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Informist, Wednesday, Aug 21, 2024

By Pratiksha

NEW DELHI – Logging its biggest single-day fall in nearly two months, the rupee ended lower against the dollar today as foreign and state-owned banks purchased the greenback for foreign fund outflows from corporates and on behalf of importers, dealers said. This was despite the Reserve Bank of India's likely intervention through dollar sales to support the Indian currency, they said.  

"There was buying (of dollars) for most of the day, but there were offers (selling of dollars) too after 83.90 was hit," said a dealer at a state-owned bank. Declining 0.2% against the dollar, the rupee settled at 83.9225 a dollar today. It moved in a range of 13 paise throughout the day. 

The Indian unit started the day at 83.8150 a dollar. However, soon afterwards, it fell beyond 83.85 a dollar, as banks rushed to buy dollars on behalf of importers, dealers said.

Taking note of the Reserve Bank of India's intervention through dollar purchases at around 83.75 a dollar on Tuesday, importers bought dollars due to expectations that the central bank might not allow the Indian unit to appreciate sharply going ahead. Thus, importers bought the greenback at around 83.80 a dollar in early trade, they said.  

Further, foreign banks bought the US unit for foreign fund outflows from Indian corporates, which also weighed on the Indian unit, dealers said. Foreign fund outflows were likely on account of Antfin Singapore Holding divesting over 2% stake in online food delivery company Zomato for 47.71 bln rupees or almost $569 mln through open market transactions.

"The initial movement in the rupee was due to the Zomato $500-mln outflow. It was not a lot, but it hit the market well," a dealer at a private bank said. "Importers were buying (dollars), as they expect a further 10-15 paisa upside in the pair (dollar/rupee)." 

During the first half of trade, the local unit was also weighed down due to dollar buying by some big state-owned banks ahead of daily reference rate fixing, dealers said.

Further, during the latter half of the day, some state-owned banks persistently bought dollars, likely for the government's defence-related payments, according to dealers. Following this, the rupee fell to the day's low of 83.9375 a dollar, not too far from its record low level of 83.9800 a dollar. 

However, as the domestic currency moved beyond 83.90 a dollar, some state-owned banks stepped in to sell the greenback, likely for the RBI, which limited losses for the Indian unit and prevented it from falling beyond the psychologically-crucial level of 84 per dollar, dealers said. However, the central bank's dollar sales were not aggressive in nature, they said.

Banks' dollar purchases for foreign portfolio investors, who looked to withdraw funds from domestic equities, also pressured the Indian unit, dealers said. So far this month, FPIs have pulled out nearly $2.3 bln from Indian equities.

"Today's movement shows that the rupee's range is going to stay here only - 83.80-83.97 (a dollar). Nothing more and nothing less," said a dealer at a foreign bank.

The currency market did not take much comfort from a weakness in the dollar index, which fell to a near-eight-month low earlier today, dealers said. The dollar index fell sharply as investors aggressively bet on chances of the US Federal Reserve providing further indication of imminent interest rate cuts in the minutes of the US Fed's July policy meeting later today and Fed Chair Jerome Powell's speech at Jackson Hole on Friday. 

Dealers said the July Federal Open Market Committee's meeting minutes may not have a considerable impact on the dollar index as the Fed officials' comments would be dated. This is because the policy review took place before the July jobs data report was released by the US and stoked fears of a recession, dealers said. 

At 1530 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.45 compared with 101.38 on Tuesday, and 101.85 on Monday. The index fell 101.31 earlier today, its lowest level since Jan 1. 

FORWARDS

Premium on the one-year dollar/rupee forward contract ended higher today because of a fall in US Treasury yields, dealers said. US yields fell as expectations of a sharp interest rate cut in the US, starting September, increased, ahead of Fed Chair Jerome Powell's speech at the US central bank's Jackson Hole Economic Symposium on Friday.

Currently, the odds of the US central bank cutting interest rates by 50 basis points at its September policy meeting are 30.5%, while the odds of a 25-bps rate cut are seen as having a 69.5% probability, as per the CME FedWatch Tool. 

With increasing chances of a rate cut by the Fed, and a likely delay in cutting rates by the Reserve Bank of India, the interest rate differential between the two countries is expected to widen, thus pushing the forward premiums higher. Market participants also look forward to the release of the Federal Reserve's July meeting minutes, later today.

