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Informist, Monday, Aug 26, 2024

By Kabir Sharma

MUMBAI – The rupee erased all gains and ended flat against the dollar today as importers bought the greenback to meet their month-end payment obligations, dealers said. "Some month-end payment demand was there from importers. And the oilers (oil marketing companies) also bought. We had expected it (rupee) to come down to 89 (83.89 a dollar) by the end of the day," a dealer with a state-owned bank said.

The rupee closed at 83.9000 a dollar against Friday's close of 83.8900 a dollar. Intraday, the rupee touched a high of 83.8000 against the dollar as the greenback was weak. But it gave up the gains and fell to the day's low of 83.9100 a dollar. Thereafter, the rupee remained broadly steady and moved in a 3-4 paise range against the greenback.

The Indian currency rose early in the day as the dollar index slumped to an over 13-month low today after US Federal Reserve Chair Jerome Powell on Friday hinted at a rate cut at the next meeting in September. At the Jackson Hole Economic Symposium in Wyoming, Powell said the time had come for the policy to be adjusted. Speaking at the Kansas City Fed's annual economic conference, he said there was growing confidence regarding inflation coming back to 2%.

Further emphasising risks to the world's largest economy, he said a slowdown in the labour market was "unmistakable" and that the downside risks to employment had increased. This raised investors' expectations of the Federal Open Market Committee cutting rates at its next meeting in September.

The dollar index slumped to a 13-month low of 100.53 today. At 1530 IST, the index, which measures the strength of the greenback against a basket of six major currencies, was at 100.73. It was at 100.68 on Friday and 101.52 on Thursday. 

The rupee was also weighed down by dollar purchases by banks on behalf of oil marketing companies who feared further appreciation in the price of the fuel, dealers said. At 1613 IST, the October Brent crude contract on the Intercontinental Exchange was $79.53 per barrel, compared with $79.02 per bbl on Friday and $77.22 per bbl on Thursday.

Crude oil prices rose on increased expectations of a rate cut by the Fed next month. Prices also rose on fears that the war in west Asia may escalate. Early Sunday, Hezbollah launched hundreds of rockets and drones at Israel. This was after Israel said it had struck Lebanon with around 100 fighter jets to eliminate the possibility of a larger attack, according to a report by Reuters.

FORWARDS

Premium on the one-year dollar/rupee forward contract touched an over 15-month-high on Powell's rate cut hint, dealers said.

A fall in US Treasury yields also supported dollar/rupee premiums. The one-year dollar/rupee forward premium rose to a high of 2.14% today. Dealers said a few banks sold the greenback for forward delivery on behalf of some big corporate, taking advantage of a relatively higher one-year dollar/rupee forward premium. This capped gains in the premium.

Yield on the 10-year US Treasury note fell on Friday after Powell said the time had come for policy to be adjusted.

Powell's speech at the Jackson Hole Economic Symposium in Wyoming gave market participants confidence that the Fed would cut rates next month, but questions about the quantum of the cut remain. Market participants are now waiting for US unemployment claims data on Thursday to assess the chances of a 50-basis points rate cut. As of today, the odds of a 50-bps rate cut by the Fed in September are 38.5%, with a 61.5% chance for a 25-bps cut.

With increasing chances of a rate cut by the Fed, and 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, pushing forward premiums higher.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 178.61 paise, compared with 175.05 paise on Friday. On an annualised basis, the premium was 2.13%, against Friday's close of 2.09%.

OUTLOOK

On Tuesday, the rupee will take cues from the movement of the dollar index and 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 to control the rupee's sharp movement on either side.

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 - World FX: Yen up 0.4% as dollar index falls to 13-month low

MUMBAI – The Japanese yen rose 0.4% against the US currency today as the dollar index fell to a 13-month low after US Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium in Wyoming on Friday. Though Powell hinted at a rate cut in September, he did not give any cues on the quantum. Meanwhile, Bank of Japan Governor Kazuo Ueda, in a discussion in the parliament on Friday, stood firm on the bank's decision to keep its interest rates high.

The Swiss franc was up 0.1% as Switzerland's non-farm payrolls rose to 5.499 mln in Apr-Jun compared to 5.484 mln in Jan-Mar, rising 1.3% on year. A weak dollar index also supported the currency. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 100.63 at 1523 IST, compared to 100.68 on Friday and 101.52 on Thursday.

