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Informist, Wednesday, Aug 14, 2024

By Sourabh Kumar

MUMBAI – The rupee ended steady against the dollar after the Reserve Bank of India likely stepped in to sell the greenback, offsetting the downward pressure from dollar purchases by importers, dealers said.

"Importers bought at lower (dollar/rupee) levels, and then the central bank was selling continuously in small amounts at around 83.96 a dollar," a dealer with a private bank said.

After touching today's high of 83.8900 a dollar, the rupee settled at 83.9475 a dollar. On Tuesday, the Indian unit closed at 83.9700 a dollar. Today, the rupee opened slightly higher against the greenback due to a fall in the dollar index after the release of the July US producer price index.

The US producer price index for final demand edged up 0.1% in July, lower than the forecast of a 0.2% rise in a Reuters poll. It was also less than the 0.2% rise in June. On an annual basis, the PPI increased 2.2% compared with 2.7% in June.

The dollar index fell further, and touched an over one-month low of 102.42 today, mainly due to a rise in the euro. The euro rose after the flash estimate showed that the eurozone's economy grew 0.3% from a quarter ago in Apr-Jun, confirming the previous estimate. The euro has a weightage of 57.6% in the dollar index. The index, which measures the strength of the greenback against a basket of six major currencies, was 102.43 at 1530 IST, after settling at 102.60 on Tuesday. On Monday, it was 103.13.

A fall in the dollar index kept the rupee supported throughout the day. However, when the Indian currency touched today's high, importers purchased the greenback in large amounts, which exerted downward pressure on the rupee, dealers said. Importers bought dollars, taking advantage of relatively lower dollar/rupee levels, as they expected the Indian rupee to fall below 84.00 a dollar in the coming week, dealers said.

Oil prices rose slightly today, which put downward pressure on the rupee, dealers said. As crude oil is the largest item in India's import basket, a rise in oil prices weighs on the domestic currency. Oil prices rose on an expected fall in US crude inventories. A report by Reuters, which cited industry sources, showed crude stocks falling by 5.21 mln barrels for the week ended Friday.

At 1530 IST, the October Brent crude contract on the Intercontinental Exchange was at $80.95 per bbl, compared with $80.69 per bbl on Tuesday and $82.30 per bbl on Monday. Oil prices touched a high of $81.44 a bbl earlier today.

The rupee also came under pressure after India's merchandise trade deficit widened to $23.50 bln in July from $19.00 bln a year ago because of a rise in imports and a fall in exports, data released by the commerce ministry today showed.

Amidst such downward pressure on the rupee, the RBI sold the greenback near 83.96 a dollar, which prevented it from falling to the psychologically crucial level of 84.00 a dollar. 

Today, exporters did not sell dollars in large amounts. "They were only covering their basic needs," a dealer with a state-owned bank said. "Nobody is ready to take any long-term position in the dollar/rupee, as the near-future movement in dollar/rupee is so unsure." Exporters were waiting for the rupee to fall below 84.00 a dollar before placing large bets, dealers said.

Some foreign fund inflows in the domestic equities are expected to support the rupee, dealers said. Bajaj Finance is planning to raise up to $500 mln from the external commercial borrowing route. Further, Torrent Pharmaceuticals is also expected to borrow about $3 bln from foreign lenders to acquire a controlling stake in JB Chemicals, according to Bloomberg. 

"If such big (foreign fund) inflows come unhindered, we may see the rupee rising towards 83.80 a dollar, before falling below 84.00 a dollar," the dealer with the state-owned bank said. "But that seems very difficult, looking at the past, when the central bank has absorbed all the inflows."

FORWARDS

Premium on the one-year dollar/rupee forward contract ended higher today due to a fall in the benchmark US Treasury yields, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

Yield on the benchmark 10-year US Treasury note fell 5 basis points to close at 3.85% on Tuesday, after a softer-than-expected US producer price index. After the data, the odds of the Fed cutting rates by 50 bps in September increased to about 55% now from 50% on Monday, as per CME FedWatch tool.

Market participants now eagerly wait for the release of the US CPI data, due later today, to assess the rate trajectory in the US and around the globe. If the US inflation data comes on expected lines, it would likely lead to a further rise in the one-year dollar/rupee forward premiums to about 2.12%. Banks may sell dollars for forward delivery at this level, which could cap gains for the forward premiums.

