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Informist, Monday, Aug 19, 2024

By Sourabh Kumar

MUMBAI – The rupee ended slightly higher against the dollar today, after closing steady for a week, on account of a fall in the dollar index, dealers said. Some foreign fund inflows to corporates also aided the domestic currency, they said.

"We have seen some movement today, and largely it was the dollar index effect on one side and oil companies buying (dollar) on the other," a dealer with a state-owned bank said.

After moving in a range of 10 paise, the rupee ended the day at 83.8700 a dollar. On Friday, the domestic currency closed at 83.9400 a dollar. In the morning, the rupee opened slightly higher, and stayed up for the first hour, before importers started purchasing dollars, dealers said.

The dollar index fell after US housing starts data on Friday showed that single-family housing starts fell 14.1% to 851,000 units in July. This reinforced investor expectations of a rate cut by the US Federal Open Market Committee at its meeting in September. The index, which measures the strength of the greenback against a basket of six major currencies, was at 102.17 at 1530 IST, compared with 102.40 on Friday and 103.04 on Thursday.

There is near-certainty that the Fed will cut rates at its next meeting. According to the CME FedWatch tool, the probability of a 25-basis-point rate cut is 71.5%, with the rest for a 50-bps cut. "If there is a 50 bps rate cut, I think the rupee may touch 83.60 a dollar," a dealer with a private bank said. "But I think that path is very difficult, because 85 (83.85 a dollar) is a protected level." 

Dealers said if the rupee rises past 83.85 a dollar, it could see a very quick upward movement to 83.65 a dollar due to the possibility of multiple stop losses getting triggered. Further, they said, a weak dollar index is expected to keep the rupee supported. "I think the dollar index may fall to 101.80," a dealer at another private bank said.

Apart from the dollar index, an fall in crude oil prices also supported the rupee in early trade, dealers said. Crude prices fell due to looming concerns over demand from China as data last week showed industrial production rose slower-than-expected in July. China is the world's largest importer of crude.

At 1530 IST, the October Brent crude contract on the Intercontinental Exchange was at $79.03 per barrel compared with $79.68 per bbl on Friday after touching the day's high of $81.02. On Thursday, it settled at $81.04 a bbl.

While easing crude oil prices and a fall in the dollar index aided the rupee, the joy for the Indian currency was short-lived, as importers quickly started purchasing dollars, dealers said. Importers, including oil marketing companies, persistently bought the greenback, taking advantage of relatively lower dollar/rupee levels. The rupee touched over a week high of 83.8400 a dollar today.

A few dealers also speculated about the intervention by the Reserve Bank of India via dollar purchases when the rupee hit 83.85 a dollar today. They said the RBI might have purchased dollars to prevent the rupee from rising sharply, and to shore up its foreign exchange reserves. As of Aug 9, India's foreign exchange reserves were at $670.119 bln, falling $4.8 bln in that week.

Dealers said volumes in the market were also less today, due to a holiday in certain parts of the country, and lower-than-usual staffing in banks' treasuries, on account of Raksha Bandhan. 

FORWARDS

Premium on the one-year dollar/rupee forward contract ended steady as some banks' dollar sales for forward delivery offset the upward push received from a fall in the yield on the benchmark 10-year US Treasury note, dealers said.

In early trade, the one-year dollar/rupee forward premium rose to 2.09%, today's high, due to a fall in US Treasury yields. Shortly after, banks sold dollars for forward delivery, noting higher dollar/rupee forward levels, dealers said. The yield on the benchmark 10-year US Treasury note fell after US single-family house building fell to a 16-month low in July.

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

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 173.87 paise, compared with 173.76 paise on Friday. On an annualised basis, the premium was 2.07%, similar to Friday's close.

OUTLOOK

On Tuesday, the rupee will track the dollar index and crude oil prices, dealers said. Traders will continue to monitor the evolving situation 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 prevent a sharp rise in the Indian unit.

Market participants will also look forward to China's decision on one-year and five-year loan prime rates on Tuesday. They also await the Reserve Bank of Australia's August meeting minutes, scheduled on the same day. On Thursday, the Bank of Korea's rate decision is due. Back home, the minutes of the RBI's latest monetary policy meeting are also scheduled to be released on Thursday.

During the day, the rupee is seen at 83.85-84.00 a dollar, with strong technical support pegged at 84.00 and a strong resistance at 83.85 a dollar.

