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Informist, Thursday, Aug 22, 2024

By Sourabh Kumar

MUMBAI – The rupee ended the day steady against the dollar after the Reserve Bank of India sold the greenback to offset the downward pressure from dollar purchases by banks for importers and foreign fund outflows, dealers said.

"Apart from importers, there were some outflows from equities as well, which put pressure on the rupee," a dealer with a state-owned bank said. "The central bank again protected the rupee (sold dollars) from hitting the figure (84.00 a dollar)."

The rupee closed at 83.9525 a dollar after moving under a 4-paise range. On Wednesday, the Indian currency had closed at 83.9225 a dollar. Today, volumes in the market were lower than usual as market participants are waiting for US Federal Reserve Chair Jerome Powell's speech on Friday.

The Indian currency had opened steady but soon came under pressure as banks purchased dollars on behalf of importers.

Importers purchased dollars anticipating a fall in the rupee, dealers said. "The rise that we saw in the rupee in the past few days was mainly due to inflows (foreign fund inflows), and that was short-lived," a dealer with a foreign bank said. "The current level shows that directionally, the rupee will fall."

Apart from importers, banks also purchased the greenback for foreign fund outflows from domestic equities, which put the rupee under pressure throughout the day, dealers said. This was after the Indian currency recorded the worst single-day fall in nearly two months on Wednesday as it came under extreme pressure from dollar purchases by foreign portfolio investors, who exited the domestic equities market. "The trend continued today as well," the dealer with the foreign bank said.

Noting relatively lower crude oil prices, oil marketing companies purchased dollars, which put pressure on the rupee, dealers said. Oil prices fell after data indicated a weaker labour market in the US. At 1530 IST, the October Brent crude contract on the Intercontinental Exchange was at $76.31 per barrel, compared with $76.05 per bbl on Wednesday and $77.20 per bbl Tuesday.

However, the fall in crude futures was limited as US crude oil inventories declined in the week ended Friday. Crude stocks fell by 4.6 mln barrels to 426 mln bbl during the week, according to the US Energy Information Administration. This was more than analysts' expectation of a 2.7 mln barrel fall in inventories, as per a Reuters poll.

With such pressure on the rupee, the RBI intervened in the market by selling dollars, to prevent the rupee from falling to 84.00 a dollar, dealers said. They said a few exporters also sold the greenback, noting RBI's support for the Indian unit.

A broad weakness in the dollar index also supported the rupee, dealers said. The dollar index fell to a near eight-month low of 100.92 on Wednesday, after data showed that the addition of jobs in the US in the year to March was significantly lower than previously reported. This suggested that the world's largest economy might have been cooling faster than expected. The index, which measures the strength of the greenback against a basket of six major currencies, was 101.27 at 1530 IST, compared with 101.14 on Wednesday and 101.38 on Tuesday.

Market participants are now waiting for Powell's speech at the annual central banking conference in Jackson Hole, Wyoming, dealers said. Traders see a 30.5% chance of a 50-basis-point rate cut by the Federal Open Market Committee at its meeting in September, with odds of a 25-bps rate cut at 69.5% as of today, according to the CME FedWatch tool.

FORWARDS

Premium on the one-year dollar/rupee forward contract ended at an over 15-month-high as US Treasury yields fell after data showed that the US labour market might have been cooling for long, and more than what was previously expected, dealers said.

Premiums also received a boost as oil marketing companies purchased the greenback for forward delivery, fearing that the rupee may fall in the spot market.

As the forward one-year dollar/rupee forward premium rose to a high of 2.11%, some banks also sold the greenback for forward delivery to take advantage of a relatively higher dollar/rupee forward premium. This capped the rise in the premium.

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.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 176.15 paise compared with 175.02 paise on Wednesday. On an annualised basis, the premium was 2.10%, against Wednesday's close of 2.07%.

OUTLOOK

On Friday, the rupee will track the movement of the dollar index, dealers said. "I am expecting the dollar index will go further down to around 100.50-100.20, and that could remove some downside pressure from the rupee," a dealer with a state-owned bank said.

The Indian unit may also take cues from movement in crude oil prices. Noting lower crude oil prices, oil marketing companies may ramp up their dollar purchases, which could put pressure on the rupee, dealers said.

Traders will continue to monitor the evolving situation in West Asia and its impact on crude oil prices.

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

Market participants are waiting for the minutes of the RBI's meeting held earlier this month. The minutes will be released later today. During the day, the rupee is seen in a range of 83.80-84.00 a dollar, with strong technical support pegged at 84.00.

India Rupee - World FX: Pound sterling up on higher-than-view PMI

MUMBAI – The pound sterling was up 0.2% against the greenback as the data released today showed that the UK S&P Global Composite purchasing managers' index rose to 53.4 this month from 52.8. It was also above economists' forecast of 52.9 in a Reuters poll. This was the highest reading since April.

The euro was steady against the US dollar as expectations that the European Central Bank would cut rates at its next meeting in September grew after comments from an ECB member on Wednesday. European Central Bank governing council member Fabio Panetta said on Wednesday that he hoped the central bank would cut rates in September, according to a report by Reuters. 

