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Informist, Tuesday, Aug 20, 2024

By Sourabh Kumar

MUMBAI – The rupee ended the day at an over two-week high against the dollar due to a slump in the dollar index and dollar sales by some banks on behalf of foreign portfolio investors, dealers said. A few banks bought the greenback, likely on behalf of the Reserve Bank of India, which capped gains for the Indian currency, they said.

"There were corporate flows (foreign fund inflows) today, and then the dollar index was already low, so that provided cushion to the rupee," a dealer with a private bank said.

After moving in a range of a little over 12 paise, the Indian currency settled at 83.7925 a dollar. On Monday, the rupee closed at 83.8700 a dollar. The rupee was steady against the dollar in early trade as the upward push from the fall in the dollar index was offset by dollar purchases by some importers, dealers said.

Today, the dollar index fell to a near eight-month low of 101.76, as market participants await the US Federal Reserve Chair Jerome Powell's speech at Jackson Hole on Friday to see if he indicates a 25 basis point or a 50 bps rate cut in September. The index was 101.81 at 1530 IST, compared with 101.85 on Monday, and 102.40 on Friday.

While there is a consensus in the market regarding the Fed cutting rates in September, the difference of opinion remained on the quantum of cuts. The odds of the US central bank cutting rates by 50 bps at its September policy meeting are 24.5% compared with 53% a week ago, data from the CME FedWatch tool showed. The odds of a 25-bps rate cut in September are seen at 75.5%.

Apart from a relatively lower dollar index, the rupee also received support from dollar sales by some foreign banks on behalf of foreign portfolio investors for their investment in Indian corporates, dealers said. Some banks started selling the greenback for foreign fund inflows within the first few hours, pushing up the rupee to touch the day's high of 83.7500 a dollar. 

While the rupee rose 0.09% today, it was an underperformer amongst other emerging market economic currencies, which rose in a range of 0.03-0.74% against the dollar. The South Korean won, and the Malaysian ringgit were the Asian peers which rose less than the Indian unit today. The Indonesian rupiah rose the most against the greenback.

The rupee came under pressure from dollar purchases from importers, including oil marketing companies, dealers said. Importers demanded the greenback to take advantage of lower dollar/rupee levels. Oil companies also purchased the greenback, noting lower crude oil prices, dealers said. 

Oil prices fell over 2% on Monday as traders analysed the progress made in the Israel-Hamas peace talks. On Monday, US Secretary of State Antony Blinken said that Israeli Prime Minister Benjamin Netanyahu had accepted a "bridging proposal" presented by the US, aiming to resolve disagreements in the ceasefire deal, according to a Reuters report. Blinken also urged Hamas to do the same, the report added. 

At 1530 IST, the October Brent crude contract on the Intercontinental Exchange was at $77.43 per bbl compared with $77.66 per bbl on Monday and $79.68 per bbl on Friday.

After over two weeks of intermittently selling dollars to prevent the rupee from falling, the RBI purchased the greenback today to not allow the Indian currency to rise sharply, dealers said. They said the central bank also purchased the greenback to shore up its reserves. As of Aug 9, India's foreign exchange reserves were at $670.12 bln, down $4.8 bln from a week ago.

Dealers said the central bank may continue to cap a sharp rise in the Indian unit, to maintain the trade competitiveness of the Indian unit.

"The rupee is overvalued by almost 1%, and the RBI bought $1 bln today. So I feel too much of appreciation may not be allowed by RBI," Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP said.

The rupee's real effective exchange rate against a basket of 40 currencies, in terms of trade-based weights, rose to 107.33 in July, the highest since Dec 2017, according to data from the Reserve Bank of India. It was at 106.36 in June.

FORWARDS

The premium on the one-year dollar/rupee forward contract fell today as some banks sold the greenback for forward delivery, on behalf of Indian corporates, dealers said.

The one-year dollar/rupee forward contract rose to 2.08%, due to a slight fall in US Treasury yields, but fell shortly after as banks sold dollars for forward delivery for corporates, noting higher dollar/rupee forward levels, dealers said.

Premiums on a currency pair's forwards reflect the interest rate differential between the two countries. With increasing chances of a rate cut by the Fed and a likely 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.

