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Informist, Thursday, Aug 29, 2024

By Pratiksha

NEW DELHI – The rupee ended at an over one-week high against the dollar today as banks persistently sold dollars for foreign fund inflows related to changes in the MSCI Global Standard Indices, dealers said. However, dollar purchases on behalf of importers prevented the Indian unit from notching further gains, they said. 

"Importers were hedging around these levels, else with the kind of selling (of dollars) in the market today, 83.80 should have been touched," said a dealer at a state-owned bank. 

After appreciating 0.1% against the dollar, the rupee settled at 83.8700 a dollar today. However, it was lagging most of its Asian peers, which rose 0.1-0.7% against the dollar, tracking broad-based weakness in the dollar index. The Malaysian ringgit was the best performing emerging market unit today.

The rupee opened largely steady at 83.9250 a dollar. However, soon after opening, it rose above 83.90 a dollar as banks stepped in to sell dollars for foreign fund inflows, dealers said. The inflows were on account of changes in the MSCI Global Standard Indices, which will come into effect after markets close on Friday, dealers said. On Aug 13, index provider MSCI said it would add seven Indian stocks to its MSCI global standard indices as part of its index review for August.

MSCI has added Dixon Technologies India, Oil India, Oracle Financial Services Software, Prestige Estates Projects, Rail Vikas Nigam, Vodafone Idea, and Zydus Lifesciences to the MSCI Global Standard Indices. It has deleted Bandhan Bank from these indices, but added it to the MSCI Global Smallcap Indices. After the changes in the MSCI index, India is likely to see foreign inflows to the tune of $2.7 bln-$3.0 bln, according to Nuvama Alternative & Quantitative Research. 

"There was selling (of dollars) in the first half, but after that it (the rupee) was just there (at the same level)," said a dealer at a foreign bank said. "Investors were booking before the rebalancing takes place, it was just anticipation inflows."

However, as the domestic unit moved closer to 83.85 a dollar, importers rushed to purchase the greenback to take advantage of the relatively lower dollar/rupee levels, dealers said. This capped the rise in the Indian unit. The rupee rose to a high of 83.84 a dollar during the day. "We have been seeing 83.95-83.97 kind-of-levels (of the rupee) this week. So, of course, importers will book around these levels," said a dealer at a big state-owned bank. 

Further, banks also sold the greenback on behalf of exporters, who looked to meet their month-end payment requirements, which also gave support to the local unit, some dealers said. 

Meanwhile, most traders avoided placing large bets ahead of the weekly US unemployment claims data and the preliminary estimate of Apr-Jun US GDP, both due later today, dealers said. The US core personal consumption expenditures index, the Federal Reserve's preferred inflation measure, is due on Friday.

"See, we are not expecting a lot from the US data. But if the numbers come weak, we may see the dollar index falling more. RBI has been allowing some appreciation in the rupee, so we may see that happening. Not a lot but some," said a dealer at a private bank.

Market participants await multiple key economic data from the US this week for further cues on the US Federal Reserve's rate easing cycle. 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 seen at 65.5%, as per the CME FedWatch Tool. 

A rise in domestic share indices aided the Indian unit, dealers said. The Nifty 50 and the Sensex ended 0.4% higher each, marking a record closing high. 

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at an over 15-month high today as banks bought the greenback for forward delivery on view that the differential between Indian and US yields may widen as the US Federal Reserve is expected to start cutting rates in September, dealers said. 

Expectations of a rate cut by the US central bank in September have increased after Fed Chair Jerome Powell said at the Jackson Hole Economic Symposium on Friday that the time had come for policy to be adjusted. 

On Wednesday, Federal Reserve Bank of Atlanta President Raphael Bostic said that with inflation falling further and the unemployment rate up more than he anticipated, it might be "time to move" to rate cuts, but added that he wanted to be sure before pulling that trigger.

While there is near certainty among market participants about a rate cut in the US next month, the debate is now focused on whether it will be a 50-basis-point cut or one of 25 bps. 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 seen at 65.5%, as per the CME FedWatch Tool.

With the Fed expected to go for a rate cut in September, and no sight of a rate cut by the Reserve Bank of India yet, the interest rate differential between the US and India is likely to rise, driving dollar/rupee forward premiums higher. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

A rise in the Indian currency in the domestic spot market also prompted some banks to buy dollars for forward delivery, dealers said. This also supported premiums. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 179.04 paise compared with 178.70 paise on Wednesday. On an annualised basis, the premium was 2.13%, compared with Wednesday's close of 2.11%.