The fall in the euro was limited after data showed higher-than-expected business activity in the eurozone this month. The purchasing managers' index in the eurozone in August rose to 51.2 from 50.2 in July. It was higher than the expectation of 50.1 in a Reuters poll.

The Japanese yen fell 0.3% against the greenback ahead of Bank of Japan governor Kazuo Ueda's appearance in the country's parliament on Friday, where he is expected to discuss reasons behind the central bank's rate hike last month. Further, the currency continued to be under pressure after the data released on Wednesday showed that the trade deficit in Japan rose more than expected.

The Australian dollar was steady against the US currency. The flash Australia Judo Bank manufacturing purchasing managers' index rose to 48.7 this month from 47.5 in July, which supported the Australian unit.

The Canadian dollar was up 0.1% against the greenback. The dollar index remained weak, after falling to a near eight-month low of 100.92 on Wednesday. The index fell after data showed that the addition of jobs in the US in 2023-24 (Apr-Mar) was significantly lower than previously reported. This suggested that the world's largest economy might have been cooling faster than expected. The index, which measures the strength of the greenback against a basket of six major currencies, was 101.27 at 1451 IST, compared with 101.14 on Wednesday and 101.38 on Tuesday.

Total employment in the US during the year ended March was revised lower by 818,000 jobs, according to the data. This suggested that the US added 174,000 jobs each month during that period, compared with the previously reported figure of 242,000 jobs. The data reinforced expectations that the Fed will cut rates in September.

Traders now see a 30.5% chance of a 50-basis-point rate cut by the Federal Open Market Committee at its meeting in September, with odds of a 25-bps rate cut at 69.5% as of today, according to the CME FedWatch tool.

Market participants now await a speech by Fed chair Jerome Powell on Friday at the annual central banking conference in Jackson Hole, Wyoming. Investors expect a hint at a rate cut in September or a softening of stance on policy by Powell.  (Sourabh Kumar)

India Rupee: Premiums over 15-mo-high as US job mkt weaker-than-view

MUMBAI – Premium on the one-year dollar/rupee forward contract rose to an over a 15-month-high today, as US Treasury yields fell after data showed that the US labour market might have been cooling down for long, and more than what was expected, dealers said.

"Premiums are mainly up due to UST (US Treasury yields) after the downward revision in jobs data," a dealer with a state-owned bank said. "Premiums (one-year dollar/rupee forward premiums) will go up from here, before settling around 2.10%."

Premiums also received a boost as oil marketing companies purchased the greenback for forward delivery, fearing that the rupee may fall in the spot market. Today, as the rupee came under pressure due to banks' dollar sales for foreign fund inflows and some importers, the Reserve Bank of India intervened via dollar sales to prevent a sharp fall in the Indian currency.

On an annualised basis, the premium on the one-year dollar/rupee forward contract rose to over a 15-month-high of 2.11% today. Some banks also sold the greenback for forward delivery to take advantage of a relatively higher dollar/rupee forward premium. This limited a rise in the premium.

Yields on the benchmark US Treasury note fell on Wednesday after a downward revision of US jobs figures for 2023-24 (Apr-Mar) in the US. This reinforced expectations of investors that the US Federal Reserve would cut rates in September.  

Market participants now await the speech by the Fed chair Jerome Powell on Friday to assess the quantum of rate cuts at the Federal Open Market Committee's September meeting. Currently, traders see a 34.5% chance of a 50-basis-point rate cut by the Federal Open Market Committee at its meeting in September, slightly higher than 29% on Tuesday, according to the CME FedWatch tool. The odds of a 25-bps rate cut are 65.5% as of today.

With increasing chances of a rate cut by the Fed, and a likely delay in cutting rates by the RBI, the interest rate differential between the two countries is expected to widen, thus pushing the forward premiums higher. 

Market participants await the release of minutes of the RBI's latest meeting, due later today. 

At 1312 IST, the premium on the one-year exact-period dollar/rupee contract was 176.64 paise compared with 175.02 paise on Wednesday. On an annualised basis, the premium was 2.10%, up from Wednesday's close of 2.07%. (Sourabh Kumar)

India Rupee: In thin band; RBI's dollar sales keep rupee above 84/$1

NEW DELHI – The rupee moved in a narrow range against the dollar today as dollar sales by state-owned banks, likely on behalf of the Reserve Bank of India, offset the impact of banks' dollar purchases on behalf of importers and foreign portfolio investors, dealers said. The Indian unit has moved in a range of only 5 paise so far today.

The central bank actively sold the greenback to keep the rupee from falling beyond the psychologically-crucial level of 84-per-dollar, they said. The Indian currency fell to a low of 83.9650 a dollar today, just a whisker away from its lifetime low of 83.9800 a dollar. 

"They (RBI) are constantly present at around 83.95 (a dollar). All the bids (dollar buys) are getting absorbed," said a dealer at a private bank. "84 (a dollar) will be a tough break, it seems."