Dealers said a few banks also sold the greenback for forward delivery in order to take advantage of the relatively higher premium levels, which weighed on the premiums. The premium on the one-year dollar/rupee forward contract touched a high of 2.08% today.

Traders look forward to the minutes of the Monetary Policy Committee's Aug 6-8 meeting, which will be released Thursday.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 175.02 paise compared with 171.98 paise on Tuesday. On an annualised basis, the premium was 2.07%, against Tuesday's close of 2.05%. 

OUTLOOK

On Thursday, the rupee will track the movement in the dollar index after the release of the July Fed meeting minutes later today, dealers said. The Indian unit will also take cues from movement in crude oil prices. 

Traders will continue to monitor the evolving situation in West Asia and its subsequent impact on crude oil prices. Traders also await the US Labor Department's benchmark revisions to its employment data for the 12 months to March today. 

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. The RBI is also expected to continue intervening through dollar sales in the domestic spot market to prevent a sharp fall in the rupee, they said. 

During the day, the rupee is seen in a range of 83.75-84.00 a dollar, with strong technical support pegged at 84.00. 

India Rupee: Premiums tad up as US ylds dn ahead of Powell speech Fri

MUMBAI – Premium on the one-year dollar/rupee forward contract rose slightly today due to a fall in US Treasury yields, dealers said. Yields on the benchmark US treasury note fell ahead of Federal Reserve Chair Jerome Powell's speech on Friday.

"US yields have dipped, so we are seeing that effect on our forwards," a dealer with a state-owned bank said.

Market participants look forward to the gathering of Fed officials at the annual central banking conference in Jackson Hole, Wyoming, on Friday, where they expect Powell to indicate a rate cut at the September meeting. 

While currently there is certainty of the Federal Reserve cutting rates at its next meeting, the opinion is divided on the quantum of cuts, with 69.5% 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 likely delay in cutting rates by the Reserve Bank of India, the interest rate differential between the two countries is expected to widen, thus pushing the forward premiums higher. Investors also look forward to the release of the Federal Reserve's July meeting minutes, later today.

Dealers expect the dollar/rupee forward premiums to gradually rise as sentiments around the Fed cutting rates grow in the coming weeks. "While currently, I see premiums (on the one-year dollar/rupee forward contract) going higher above 2.10%, I think on a medium-term basis, it will stabilise at around 2.00-2.10%," a dealer with a private bank said.

Dealers said a few banks also sold the greenback today for forward delivery, taking advantage of a relatively higher one-year dollar/rupee forward premium. The premium on the one-year dollar/rupee forward contract touched 2.08% today.

At 1435 IST, the premium on the one-year exact-period dollar/rupee contract was 174.82 paise compared with 171.98 paise on Tuesday. On an annualised basis, the premium was 2.07%, up from Tuesday's close of 2.05%. (Sourabh Kumar)

India Rupee: Falls as banks buy dollars for FX outflows, importers

NEW DELHI – The rupee fell against the dollar today as foreign and state-owned banks bought the greenback for foreign fund outflows from corporates and for importers, dealers said. Foreign fund outflows were likely on account of Antfin Singapore Holding divesting an over 2% stake in online food delivery company Zomato for 47.71 bln rupees or almost $569 mln through open market transactions.

"We have seen quite a lot of bids (buying of dollars) today. The Zomato outflow is only around $500 mln, so there is other buying (of dollars) as well," a dealer at a state-owned bank said. 

State-owned banks bought the US unit on behalf of oil and other importers at around 83.80 a dollar, dealers said. Taking a note of the Reserve Bank of India's intervention through dollar purchases on Tuesday, importers bought the greenback on the view that the RBI may not allow the Indian currency to appreciate sharply and keep it in a tight range, they said.  

The Indian unit was also weighed by some big state-owned banks' dollar buying ahead of daily reference rate fixing, said dealers. Moreover, some banks bought dollars likely for the government's defence-related payments, according to some dealers. 

"All the movement that happened yesterday (Tuesday) has been retraced today, we are back to the old levels," a dealer at a private bank said. The rupee ended at an over two-week high of 83.7925 a dollar on Tuesday. 

Market participants now await the release of the minutes of the US Federal Reserve's July policy meeting later today, and Fed Chair Jerome Powell's speech at Jackson Hole on Friday, for cues on the outlook for US interest rates. They will be watchful of any hints about the likely size of a rate cut in September in the US.