OUTLOOK

On Friday, the rupee will take cues from the movement in the dollar index after the release of the weekly US unemployment claims data and the preliminary estimate of Apr-Jun US GDP, later today, dealers said.

Market participants expect further foreign fund inflows on account of changes in the MSCI Global Standard Indices. "The rupee is expected in a range of 83.75 to 84.05 tomorrow (Friday) as the inflow from MSCI should continue tomorrow," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

Traders will closely watch the evolving geopolitical developments in West Asia and their impact on crude oil prices. The Reserve Bank of India is expected to continue to keep the Indian unit from falling beyond its psychologically-crucial level of 84-per-dollar through its dollar sales interventions, dealers said. 

During the day, the rupee is seen in a range of 83.80-83.98 a dollar, with strong technical support pegged at 84.00.  

India Rupee: Premiums up as US-India interest rate gap seen widening

NEW DELHI – The premium on the one-year dollar/rupee forward contract rose today as banks bought the greenback for forward delivery on the view that the differential between Indian and US yields may widen as the US Federal Reserve is expected to start cutting rates in September, dealers said. 

"We are seeing some paying in the market. It has to do with the US rate cut now being a sure shot thing in everybody's mind," said a dealer at a big state-owned bank. "If the upcoming data comes weak, we may see it (one-year dollar/rupee forward premium) rising to 2.20%."

Expectations of a rate cut by the US central bank in September have increased after Fed Chair Jerome Powell said at the Jackson Hole Economic Symposium on Friday that the time had come for policy to be adjusted. 

On Wednesday, Federal Reserve Bank of Atlanta President Raphael Bostic said that with inflation falling further and the unemployment rate up more than he anticipated, it might be "time to move" to rate cuts, but added that he wanted to be sure before pulling that trigger.

While there is near certainty among market participants about a rate cut in the US next month, the debate is now focused on whether it will be a 50-basis-point cut or one of 25 bps. 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 seen at 65.5%, as per the CME FedWatch Tool.

With the Fed expected to go for a rate cut in September, and no sight of a rate cut by the Reserve Bank of India yet, the interest rate differential between the US and India is likely to rise, driving dollar/rupee forward premiums higher. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

A rise in the Indian currency in the domestic spot market also prompted some banks to buy dollars for forward delivery, dealers said. This also supported premiums. The rupee rose to a high of 83.8600 a dollar today. 

For more cues on the US Fed's rate easing cycle, market participants now await multiple key economic data from the US this week. The weekly unemployment claims data and the preliminary estimate of Apr-Jun US GDP are both due later today. The US core personal consumption expenditures index, the Fed's preferred inflation measure, is due on Friday. 

At 1405 IST, the premium on the one-year exact-period dollar/rupee contract was 179.04 paise compared with 178.70 paise on Wednesday. On an annualised basis, the premium was 2.13%, compared with Wednesday's close of 2.11%. (Pratiksha)

India Rupee: In thin band; importers' dollar buys offset FX inflows

NEW DELHI – The rupee moved in a narrow range against the dollar today as dollar purchases by banks on behalf of importers offset the impact of banks' greenback sales for foreign fund inflows related to changes in the MSCI Global Standard Indices, dealers said. The rupee has moved in a range of only 7 paise so far today. 

"There is demand (of dollars) around these levels, but not a lot," a dealer at a private bank said. "Maybe there is a sense that it (rupee) may rise more with all these inflows."

Banks bought dollars on behalf of importers, who wanted to take advantage of the relatively lower dollar/rupee levels, dealers said. The rupee rose to a high of 83.8600 a dollar earlier today. 

Banks persistently sold dollars for foreign fund inflows on account of changes in the MSCI Global Standard Indices, which kept the Indian unit well-supported, dealers said. "We have seen good selling (of dollars) since morning itself," a dealer at another private bank said. 

On Aug 13, index provider MSCI said it would add seven Indian stocks to its MSCI global standard indices as part of its index review for August. The changes in the index weights will come into effect after markets close on Friday.

Banks also sold the greenback on behalf of exporters, who wanted to meet their month-end payment requirements, which also aided the local unit, some dealers said. 

However, most traders refrained from placing large bets ahead of the weekly US unemployment claims data and the preliminary estimate of Apr-Jun US GDP, both due later today, dealers said. The US core personal consumption expenditures index, the Federal Reserve's preferred inflation measure, is due on Friday.