Noting the RBI's active intervention, most dealers don't see the crucial 84-per-dollar level breaking easily. However, even if the level breaches, they do not expect a knee-jerk reaction and as result, a sharp fall in the domestic unit. 

"84 is a hard stop for now. But even if it is hit, I don't see a major movement. Like it used to happen earlier when the rupee used to move 80-90 paisa after an important level break. Now, it may only move to 84.25 or at maximum 84.50 (a dollar) if the figure breaks," a dealer at a state-owned bank said. 

Meanwhile, some banks bought the greenback on behalf of importers in expectation that the Indian unit may depreciate further going ahead, dealers said. However, the dollar purchases were not aggressive in nature, they said. 

Further, some banks also purchased the greenback on behalf of foreign portfolio investors, who looked to withdraw money from domestic equities, according to dealers. This also weighed on the Indian currency. So far this month, FPIs have pulled out nearly $1.8 bln from Indian equities.

Market participants now await the US Federal Reserve Chair Jerome Powell's speech at Jackson Hole Symposium on Friday, where they expect Powell to acknowledge the case for a rate cut. 

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 84.00 a dollar.  (Pratiksha) 

India Rupee: Technical Levels for rupee - Aug 22

MUMBAI – At 0900 IST, the rupee was at 83.9325 a dollar, against 83.9225 from the previous close. At 1128 IST, the rupee was at 83.9450 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 ahead of Fed chair Powell's speech Fri

MUMBAI – Asian currencies were mixed against the dollar, as market participants remained cautious ahead of a speech by US Federal Reserve chair Jerome Powell, in which they expect him to acknowledge the case for a rate cut in September.

The dollar index fell to a near eight-month-low of 100.92 on Wednesday. The index, which measures the strength of the greenback against a basket of six major currencies, was 101.20 at 1009 IST, compared with 101.14 on Wednesday and 101.38 on Tuesday.

The Indonesian rupiah was down 0.5% against the greenback after Bank Indonesia left its benchmark rate unchanged at 6.25% on Wednesday. Saying that the focus of the central bank was to keep the rupiah strong, Bank Indonesia Governor Perry Warjiyo indicated that the rate may be cut towards the end of 2024.

The South Korean won was down 0.2% against the US currency, after Bank of Korea kept its benchmark rate steady at 3.50% earlier today, but indicated it could start cutting rates due to easing price pressure and slowing growth. This led to expectations that the central bank may cut rates at its next meeting in October.

The Thai baht was down 0.3% against the dollar after Bank of Thailand kept the benchmark rate steady at 2.50% on Wednesday. 

The Taiwan dollar was steady against the greenback as the positive effect of a relatively lower dollar index was offset by a fall in its domestic stock index. The benchmark index, the TAIEX, was down 0.3% in early trade. The Malaysian ringgit was also steady against the greenback. 

The Philippines peso rose 0.3% against the dollar as the benchmark stock index of the country, PSEi, was up 1.2% in early trade.  (Sourabh Kumar)

India Rupee: Steady on caution before Fed Powell's speech on Friday

MUMBAI – The rupee was steady against the dollar as market participants remained cautious ahead of a speech by US Federal Reserve chair Jerome Powell on Friday, dealers said.

"Ideally, looking at the falling dollar and crude, it (rupee) should have opened higher, but we are seeing some pressure on the rupee right now," a dealer with a state-owned bank said. 

A fall in other Asian currencies weighed on the rupee, dealers said. The Indonesian rupiah fell the most, by 0.4% against the greenback.

Market participants are waiting for Powell's speech, hoping that he would acknowledge a rate cut by the US Federal Open Market Committee in September, dealers said. Traders now see a 34.5% chance of a 50-basis-point rate cut by the Federal Open Market Committee at its meeting in September, slightly higher than 29% on Tuesday, according to the CME FedWatch tool. The odds of a 25-bps rate cut are 65.5% as of today.

Despite a drop in the dollar index, the rupee was steady. Earlier this week, the rupee rose to a high of 83.7500 a dollar. "The past few days of lower dollar/rupee was mainly due to inflows (foreign fund inflows), and the current level shows that the rupee will gradually keep falling," a dealer with a foreign bank said.

The dollar index fell to a near eight-month low of 100.92 on Wednesday, after data showed that the addition of jobs in the US in 2023-24 (Apr-Mar) was significantly lower than previously reported. Total employment in the US during the year ended March was revised lower by 818,000 jobs, according to the data. This suggested that the US added 174,000 jobs each month during that period, compared with the previously reported figure of 242,000 jobs.

This suggested that the world's largest economy might have been cooling faster than expected.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 101.21 at 0926 IST, compared with 101.14 on Wednesday and 101.38 on Tuesday. 

A fall in crude oil prices on Wednesday supported the rupee, dealers said. Oil prices fell after data indicated a weaker labour market in the US. At 0928 IST, the October Brent crude contract on the Intercontinental Exchange was at $76.10 per bbl, compared with $76.05 per bbl on Wednesday and $77.20 per bbl on Tuesday.

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 84.00 a dollar.  (Sourabh Kumar)

India Rupee : Expected range for rupee - Aug 22

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 Ashish Shirke

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