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Informist, Tuesday, Aug 13, 2024

By Sourabh Kumar

MUMBAI – The rupee ended steady for the fifth consecutive trading day against the dollar after banks sold the greenback, likely on behalf of the Reserve Bank of India, offsetting the downward pressure from oil marketing companies' dollar purchases, dealers said.

"It is very difficult for us to trade now," a dealer with a private bank said. "What will we earn if it moves 1-2 paise? They (RBI) are holding the rupee's movement in such a tight range," a dealer with a private bank said.

After trading in a narrow range of 3 paise, the Indian currency settled at 83.9700 a dollar. On Monday, the rupee ended at 83.9725 a dollar. Throughout the day, the rupee remained steady in its movement against the greenback as most market participants refrained from placing large bets ahead of the release of key US economic data.

Market participants were waiting for the release of inflation data from the US Wednesday to gauge the health of the world's largest economy, and project the global interest rate trajectory, dealers said.

As per the estimate of a poll conducted by Reuters, the US CPI report is expected to show headline inflation accelerating 0.2% on month in July, but remaining unchanged at 3% on a year-on-year basis. Before the US inflation data, the Producer Price Index for the world's largest economy is due later today.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.22 at 1530 IST, after settling at 103.13 on Monday and 103.15 on Friday. 

Most market participants refrained from placing large bets ahead of the release of the US CPI. Dealers said they were unsure about the movement in the dollar/rupee going ahead, leading to lower overall volume in the market.

On a day when volumes were already low, some demand for dollars from oil marketing companies weighed on the rupee. Oil companies purchased the greenback anticipating a further rise in crude oil prices amidst the volatile geopolitical situation in West Asia, dealers said. However, gains were capped as the Organization of the Petroleum Exporting Countries cut its forecast for crude oil this year on demand concerns from China. The October Brent crude contract on the Intercontinental Exchange was at $82.06 per bbl at 1530 IST, after settling at $82.30 per bbl on Monday and $79.66 per bbl on Friday.

Due to pressure from oil companies' dollar purchases, the RBI intervened by way of dollar sales near 83.97 a dollar, preventing the rupee from falling, dealers said. "The central bank is restricting the 84.00 a dollar figure to restrict any panic (buying of dollars) by importers," a dealer with a brokerage said. "It will eventually break 84.00 but slowly."

Exporters, on the other hand, did not sell the greenback in large amounts despite the rupee trading near historic lows, as they are waiting for the Indian unit to fall past 84.00 a dollar, dealers said.

Further, after MSCI said it would add seven Indian stocks to its MSCI global standard indices as part of its index review for August, dealers expect the rupee to receive support from foreign fund inflows into the domestic equities market. "We are expecting $1 bln-$2 bln of inflows for HDFC, but I think most of such inflows would be absorbed by the central bank, as they have been doing in the past," a dealer with another private bank said.

Nuvama Alternative & Quantitative Research said that after changes in the MSCI index, India is likely to witness foreign inflows to the tune of $2.7 bln-$3 bln, while HDFC Bank is likely to get an inflow of $1.8 bln.

FORWARDS

Premium on the one-year dollar/rupee forward contract ended steady today as market participants remained on the sidelines and refrained from placing large bets ahead of key US economic data, dealers said.

Dealers said one-year dollar/rupee forward premiums are expected to remain above 2% on an annualised basis on the expectation that the US Federal Reserve would cut rates at its upcoming meeting in September.

Odds of a cut of 50 basis points in the Fed rate in September, as measured by the CME FedWatch tool, have fallen to about 52% as of today, from 68% a week ago, with 100% odds of at least a 25 bps rate cut.

Dealers said that even if US inflation for July is higher than expected, forward premiums are likely to remain above 2% on a durable basis due to expectations of a wider interest rate differential. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 171.44 paise, compared with 170.83 paise on Monday. On an annualised basis, the premium was 2.04% compared with 2.03% on Monday.

OUTLOOK

On Wednesday, the rupee will track movement in the dollar index and crude oil prices, dealers said. The RBI may intervene through dollar sales in the offshore non-deliverable forwards market if the rupee inches closer to 84.00 per dollar during opening at 0900 IST, dealers said. 

Market participants may also take cues from the release of the US Producer Price Index today. The core Producer Price Index, which excludes volatile food and energy prices, is expected to have grown at a slower pace of 0.2% compared with the 0.4% increase seen in June.

Traders will continue to monitor the evolving situation in West Asia and its subsequent impact on crude oil prices. The RBI is also expected to continue intervening through dollar sales in the domestic spot market to prevent a sharp fall in the rupee. 

Dealers expect importers to continue buying dollars at every dip in the dollar/rupee level, which may keep the Indian unit under pressure.

During the day, the rupee is seen at 83.90-84.10 a dollar, with strong technical support pegged at 84.00.

