record lows hit by the rupee this week has prompted importers to aggressively purchase dollars in fear that the Indian unit may fall further in the coming days. The rupee hit a lifetime low of 83.9725 a dollar on Wednesday. 

"The kind of buying (of dollars) interest we were seeing maybe on Monday or Tuesday, is probably absent. But there is still a solid buying (of dollars) happening," said a dealer at a private bank said. 

Dealers said a portion of foreign fund inflows were likely on account of Japan Bank for International Cooperation inking a 25.5 bln yen, or $173.4 mln, loan agreement with Power Finance Corp Ltd. 

Banks also sold dollars on behalf of foreign portfolio investors, looking to invest in domestic equities, dealers said. "Since the jolt the market got on Monday, things have stabilised for now and investors are returning," a dealer at a state-owned bank said. "The next big event will be the US CPI next week, till then things should be stable." 

Investors' risk sentiment improved after the lower-than-expected weekly US unemployment claims data on Thursday eased fears of a recession in the US, dealers said. In the US, initial claims for state unemployment benefits fell 17,000 to a seasonally-adjusted 233,000 for the week ended Saturday, the largest drop in about 11 months. Economists polled by Reuters had forecast 240,000 claims for the latest week.

A sharp rise in domestic equities also aided the local unit, dealers said. At 1340 IST, both the Nifty 50 and Sensex were up 1.1% each. 

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

India Rupee: Technical Levels for rupee - Aug 9

MUMBAI – At 0900 IST, the rupee was at 83.9400 a dollar, against 83.9625 from the previous close. At 1037 IST, the rupee was at 83.9000 per dollar.

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

(Sourabh Kumar)

India Rupee - Asia FX: Most up as risk appetite of investors improves

MUMBAI – Most Asian currencies were up today tracking a rise in their domestic equity indices as risk appetite of investors improved after the latest US jobs data allayed fears that the US economy was heading into a recession.

In the US, initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 233,000 for the week ended Saturday, against expectations of 240,000 claims by a Reuters poll. This eased investor concerns about a possible recession in the US. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 103.16 at 0942 IST, compared with 103.24 on Thursday and 103.19 on Wednesday. The index rose to a near one-week high of 103.55 on Thursday after the jobs data was released.

The Taiwan dollar was up 0.2% against the US unit due to rise in equities on the Taiwan Stock Exchange. The Taiwan Stock Exchange weighted index rose over 3%. Gains in the currency were limited due to pressure from weak growth in the country's exports. Exports from the country rose 3.1%, much lower than the forecast of 6.13% in a Reuters poll, and way below the 23.5% rise in June. Exports were hit mainly due to lack of demand from China.

The South Korean won rose 0.7% against the dollar, boosted by a positive stock index. The Korea Composite Stock Price Index rose 1.5%. Korea Development Institute, a state-run think-tank, on Thursday said that there was a need for early rate cuts, flagging weaker economic growth and inflation in the country. The think-tank said the South Korean economy is likely to grow at 2.5% in 2024, down from 2.6% seen three months ago.

The Philippines peso was up 0.1% against the dollar as the country's GDP rose 6.3% in Apr-Jun, more than the forecast of 6.2%. The PSEi Index was up about 1%. The Malaysian ringgit was up 0.2%, while the Thai baht was steady against the dollar.

The Indonesian rupiah was down 0.1% against the greenback. The currency was down despite hopes of exports improving after Indonesia signed a protocol amending the Indonesia-Japan Economic Partnership Agreement. Indonesian Trade Minister Zulkifli Hasan Thursday said that the protocol is expected to increase the total value of exports from the country by about 58% to $35.9 bln in 2028.  (Sourabh Kumar)

India Rupee: Tad up on improved risk appetite, likely FX inflows

MUMBAI – The rupee was slightly higher against the dollar today due to an improved risk appetite among investors after the lower-than-expected weekly US unemployment claims data on Thursday allayed fears of a recession in the US, dealers said. The economic data also led to reduced expectations of aggressive interest rate cuts by the US Federal Reserve this year. 

Domestic and Asian share indices rose sharply today, supporting the rupee, dealers said. At 0935 IST, both the Nifty 50 and Sensex were up 1.1% each. 

In the US, initial claims for state unemployment benefits fell 17,000 to a seasonally-adjusted 233,000 for the week ended Saturday, the largest drop in about 11 months. Economists polled by Reuters had forecast 240,000 claims for the latest week.

The odds of the US central bank slashing interest rates by 50 basis points at its September policy meeting fell to 57% from 69% on Wednesday, with a 43% probability now for a 25-bps cut, as per the CME FedWatch Tool.

Further, some dealers said that banks sold dollars, likely for foreign fund inflows into an Indian corporate, which also supported the Indian currency. 

However, banks stepped in to purchase the greenback on behalf of importers, which limited gains for the Indian unit, dealers said. Noting the successive record lows hit by the rupee this week, importers are persistently buying dollars in fear that the Indian unit will depreciate further in the coming days. The rupee hit a lifetime low of 83.9725 a dollar on Wednesday.  
 

"There is a lot of buying (of dollars) interest in the market. The data seems to not have much of an impact on the rupee," a dealer at a private bank said. "I think it (the rupee) will stay around these levels only. RBI will also be in the market when needed."

Traders expect the Reserve Bank of India to intervene through dollar sales if the rupee inches closer to the psychologically-crucial level of 84-per-dollar.

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 resistance for the Indian currency at 83.80 a dollar. (Pratiksha)

India Rupee: Expected range for rupee - Aug 9

MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecast by leading banks and brokerages in an Informist poll:

(Pratiksha)

End

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

Edited by Ashish Shirke

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