With increasing chances of a rate cut by the Fed, and a possible delay in cutting rates by the Reserve Bank of India as expected by market participants, the interest rate differential between the two countries is expected to widen, thus pushing the forward premiums higher.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 176.93 paise, compared with 171.44 paise on Tuesday. On an annualised basis, the premium was 2.10% compared with 2.04% on Tuesday.

OUTLOOK

The market is closed on Thursday for Independence Day. On Friday, the rupee will track movement in the dollar index and crude oil prices, dealers said. Market participants are awaiting the release of the US CPI data, due later today. US consumer prices are expected to have risen 3.0% on year in July. Sequentially, the inflation is forecast at 0.2%.

The RBI may intervene through dollar sales in the non-deliverable forwards market if the rupee inches closer to 84.00 per dollar in the offshore market ahead of the opening at 0900 IST. "I am expecting some movement in the offshore (non-deliverable dollar/rupee forward), after the US CPI data," a dealer with a state-owned bank said.

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: Steady as importers' dlr buys offset fall in dlr index

MUMBAI – The rupee was steady against the dollar as importers purchased the greenback, noting lower dollar/rupee levels, which offset a fall in the dollar index, dealers said.

"Importers were buying at dips, and it brought the rupee to this level," a dealer with a state-owned bank said. At 1342 IST, the rupee was at 83.9500 a dollar, compared with today's opening of 83.9075 a dollar. On Tuesday, the Indian currency closed at 83.9700 a dollar.

The rupee was higher against the greenback in the morning, as the dollar index fell on Tuesday after a softer-than-expected US producer price index, dealers said. The producer price index for final demand rose 0.1% in July after rising by an unrevised 0.2% in June, data showed. A Reuters poll had forecast the PPI gaining 0.2%.

The index, which measures the strength in the greenback against a basket of six major currencies, was 102.63 at 1245 IST, compared with 102.60 on Tuesday. It had touched over a week low of 102.55 on Tuesday. On Monday, the index closed at 103.13.

As the rupee touched today's high of 83.8900 a dollar, importers purchased dollars in large amounts, which weighed on the rupee, dealers said. Higher demand for the greenback from importers at such levels was due to their anticipation of a fall in the Indian currency below 84.00 a dollar, dealers said.

A slight rise in crude oil prices also weighed on the currency, dealers said. As crude oil is a major commodity that India imports, a rise in oil prices increases the import bill of the country, thus weighing on the domestic currency. Oil prices rose on an expected fall in US crude inventories. A report by Reuters, which cited industry sources, showed crude stocks falling by 5.21 mln barrels for the week ended Friday.

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: Premiums up as US ylds fall post softer-than-view US PPI

MUMBAI – Premium on the one-year dollar/rupee forward contract rose today due to a fall in the benchmark US Treasury yields, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

"After the US PPI (producers price index) came in lower-than-expected, confidence of investors about the Fed (US Federal Reserve) cutting rates increased, and that is why premiums are rising," a dealer with a state-owned bank said.

Yield on the benchmark 10-year US Treasury note fell 5 basis points to close at 3.85% on Tuesday, after producer prices in the US in July rose less than what was expected. Sequentially, the US Producer price index advanced 0.1% in July, lower than economists' expectation of a 0.2% increase in a Reuters poll. On a yearly basis, it rose 2.2% in July after rising 2.7% in June.

With a lower-than-expected US producer price index, odds of the Fed cutting rates by more than 25 bps in September rose to about 55% as of today, compared to 50% on Monday, as per CME FedWatch tool.

Market participants now eagerly wait for the release of the US CPI data, due later today, to assess the rate trajectory in the US and around the globe. US consumer prices are expected to have risen 3.0% on year in July. Sequentially, the inflation is forecast at 0.2%.

If the US inflation data comes on expected lines, it would likely lead to a further rise in the one-year dollar/rupee forward premiums. "However, I think there would be a cap at 2.11-2.12% (in one-year exact period dollar/rupee forward premium), as heavy receiving (selling dollars for forward delivery) is likely at such lucrative (higher) levels," a dealer with another state-owned bank said.