India Rupee - World FX: Sterling up on lower-than-view unemployment

MUMBAI – The pound sterling rose 0.2% against the dollar as data showed the labour market in the UK remained strong with unemployment coming in at less than what the market had expected. The UK Office for National Statistics reported that the unemployment rate fell unexpectedly to 4.2%. Economists had expected the joblessness rate to have increased to 4.5% from the prior release of 4.4%, according to Reuters.

The dollar index, however, remained firm ahead of multiple data releases from the US. The Producer Price Index is scheduled for release later today, and the CPI data for July are expected to be released Wednesday. The index, which measures the strength of the greenback against a basket of six major currencies, was at 103.25 at 1456 IST, compared with 103.13 on Monday, and 103.15 on Friday.

Economists expect that the monthly headline Producer Price Index barely rose last month. The core Producer Price Index, which excludes volatile food and energy prices, is expected to have grown at a slower pace of 0.2% compared with the 0.4% increase seen in June. Annual headline and core Producer Price Index are estimated to have decelerated by three-tenths to 2.3% and 2.7%, respectively.

The US inflation print for July is expected to rise 0.2% on month but may remain unchanged from the previous month at 3% on year, as per a Reuters poll. The odds of a 50 basis points rate cut by the US Federal Reserve in September, as measured by the CME FedWatch tool, have come down to about 50% as of today from 68% a week ago, with 100% odds of at least a 25 bps rate cut.

The Japanese yen was down 0.4% against the dollar as the greenback remained firm. However, safe haven flows into the yen due to the escalating conflict in West Asia limited the fall in the unit. The US Defence Department said over the weekend that it will send a guided missile submarine to West Asia as the region braces for potential attacks on Israel by Iran and its allies, reports said. Iran and Hezbollah have vowed retaliation for the assassinations of Hamas political leader Ismail Haniyeh and Hezbollah military commander Fuad Shukr, as per reports. Any such retaliation may widen the West Asia conflict and tighten access to global crude supplies, pushing oil prices higher.

The euro was down 0.1% against the greenback.  (Kabir Sharma)

India Rupee: Premiums steady; market cautious ahead of US CPI on Wed

MUMBAI – Premium on the one-year dollar/rupee forward contract was steady as market participants remained on the sidelines and refrained from placing large bets ahead of key US economic data, dealers said.

"After what happened on that Friday (when US non-farm payrolls data was released on Aug 2), people are apprehensive of taking any bets before the release of such crucial data," a dealer with a state-owned bank said. In reaction to the lower than expected US jobs data, dollar/rupee forward premiums rose sharply on Aug 5.

US consumer prices are expected to have risen 3.0% on year in July. Sequentially, the inflation is forecast at 0.2%.

Dealers said one-year dollar/rupee forward premiums are expected to remain above 2% on an annualised basis on the expectation that the US Federal Reserve would cut rates at its upcoming meeting in September. At 1354 IST, premium on the one-year exact-period dollar/rupee contract was 171.19 paise, compared with 170.83 paise on Monday. On an annualised basis, the premium was 2.04% compared with 2.03% on Monday.

Dealers said that even if US inflation for July is higher than expected, forward premiums are likely to remain above 2% on a durable basis due to expectations of a wider interest rate differential. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

A dealer at a state-owned bank said the Fed is certainly going to cut rates in September, and "we think they will go for a 50 basis points rate cut". However, the odds of a 50 bps rate cut by the Fed in September, as measured by CME FedWatch tool, have come down to about 50% as of today from 68% a week ago, with 100% odds of at least a 25 bps rate cut.

With the Fed expected to cut rates by more than 25 bps as was previously expected and India expected to delay a rate cut, the interest rate differential between the US and India is likely to rise, thus driving the dollar/rupee forward premiums higher.  (Sourabh Kumar)

India Rupee: In thin band as RBI's dollar sales offset oil cos' buys

MUMBAI – The rupee traded in a thin band against the dollar as a few banks sold the greenback on behalf of the Reserve Bank of India to offset a slight downward pressure from dollar purchases by some oil marketing companies, dealers said.

"It has been steady for a while now, and again the central bank keeps selling in small amounts amidst some demand (for dollars) from oil companies," a dealer with a state-owned bank said. Being a major importer of crude oil, a rise in oil prices increases the import bill of India, thus weighing on the rupee.

Oil prices rose on Monday due to concerns over rising geopolitical tensions in West Asia. Traders remained cautious about the developing situation in the region, after Iran rejected calls by European countries, including France, Germany, and the UK, to exercise restraint against Israel. A report by Reuters quoted Iran's foreign minister as saying that calls for restraints lack political logic and were in contradiction to international laws.

The October Brent crude contract on the Intercontinental Exchange was at $81.91 per bbl, after settling at $82.30 per bbl on Monday and $79.66 per bbl on Friday.