India Rupee - World FX: Yen rises 1% as Japan GDP beats expectations

MUMBAI – The Japanese yen surged 1% against the dollar today after data showed growth in Japan's GDP supports the potential for an interest rate hike by the central bank in the near term.

Japan's GDP grew 0.8% on quarter in Apr-Jun, surpassing market forecasts of 0.5% rise and rebounding from a 0.6% decline in Jan-Mar. This marked the strongest quarterly growth since Jan-Mar of 2023. Meanwhile, the annualised GDP growth reached 3.1%, exceeding the market consensus of 2.1% and reversing a 2.3% contraction in Jan-Mar. 

Moreover, Japan's Machinery Orders, a crucial gauge of capital spending, saw a 2.1% on-month growth in June, exceeding the expected 1.1% increase. Investors are now looking forward to the upcoming Japanese inflation data this week to gain more clarity on the Bank of Japan's future monetary policy decisions.

The dollar index fell after Friday's data showed that single-family housing starts fell 14.1% to 851,000 units in July. This reinforced investors' hope that the US Federal Reserve may cut rates in September. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.12 at 1311 IST, compared with 102.40 on Friday and 103.04 on Thursday.

While there is certainty of the Fed cutting rates at its next meeting, the opinion is divided on the quantum of cuts, with 71.5% chances seen for a 25-basis-point rate cut, and the rest for a 50-bps cut, according to the CME FedWatch tool.

The dollar index was also down on the back of comments from Federal Reserve officials. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, cautioned that central bank authorities should exercise care in maintaining a restrictive policy for an extended period beyond what is required. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.17 at 1447 IST, compared with 102.40 on Friday and 103.04 on Thursday.

The Australian dollar was up 0.2% against the dollar. On Friday, Reserve Bank of Australia Governor Michele Bullock emphasised the Australian central bank's attention to potential inflationary risks and projected no interest rate reductions in the immediate future. (Kabir Sharma)

India Rupee: Erases all gains on importers' persistent dollar buys

MUMBAI – The rupee erased all its earlier gains against the dollar as banks purchased the greenback on behalf of importers, taking advantage of relatively lower dollar/rupee levels, dealers said. "Importers were in the market, buying heavily, and now we are again at the same level as earlier," a dealer with a private bank said. 

After opening slightly higher, the Indian unit touched today's high of 83.8400 a dollar, after which importers bought the greenback in large amount. Importers demanded the greenback as the rupee touched a near two-week high today.

In early trade today, the rupee was supported by a falling dollar index. The index, which measures the strength in the greenback against a basket of six major currencies, was 102.12 at 1256 IST, compared with 102.40 on Friday and 103.04 on Thursday.

The dollar index fell after Friday's data showed that single family housing starts fell 14.1% to 851,000 units in July. This reinforced investors' hope that the US Federal Reserve may cut rates in September. The index, which measures the strength of the greenback against a basket of six major currencies, was at 102.12 at 1311 IST, compared with 102.40 on Friday and 103.04 on Thursday.

While there is certainty of the Fed cutting rates at its next meeting, the opinion is divided on the quantum of cuts, with 71.5% chances seen for a 25-basis-point rate cut, and the rest for a 50-bps cut, according to the CME FedWatch tool.

A fall in crude oil prices also supported the rupee, dealers said. Oil prices fell due to looming concerns over demand from China, as data last week showed industrial production rose slower-than-expected in July in the Asian country. At 1311 IST, the October Brent crude contract on the Intercontinental Exchange was at $79.47 per bbl compared with $79.68 per bbl on Friday after touching the day's high of $81.02. On Thursday, it settled at $81.04 a bbl.

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

India Rupee:Premiums steady; bks' fwd dlr sales offset fall in US ylds

MUMBAI – The premium on the one-year dollar/rupee forward contract was steady as some banks' dollar sales for forward delivery offset the upward push received from a fall in the benchmark 10-year US Treasury note, dealers said.

"Receiving (selling forward dollars) is happening at this level, but I think, broadly the levels will remain above 2%," a dealer with a private bank said. 

In early trade, the one-year dollar/rupee forward contract rose to touch 2.09%, today's high so far, due to a fall in US Treasury yields. Shortly after, banks sold dollars for forward delivery, noting higher dollar/rupee forward levels, dealers said.