The euro slipped 0.1% as Germany's business sentiment data, which was released earlier today, showed a decline in confidence for the third consecutive month. The country has been witnessing continued weakness, beginning in the first half of 2024. The Ifo Institute's survey showed that the business climate index fell to 86.6 in August from 87.0 in July. Germany's Bundesbank said that the odds of a recession are unlikely and the overall outlook remains muted, Reuters reported. Market participants are waiting for Germany's GDP data, due on Tuesday.

Investors anticipate another interest rate cut by the European Central Bank on Sep 12.

The pound sterling was down 0.1% against the greenback. Speaking at the Jackson Hole symposium, Bank of England Governor Andrew Bailey said its stance is less rigid than the US Federal Reserve and the European Central Bank and that it was too early to declare victory over inflation, suggesting more flexibility with interest rate cuts.

The New Zealand dollar slipped 0.4% against the US unit as market participants expect an additional 25 basis point rate cut in October and November by the Reserve Bank of New Zealand. Market participants are waiting for the ANZ-Roy Morgan Consumer Confidence for August and the seasonally adjusted building permits data for July, due later this week. (Gowri Lakshmi)

India Rupee: Erases most gains on banks' dollar buys for importers

MUMBAI – The rupee erased most of its gains as banks purchased the greenback on behalf of importers for their month-end payment obligations, which offset the fall in the dollar index, dealers said.

"Some importer-demand (for dollars) is present, particularly from oilers (oil marketing companies), which has dragged it (rupee) down," a dealer with a state-owned bank said.

After opening slightly higher, the rupee came under pressure, as importers, most of which were oil marketing companies, purchased the greenback for their month-end payment obligation, dealers said. 

Oil marketing companies also purchased dollars, fearing that crude oil prices would rise further. Oil prices were up on fears of escalation in war in West Asia. Early on Sunday, Hezbollah launched hundreds of rockets and drones at Israel, according to a report by Reuters. At 1337 IST, the October Brent crude contract on the Intercontinental Exchange was at $79.83 per bbl, compared with $79.02 per bbl on Friday and $77.22 per bbl on Thursday.

Oil prices were also supported after US Federal Reserve Chair Jerome Powell hinted on Friday towards an imminent rate cut. Speaking at the Jackson Hole Economic Symposium in Wyoming on Friday, he said the time has come for policy to be adjusted. As of today, the odds of a 50-bps rate cut by the Fed in September were 38.5%, with a 61.5% chance for a 25-bps cut, according to the CME FedWatch tool.

The dollar index fell after Powell's speech. The index, which measures the strength in the greenback against a basket of six major currencies, was 100.72 at 1338 IST, compared with 100.68 on Friday, and 101.52 on Thursday. It had fallen to over a 13-month-low of 100.53 earlier today.

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

India Rupee: Premiums over 15-mo high as Powell hints at Sep rate cut

MUMBAI – Premium on the one-year dollar/rupee forward contract touched an over 15-month-high today, after US Federal Reserve chair Jerome Powell indicated that the Fed may cut rates in September, dealers said.

"Since rate cut expectations (by the Fed) have grown after Powell's speech, we can see forwards rising," a dealer with a state-owned bank said. "I think premiums (on one-year dollar/rupee forward contract) will rise even higher to near 2.20%, before reversing."

A fall in US Treasury yields also supported dollar/rupee premiums. The one-year dollar/rupee forward premium rose to a high of 2.14% today. Dealers said a few banks sold the greenback for forward delivery on behalf of some big corporates, taking advantage of a relatively higher one-year dollar/rupee forward premium. This capped gains in the premium.

Yields on the one-year dollar/rupee forward contract fell after Powell, at the Jackson Hole Economic Symposium in Wyoming on Friday, said the time had come for policy to be adjusted. Speaking at the Kansas City Fed's annual economic conference, he said there was growing confidence regarding inflation coming back to 2%, and that downside risks to employment had increased.

After the speech, the dollar index had slumped to an over 13-month low of 100.53 today. The index, which measures the strength of the greenback against a basket of six major currencies, was 100.70 at 1144 IST, compared with 100.68 on Friday, and 101.52 on Thursday.

While Powell's speech gave market participants confidence that the Fed would cut rates next month, questions about the quantum of the cut remain. Market participants now wait for US unemployment claims data on Thursday to assess the chances of a 50-bps rate cut. As of today, the odds of a 50-bps rate cut by the Fed in September were 38.5%, with a 61.5% chance for a 25-bps cut.