Dealers said the RBI did not want the rupee to move sharply, and hit 84.00 a dollar, to avoid a panic amongst importers. Today, the central bank intervened for the second consecutive day to save the rupee from falling sharply. The rupee was at 83.9625 a dollar at 1339 IST.

The dollar index remained steady ahead of the release of key economic data from the US, which supported the Indian currency, dealers said. The index, which measures the strength of the greenback against a basket of six major currencies, was at 103.17, compared with 103.13 on Monday, and 103.15 on Friday.

Following the release of the July producer price index from the US later today, market participants will look forward to the US inflation data for July, due to be released on Wednesday. The US inflation print for July is expected to rise 0.2% on month but may remain unchanged from a month ago at 3% on year, as per a Reuters poll. 

For the rest of the day, the rupee is seen at 83.85-84.00 against the dollar, dealers said. They peg key technical support for the Indian currency at 84.00 a dollar.  (Sourabh Kumar)

 India Rupee: Technical Levels for rupee - Aug 13

MUMBAI – At 0900 IST, the rupee was at 83.9400 a dollar, against 83.9725 from the previous close. At 1100 IST, the rupee was at 83.9575 per dollar. Following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee - Asia FX: Mixed; traders await multiple key US economic data

MUMBAI – Asian currencies moved on a mixed note against the dollar today as traders await a slew of economic data releases from the US this week, with the most crucial being the US CPI inflation data for July, due on Wednesday. 

The US CPI report is expected to show headline inflation accelerated 0.2% in July from June, but remained unchanged at 3% on a year-on-year basis, as per a Reuters poll. Market participants also await the US July Producer Price Index, due later today, and the US retail sales data, due on Thursday. The US retail sales data is likely to show marginal growth, reports said. However, any weakness in the data could reignite fears of a consumer slowdown and a potential recession in the US.

Market participants will assess the key US economic data for further cues on the US Federal Reserve's rate cut cycle. The odds of the US central bank slashing interest rates by 50 basis points at its September policy meeting are 50%, with a 25-bps cut also seen as having a 50% probability, as per the CME FedWatch Tool.

The Indonesian rupiah rose 0.4% against the US unit, tracking gains in domestic equities. At 0930 IST, Indonesia's Jakarta Composite was up 0.7%. 

Market participants are also keeping a close eye on the evolving geopolitical situation in West Asia. The West Asia conflict has escalated, with the US stepping in for any potential attacks by Iran or its allies in the region as soon as this week, reports said. 

The Taiwan dollar and the Philippine peso rose 0.2% against the dollar, while the South Korean Won and Malaysian ringgit were flat against the greenback. The Thai baht and offshore Chinese yuan were also steady against the dollar.  (Pratiksha) 

India Rupee: Steady as traders await US economic data; rise in oil weighs

MUMBAI – The rupee was largely steady against the dollar today as traders stayed cautious ahead of a slew of economic data releases from the US this week, including the July producer price index, which is due later today, dealers said. "The US CPI data is the main thing, but today's data is also being seen. It is unlikely that the rupee will be impacted a lot by all this, unless there is very surprising data," a dealer at a state-owned bank said. 

Market participants also await the crucial US CPI inflation data for July, due to be released on Wednesday. The US inflation print for July is expected to rise 0.2% on month but may remain unchanged from a month ago at 3% on year, as per a Reuters poll. Following this, market players will look forward to the US retail sales data, due on Thursday. 

Market participants will assess the key US economic data for further cues on the Federal Reserve's rate cut cycle. Currently, odds are evenly split between a 50-basis-point and a 25-bps rate cut by the Fed at its September meeting, as per the CME FedWatch Tool.

The dollar index was steady ahead of the key economic data releases. At 0930 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.12, compared with 103.13 on Monday, and 103.15 on Friday.

Traders are also keeping a close eye on the evolving geopolitical tension in West Asia. The US defence department said over the weekend that it will send a guided missile submarine to West Asia as the region braces for potential attacks on Israel by Iran and its allies, reports said.

Crude oil prices eased slightly in early trade today. However, on Monday, prices rose by almost 3% on concerns of a widening conflict in West Asia, which may tighten global crude oil supplies. Dealers expect oil marketing companies to purchase dollars if oil prices stay sustainably above $80-per-bbl. At 0930 IST, the October Brent crude contract on the Intercontinental Exchange was at $81.66 per bbl, compared with $82.30 per bbl on Monday and $79.66 per bbl on Friday.

"Crude has gone back to $80 (a bbl). There are some concerns around that but unless there is a move towards $85 (a bbl), I don't think there should be any panic," a dealer at a large oil marketing company said. 

Dealers expect the dollar/rupee to move in a tight range today. They 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 at 83.85-84.00 against the dollar, dealers said. They peg key technical support for the Indian currency at 84.00 a dollar.  (Pratiksha)

India Rupee: Expected range for rupee - Aug 13

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

(Gowri Lakshmi)

End

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

Edited by Rajeev Pai

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