The yield on the benchmark 10-year US Treasury note fell after US single-family housebuilding fell to a 16-month low in July. US single-family housing starts fell 14.1% to 851,000 units last month. This reinforced investors' expectations of a rate cut by the US Federal Open Market Committee at its meeting in September. While there is certainty of the Federal Reserve cutting rates at its next meeting, the opinion is divided on the quantum of cuts, with 71.5% chances seen for a 25-basis-point rate cut and the rest for a 50-bps cut, according to the CME FedWatch tool.

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. "I think we can see forward premiums go higher to about 2.20% regardless of the quantum of a rate cut in September," a dealer with another private bank said. "But we can see good receiving interest at 2.10%, which is expected to limit the rise."

At 1240 IST, the premium on the one-year exact-period dollar/rupee contract was 173.87 paise compared with 173.76 paise on Friday. On an annualised basis, the premium was 2.07%, similar to Friday's close.  (Sourabh Kumar)

India Rupee - Asia: Most rise as dlr index falls post US econ data

MUMBAI – Most Asian currencies rose against the dollar as the dollar index fell after the release of a weaker-than-expected housing starts data on Friday. The index, which measures the strength of the greenback against a basket of six major currencies, was 102.35 at 0830 IST, compared with 102.40 on Friday and 103.04 on Thursday.

The dollar index fell after Friday's data showed that single family housing starts fell 14.1% to 851,000 units in July. This reinforced investors' hope that the US Federal Reserve may cut rates in September.

According to the CME FedWatch tool, while there is a certainty that the Fed will cut rates at its next meeting, the division of opinion is on the quantum of cuts, with 71.5% chances seen for a 25 basis point rate cut, and the rest for a 50 bps cut.

The South Korean won and the Malaysian ringgit both rose 1.3% each against the greenback. The Taiwan dollar rose 0.9% against the US currency, after the country said its GDP grew 6.63% in Jan-Mar, revising upwards from the 6.56% reported earlier.

The Philippines peso rose 0.9% against the dollar. The Indonesian rupiah was up 0.8% against the greenback. The Thai baht rose 0.5% against the dollar as the country's economy expanded at a faster rate than expected. Thailand's GDP grew 2.3% in Apr-Jun, more than the 2.1% that analysts expected in a Reuters poll.

Investors now look forward to China's decision on one-year and five-year loan prime rates on Tuesday. Market participants also await the minutes of the Reserve Bank of Australia's August meeting scheduled on Tuesday, and the Bank of Korea's rate decision on Thursday. The minutes of the US Federal Open Market Committee's meeting, Eurozone inflation data, and speeches by a few Fed officials, including Fed chair Jerome Powell, are all due this week. Market participants look forward to these data points and events to analyse the further movement in the dollar index.  (Sourabh Kumar)

India Rupee: Up on fall in dlr index; importers' dlr buys cap gains

MUMBAI – The rupee was higher against the dollar today as the dollar index fell after the release of weaker-than-expected housing starts data from the US on Friday, dealers said. 

"Mainly, it is the effect of the dollar index, and I think 85 (83.85 a dollar) will be protected," a dealer with a private bank said.

The dollar index weakened after data on Friday showed that single family housing starts fell 14.1% to 851,000 units in July in the US. This reinforced expectations of investors of a rate cut by the US Federal Open Market Committee at its meeting in September. The index, which measures the strength of the greenback against a basket of six major currencies, was at 102.21 at 0923 IST, compared with 102.40 on Friday and 103.04 on Thursday.

While there is certainty that the Fed will cut rates at its next meeting, the opinion is divided on the quantum of cuts, with 71.5% chances seen for a 25-basis-point rate cut in Septemeber, while the rest peg a 50-bps cut, according to the CME FedWatch tool.

Dealers said the Indian currency also received support from an ease in crude oil prices. Oil prices fell due to looming concerns over demand from China, as data last week showed industrial production rose slower-than-expected in July in the Asian country. 

At 0911 IST, the October Brent crude contract on the Intercontinental Exchange was at $79.60 per bbl compared with $79.68 per bbl on Friday after touching the day's high of $81.02. On Thursday, it settled at $81.04 a bbl.

Dealers said importers purchased the greenback, taking advantage of relatively lower dollar/rupee levels. Their demand is expected to persist throughout the day, and it could limit gains for the rupee, they said. They further said the Reserve Bank of India may also intervene in the market today by way of dollar purchases to limit a sharp rise in the Indian currency.

For the rest of the day, the rupee is seen at 83.80-84.00 against the dollar, dealers said. They peg key technical support for the Indian currency at 83.80 a dollar and key restistance at 83.80 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Aug 19

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 Aditya Sakorkar

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