For the rest of the day, the rupee is seen at 83.85-83.97 against the dollar, dealers said. Dealers peg key technical resistance for the Indian currency at 83.80 a dollar. (Pratiksha)

India Rupee: Technical Levels for rupee - Aug 29

NEW DELHI – At 0900 IST, the rupee was at 83.9250 a dollar, against 83.9525 from the previous close. At 1045 IST, the rupee was at 83.9025 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)  

India Rupee - Asia FX: Most up on weak dlr; Malaysian ringgit up 0.4%

MUMBAI – Most Asian currencies rose against the dollar today due to broad-based weakness in the dollar index. The dollar index eased slightly in early trade, after recovering in the previous session from the over 13-month low it hit on Tuesday. However, a fall in Asian equities weighed on the Asian units. 

The dollar index had fallen sharply after US Federal Reserve Chair Jerome Powell at the Jackson Hole Economic Symposium on Friday indicated a rate cut in September. 

On Wednesday, Federal Reserve Bank of Atlanta President Raphael Bostic said that with inflation falling further and the unemployment rate up more than he anticipated, it may be "time to move" to rate cuts, but added that he wants to be sure before pulling that trigger.

The dollar index, which measures the strength of the dollar against a basket of six major currencies, stood at 100.93 at 1035 IST, compared with 101.04 on Wednesday and 100.55 on Tuesday. 

The Malaysian ringgit rose 0.4% against the dollar, the most amongst its Asian peers. The South Korean won was up 0.1% against the greenback. However, the South Korean President Yoon Suk Yeol earlier today said there was a need to 'manage' policy rates should expectations about lower borrowing costs lead to further price increases in the country's already hot housing market, reports said. The Bank of Korea, in a meeting last week, hinted about interest rate cuts after leaving the benchmark rate steady, in line with market expectations. 

Market participants keenly await key economic data from the US in anticipation of the quantum of rate cuts in September. The US core personal consumption expenditures index is due Friday and the weekly unemployment data is due later today. Currently, the odds of a 25 basis point rate cut are 65.5%, whereas the odds of a 50 basis point rate cut stood at 3.5%, according to CME FedWatch tool. 

The Thai baht rose 0.1% against the dollar. "Market expectations of a potential policy rate cut by the US Federal Reserve are pressuring the dollar, contributing to its depreciation against the baht", central bank governor Sethaput Suthiwartnarueput said on Wednesday. The governor also noted the domestic economy is improving and that if the outlook remains positive, the central bank will be ready to cut rates. The central bank of Thailand kept the benchmark interest rate steady at the monetary policy meeting last week. 

The Taiwan dollar was up 0.1% against the dollar despite a fall in major stocks in the tech sector, tracking overnight losses in market leader Nvidia after the chipmaker's guidance on revenue and margins underwhelmed. Bucking the trend, the Philippines peso was down 0.1% against the dollar. (Gowri Lakshmi)

India Rupee: Rises slightly on MSCI index-rejig related FX inflows

NEW DELHI – The rupee rose slightly against the dollar today as banks sold the greenback for foreign fund inflows related to changes in the MSCI Global Standard Indices, dealers said. On Aug 13, index provider MSCI said it would add seven Indian stocks to its MSCI global standard indices as part of its index review for August. The changes in the index weights will come into effect after markets close on Friday.

"There is optimism among traders that the rupee could find some relief later this week. Up to $3 bln in inflows are expected due to changes in the MSCI index, which tracks emerging market equities," Amit Pabari, managing director, CR Forex, said in a note.

After the changes in the MSCI index, India is likely to witness foreign inflows to the tune of $2.7 bln-$3 bln, according to Nuvama Alternative & Quantitative Research. 

"There are inflows, but it is unlikely that the gains (in rupee) will hold," said a dealer at a state-owned bank. "Buying (of dollars) should come in at every dip (in dollar/rupee level)."

Traders are avoiding placing large bets ahead of weekly US unemployment claims data and the preliminary estimate of Apr-Jun US GDP, both due later today, dealers said. The US core personal consumption expenditures index, the Federal Reserve's preferred inflation measure, is due on Friday.

Market participants await the crucial economic data points, especially the core personal consumption expenditures data, for more cues on the US central bank's interest rate path. 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 at 65.5%, as per the CME FedWatch Tool.

For the rest of the day, the rupee is seen at 83.85-83.97 against the dollar, dealers said. Dealers peg key technical resistance for the Indian currency at 83.80 a dollar. (Pratiksha)

India Rupee: Expected range for rupee - Aug 29

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 Akul Nishant Akhoury

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