Yields on the benchmark 10-year US Treasury note fell ahead of the Federal Reserve Chair Jerome Powell's comments at the Jackson Hole Economic Symposium on Friday.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 171.98 paise, compared with 173.87 paise on Monday. On an annualised basis, the premium was at 2.05%, compared with Monday's close of 2.07%.

OUTLOOK

On Wednesday, the rupee will track the movement in the dollar index and crude oil prices, dealers said. "I feel the dollar index could fall to 101.50 this week and now since the rupee broke 83.80, in my opinion, it could rise up to 83.75, where there is a strong resistance," a dealer with a private bank said.

Importers are likely to continue purchasing the greenback, taking advantage of the relatively lower dollar/rupee level, dealers said. With crude prices comparatively lower, oil marketing companies are also expected to demand the greenback, thus putting pressure on the rupee, 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.

During the day, the rupee is seen at 83.75-84.00 a dollar, with strong technical support pegged at 84.00 and a strong resistance at 83.75 a dollar.

India Rupee: Premiums down on fwd dlr sales by banks for Indian cos

MUMBAI – The premium on the one-year dollar/rupee forward contract fell slightly today as some banks sold the greenback for forward delivery, on behalf of Indian corporates, dealers said.

"We have seen some receiving interest (selling dollars for forward delivery) from corporates," a dealer with a brokerage firm said. The forward dollar purchases offset the upward push received from a fall in US Treasury yields, dealers said. Premiums on a currency pair's forwards reflect the interest rate differential between the two countries.

The one-year dollar/rupee forward contract rose to 2.08%, due to a slight fall in US Treasury yields, but fell shortly after as banks sold dollars for forward delivery for corporates, noting higher dollar/rupee forward levels, dealers said.

Yields on the benchmark 10-year US Treasury note fell ahead of the Federal Reserve Chair Jerome Powell's comments at the Jackson Hole Economic Symposium on Friday. Powell's comments assume significance as they may indicate the trajectory of rate cuts in the US, dealers said. According to data from the CME FedWatch tool, 76% of Fed Fund futures traders expect the Federal Reserve to lower interest rates at its September policy meeting by 25 basis points. The remaining 24% expect a 50 bps cut.

At 1429 IST, the premium on the one-year exact-period dollar/rupee contract was 171.98 paise compared with 173.87 paise on Monday. On an annualised basis, the premium was 2.05%, compared to Friday's close of 2.07%.  (Sourabh Kumar and Kabir Sharma)

India Rupee: Rises on FX inflows; RBI's likely dollar buys cap gains

NEW DELHI – The rupee rose against the dollar as foreign banks, including a US-based bank, sold dollars, likely on behalf of foreign portfolio investors, dealers said. "The sentiment has been good for the last few days, so we are seeing inflows," a dealer at a private bank said. "Custodians are selling (dollars)".

Dealers said some banks' stop-losses were triggered on long-dollar bets around 83.80 a dollar, leading to a further rise in the Indian currency. The rupee rose to 83.7550 a dollar, its highest level since Aug 5. "Everybody who was long had their stop losses hit after this much selling (of dollars) interest in the market," a dealer at a state-owned bank said. 

However, some banks stepped in to buy dollars, likely on behalf of the Reserve Bank of India, which capped the rise in the Indian unit, dealers said. After actively selling the US unit in the domestic spot market this month, dealers said the central bank likely bought the greenback to restock its foreign exchange reserves and curb a sharp appreciation in the Indian unit. However, the dollar purchases were not aggressive in nature, they said. 

Further, some importers also bought the US unit to take advantage of the relatively lower dollar/rupee levels, which also weighed on the Indian unit. However, a majority of the importers were absent from the market as they await more lucrative levels now. 

"There are some bids (for dollars) but it is not as much as one would expect. The market has become sell (dollars) on uptick now," a dealer at another state-owned bank said. "I expect exporters to start selling in no time if 83.75 breaks."

Meanwhile, weakness in the dollar index gave support to the Indian unit, dealers said. The dollar index fell to a near eight-month low today on expectations that US Federal Reserve officials, including Chair Jerome Powell, may give further indications of imminent rate cuts in the US later this week at the Jackson Hole symposium.

At 1305 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.93 compared with 101.85 on Monday, and 102.40 on Friday. The index fell to a near eight-month low of 101.77 earlier today. 