For the rest of the day, the rupee is seen at 83.75-83.95 against the dollar, dealers said. They peg key technical support for the Indian currency at 84.00 a dollar. (Pratiksha)

India Rupee: Technical Levels for rupee - Aug 21

MUMBAI – At 0900 IST, the rupee was at 83.8150 a dollar, against 83.7925 from the previous close. At 1140 IST, the rupee was at 83.9050 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:Mixed; traders await Fed minutes, Powell speech

NEW DELHI – Asian currencies were mixed against the dollar today as traders await the US Federal Reserve's July meeting minutes, due later today, and the central bank's symposium at Jackson Hole this week.

At the symposium, market participants expect Federal Reserve Chair Jerome Powell to acknowledge the case for a rate cut. They will also closely watch out for any hints on the likely size of a rate cut in September. Currently, the odds of the US central bank cutting interest rates by 50 basis points at its September policy meeting are 34.5%, while the odds for a 25-bps rate cut are seen as having a 65.5% probability, as per the CME FedWatch Tool.

Meanwhile, the dollar index hit a near eight-month low in early trade on expectations of the Federal Reserve offering hints of imminent interest rate cuts, which supported Asian units. At 1000 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.33 compared with 101.38 on Tuesday, and 101.85 on Monday. The index fell to 101.31 earlier today, its lowest level since Jan 1. 

The Philippine peso rose 0.3% against the dollar, the most amongst its peers. Both the Taiwan dollar and the Malaysian ringgit rose 0.1% against the dollar. 

On the other hand, the South Korean won fell 0.3% against the dollar despite early trade data today showing exports gained momentum in the country this month. The value of shipments increased 18.5% from a year earlier in the first 20 days of August. Imports increased by 10.1%, leading to a trade shortfall of $1.47 bln, reports said. South Korea’s shipments of semiconductors jumped 42.5% from a year earlier in the first 20 days of August, bringing its share of total exports to 20.3%. Meanwhile, the Bank of Korea's policy decision is due on Thursday. The central bank is expected to keep its benchmark interest rate steady at 3.50%, according to a Reuters poll.

The Indonesian rupiah was down 0.1% against the dollar ahead of the Bank Indonesia's policy outcome today. The central bank is expected to keep interest rates unchanged at 6.25%, according to a Reuters poll. 

The Thai baht was steady against the greenback ahead of the outcome of the Bank of Thailand's policy decision today, where it is expected to keep interest rates unchanged, as per a Reuters poll. (Pratiksha)

India Rupee: Slightly down as importers buy dlrs; FOMC minutes eyed

NEW DELHI – The rupee fell slightly against the dollar today as banks purchased the greenback on behalf of importers, who wanted to take advantage of the relatively lucrative levels, dealers said. Noting the Reserve Bank of India's intervention through dollar purchases on Tuesday, importers are buying dollars in fear that the central bank may not allow the Indian unit to appreciate sharply. Thus, importers are trying to make the most of the current levels, they said.  

"Yesterday's (Tuesday) buying (of dollars) activity by them (the RBI) has made the market sure that no matter what the flow or fall in the dollar is, the rupee will not move much. We are seeing bids (buying of dollars) now because of that," said a dealer at a private bank. 

Dealers expect the volume in the currency market to remain lacklustre today as traders may avoid placing large bets before the release of the minutes of the US Federal Reserve's July policy meeting later today, and Fed Chair Jerome Powell's speech at Jackson Hole on Friday.

Market participants have turned their attention to the release of minutes of the Fed's July meeting and Powell's speech at the Kansas City Fed's Jackson Hole economic symposium for cues on the US interest rate trajectory. They will closely watch out for any hints on the likely size of a rate cut in September. 

Currently, the odds of the US central bank cutting interest rates by 50 basis points at its September policy meeting are 34.5%, while the odds of a 25-bps rate cut are at 65.5%, as per the CME FedWatch Tool. 

The Indian unit did not take a lot of comfort from a weak dollar index, dealers said. The dollar index slipped to a near eight-month low in early trade as investors aggressively bet on chances of the US Fed providing further indication of imminent interest rate cuts.  

At 0930 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.46 compared with 101.38 on Tuesday, and 101.85 on Monday. The index fell to 101.31 earlier today, its lowest level since Jan 1. 

For the rest of the day, the rupee is seen at 83.75-83.95 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 21

NEW DELHI – 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 Deepshikha Bhardwaj

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