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

At 1150 IST, the premium on the one-year exact-period dollar/rupee contract was 178.39 paise compared with 175.05 paise on Friday. On an annualised basis, the premium was 2.13%, up from Friday's close of 2.09%. (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Aug 26

MUMBAI – At 0900 IST, the rupee was at 83.8100 a dollar, against 83.8900 from the previous close. At 1110 IST, the rupee was at 83.8400 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee: Up as dlr index at 13-mo low; Powell hints Sep rate cut

MUMBAI – The rupee was higher against the dollar, as the dollar index slumped to an over 13-month low today, after US Federal Reserve chair Jerome Powell indicated a rate cut in September, dealers said.

"Now that Powell has said that the rate will be cut, so some effect is seen on the rupee," a dealer with a state-owned bank said. "But I think the rupee will again fall to around 90 (83.90 a dollar) during the day." 

The dollar index fell after Powell, at the Jackson Hole Economic Symposium in Wyoming on Friday, said the time has come for policy to be adjusted. Speaking at the Kansas City Fed's annual economic conference, he said there was growing confidence regarding inflation coming back to 2%, and that downside risks to employment had increased.

The dollar index touched a 13-month low of 100.53 today. The index, which measures the strength of the greenback against a basket of six major currencies, was 100.70 at 0916 IST, compared with 100.68 on Friday, and 101.52 on Thursday.

Some oil marketing companies may purchase the greenback during the day, fearing further rise in crude oil prices, dealers said. This may cap gains for the rupee, they said.

Oil prices rose on expectations of a rate cut by the Fed next month. A rate cut is likely to boost the economy, spurring demand for crude oil. At 0918 IST, the October Brent crude contract on the Intercontinental Exchange was at $79.64 per bbl, compared with $79.02 per bbl on Friday and $77.22 per bbl on Thursday.

Prices also rose die to fears of escalation in the war in West Asia. Early on Sunday, Hezbollah launched hundreds of rockets and drones at Israel, according to a report by Reuters. This was after Israel said it struck Lebanon with around 100 fighter jets to eliminate the possibility of a larger attack, the report said.

A few dealers said the Reserve Bank of India may purchase the greenback to prevent the rupee from a sharp rise, and to shore up its foreign exchange reserves.

For the rest of the day, the rupee is seen at 83.75-84.00 against the dollar, dealers said. They peg key technical resistance for the Indian currency at 83.80 a dollar. (Sourabh Kumar)

India Rupee - Asia FX: Most up as dlr index slumps to over 13-mo low

MUMBAI – Most Asian currencies were up against the dollar as the dollar index slumped to over a 13-month low today after US Federal Reserve Chair Jerome Powell hinted at a rate cut at the next meeting in September.

At the Jackson Hole Economic Symposium in Wyoming on Friday, Powell said the time had come for the policy to be adjusted. Speaking at the Kansas City Fed's annual economic conference, he said there was growing confidence regarding inflation coming back to 2%.

Further emphasising risks to the world's largest economy, he said a slowdown in the labour market was "unmistakable", and that the downside risks to employment had increased. This raised investors' expectations of the Federal Open Market Committee to cut rates at its next meeting in September. 

After his speech, the dollar index slumped. It touched a 13-month low of 100.67 at 0902 IST. The index, which measures the strength of the greenback against a basket of six major currencies, was 100.68 on Friday, and 101.52 on Thursday.

The Indonesian rupiah rose 0.7% against the greenback. Gains in the currency were capped after data showed that the country's current account deficit widened to 0.9% of the GDP in Apr-Jun, compared with the previous quarter's deficit of 0.7% of the GDP. The Malaysian ringgit also rose 0.7% against the greenback.

The Taiwan dollar rose 0.5% against the US unit. The South Korean won and the Philippines peso both rose 0.2% each against the dollar.

Defying the trend, the Thai baht was down 0.2% against the greenback as the relationship between the country's government and the central bank failed to improve despite a new government in place. In a response to the country's prime minister, the Bank of Thailand's governor said on Sunday that it was ready to work with the finance ministry despite having differing views on certain issues.

Paetongtarn Shinawatra, who was sworn in as the country's youngest prime minister on Aug 18, has said that the central bank's independence was an "obstacle" to the country's economic growth.  (Sourabh Kumar)

India Rupee : Expected range for rupee - Aug 26

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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