For the rest of the day, the rupee is seen at 83.70-83.95 against the dollar, dealers said. They peg key technical resistance for the Indian currency at 83.75 a dollar. (Pratiksha)

India Rupee: Technical Levels for rupee - Aug 20

MUMBAI – At 0900 IST, the rupee was at 83.8625 a dollar, against 83.8700 from the previous close. At 1040 IST, the rupee was at 83.8125 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee - Asia FX:Most up as dollar index slips, Asian shrs rise

NEW DELHI – Most Asian currencies rose against the dollar today as the dollar index fell to a near eight-month low on expectation that US Federal Reserve officials, including Chair Jerome Powell, may give further indication of imminent rate cuts later this week at the Jackson Hole symposium. A rise in Asian equities, tracking gains on Wall Street, also supported the emerging market units. 

Market participants expect Powell to acknowledge the likelihood of a rate cut in September at the Jackson Hole symposium on Friday. They will also assess his comments for hints on whether the Fed will start with a 25-basis-point cut or a 50-bps cut in September. The odds of the US central bank cutting interest rates by 50 basis points at its September policy meeting are 23% compared with 50% a week ago. Odds of a 25-bps rate cut in September are now seen as having a 77% probability, as per the CME FedWatch Tool. Market players also await the minutes of the Fed's July meeting, due for release on Wednesday, for more cues on the central bank's interest rate path.

At 0950 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.95 compared with 101.85 on Monday, and 102.40 on Friday. The index fell to a near eight-month low of 101.77 earlier today. 

The Thai baht was up 0.3% against the dollar ahead of the Bank of Thailand's policy outcome on Wednesday, where the central bank is expected to keep interest rates unchanged at 2.50%. 

The Indonesian rupiah rose 0.4% against the greenback, the most among its Asian peers, tracking gains in domestic equities. At 0940 IST, Indonesia's Jakarta Composite was up 0.7%. Both the Taiwan dollar and Malaysian ringgit were up 0.3% against the dollar. The Philippine peso and the South Korean won were up 0.1% against the dollar.

Bucking the trend, the Chinese yuan fell 0.1% against the dollar, even after the People's Bank of China today left their benchmark lending rates unchanged for August.  (Pratiksha)

India Rupee: Steady as importers' dlr buys offset slump in dlr index

MUMBAI – The rupee was steady against the dollar as importers purchased the greenback, which offset the upward push received from a fall in the dollar index, dealers said. The index fell to a near eight-month low of 101.77 today.

"The rupee was up slightly because of such a fall in the dollar index," a dealer with a state-owned bank said. "But, importers are covering today."

Investors await US Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium on Friday, during which he is expected to acknowledge the case for a rate cut in September. This weighed on the dollar index. The index, which measures the strength of the greenback against a basket of six major currencies, was 101.95 at 0916 IST, compared with 101.85 on Monday and 102.43 on Tuesday.

Market participants will assess his comments for hints on whether the Fed will start with a 25-basis-point rate cut or a 50-bps cut in September. The odds of the US central bank slashing interest rates by 50 bps at its September policy meeting are about 23% compared with 50% a week ago, data from CME FedWatch tool indicated. Meanwhile, odds of a 25-bps rate cut in September are now seen as having about a 78% probability.

Dealers said importers purchased the greenback to take advantage of relatively lower dollar/rupee levels. "I think the rupee will move 83.91-83.90 a dollar today, with importers coming in at lower (dollar/rupee) levels," another dealer at a state-owned bank said.

A few dealers believed the Reserve Bank of India may also intervene via dollar buying to prevent the Indian currency from a sharp rise. They further said relatively lower dollar/rupee levels also provide the central bank with an opportunity to shore up its foreign exchange reserves by purchasing the greenback.

A fall in crude oil prices supported the rupee, dealers said. Oil prices fell over 2% on Monday as traders analysed the progress made in the Israel-Hamas peace talks. On Monday, US Secretary of State Antony Blinken said that Israeli Prime Minister Benjamin Netanyahu had accepted a "bridging proposal" presented by the US aiming to resolve disagreements in the ceasefire deal, according to a Reuters report. He also urged Hamas to do the same, the report added. 

At 0927 IST, the October Brent crude contract on the Intercontinental Exchange was at $77.05 per bbl compared with $77.66 per bbl on Monday and $79.68 per bbl on Friday.

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

India Rupee: Expected range for rupee - Aug 20

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 Vidhi Verma and Saji George Titus

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