With increasing chances of a rate cut by the Fed, and a potential delay in cutting rates by the Reserve Bank of India as expected by market participants, the interest rate differential between the two countries is expected to widen, thus pushing the forward premiums higher.

Back at home, the CPI, released by the National Statistical Office on Monday, came in at a 59-month low of 3.54% in July. While it was well under the 4% target of the RBI, the fall in the headline inflation print from June's 5.08% was mainly because of a statistical effect of a high base.

At 1223 IST, the premium on the one-year exact-period dollar/rupee contract was 176.32 paise, compared with 171.44 paise on Tuesday. On an annualised basis, the premium was 2.09% compared with 2.04% on Tuesday.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Aug 14

MUMBAI – At 0900 IST, the rupee was at 83.9075 a dollar, against 83.9700 from the previous close. At 1030 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: Rises as dollar index falls post softer US Jul PPI data

MUMBAI – The rupee rose against the dollar today as the dollar index hit an over one-week low on Tuesday after the US producer prices data came in lower-than-expected, reinforcing bets that the US Federal Reserve may start cutting interest rates in September, dealers said. 

The producer price index for final demand rose 0.1% in July after rising by an unrevised 0.2% in June, data showed. A Reuters poll had forecast the PPI gaining 0.2%. In the 12 months through July, the PPI increased 2.2% after climbing 2.7% in June.

After the data, odds of the US central bank cutting interest rates by 50 basis points at its September policy meeting rose to 54.5%, as compared to 50% on Tuesday. Odds of a 25-bps rate cut in September are now seen as having a 45.5% probability, as per the CME FedWatch Tool.

At 0940 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.65, compared with 102.60 on Tuesday, and 103.13 on Monday. The index fell to an over one-week low of 102.55 on Tuesday. 

Traders now await the key US CPI inflation data for July, due to be released later today, to assess the Fed's interest rate trajectory. US July inflation 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.

"We may see importer interest around these levels. Gold importers have primarily been buying (dollars) actively lately," said a dealer at a big state-owned bank. "But overall, the market should be calm as usual, with the US CPI data in line today."

Dealers expect importers to buy dollars to take advantage of the relatively lower dollar/rupee levels, which may limit gains for the Indian unit. However, 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 resistance for the Indian currency at 83.85 a dollar.  (Pratiksha)

India Rupee - Asia FX: Rise as dlr index down post softer US Jul PPI

MUMBAI – Asian currencies rose against the dollar today as the dollar index fell to an over one-week low on Tuesday after softer-than-expected US producer prices data cemented bets of the US Federal Reserve beginning its rate cut cycle from September. 

The producer price index for final demand edged up 0.1% in July after rising by an unrevised 0.2% in June, data showed. A Reuters poll forecast the PPI gaining 0.2%. In the 12 months through July, the PPI increased 2.2% after climbing 2.7% in June.

The odds of the US central bank slashing interest rates by 50 basis points at its September policy meeting rose to 54.5% after the economic data, as compared to 50% on Tuesday. Odds of a 25-bps rate cut in September are now seen as having a 45.5% probability, as per the CME FedWatch Tool.

At 0855 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.61, compared with 102.60 on Tuesday, and 103.13 on Monday. The index fell to an over one-week low of 102.55 on Tuesday. 

Market participants now await the key US CPI inflation data for July, slated to be released later today, to assess the Fed's interest rate path. US July inflation 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.

The Indonesian rupiah rose 0.9% against the dollar, the most amongst its peers. The Malaysian ringgit rose 0.5% against the greenback ahead of the country's Apr-Jun GDP data, due to be announced on Friday.

The South Korean won rose 0.4% against the dollar after data released today showed that the country's jobless rate unexpectedly fell to the lowest level since October, giving the central bank space to delay a rate cut. South Korea's unemployment rate decreased to 2.5% in July on a seasonally-adjusted basis, from 2.8% in June.  

The Taiwan dollar and the Philippines peso rose 0.5% and 0.2% against the dollar, respectively. The Thai baht was up 0.1% against the US unit. (Pratiksha) 

India Rupee: Expected range for rupee - Aug 14

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 Saji George Titus

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