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Informist, Friday, Aug 30, 2024

By Pratiksha

NEW DELHI – The rupee erased all of its earlier gains and ended steady against the dollar today as dollar purchases by state-owned banks on behalf of the Reserve Bank of India offset the impact of robust foreign fund inflows, dealers said. 

"They (RBI) were present almost all the time in the market and absorbed all the inflows," said a dealer at a state-owned bank. "That is why it (rupee) is around the same levels as yesterday (Thursday)"

After rising to 83.8200 a dollar during the day, the rupee settled at 83.8625 a dollar today, as against 83.8700 a dollar on Thursday. The Indian unit traded in a narrow range of 6 paise today.  

The rupee started the day at 83.8400 a dollar and shortly after touched the day's high of 83.8200 a dollar, as banks sold the greenback for foreign fund inflows related to changes in the MSCI Global Standard Indices, which will come into effect after markets close today, dealers said.

On Aug 12, 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 also said it will raise the adjustment factor for HDFC Bank to 0.75 from the current 0.5. India is likely to see foreign inflows to the tune of $2.7 bln-$3.0 bln after the rejig in the MSCI index, according to Nuvama Alternative & Quantitative Research. 

However, the Indian currency could not hold on to its gains as the central bank stepped in to buy dollars around 83.82 a dollar and soaked up most of the inflows, dealers said. The central bank actively purchased the greenback during the day to keep the Indian unit from appreciating sharply and build its foreign exchange reserves, they said. 

"The RBI has been strongly buying these inflows. Earlier they were present at 83.75 but now 83.80 seems like a stop," said a dealer at a private bank. "The inflows were good, and the rupee could have easily broken 83.75 because of them." Some dealers said the central bank likely bought almost $1.5-$2 bln from the domestic spot market today. 

Banks also bought dollars on behalf of importers, including oil marketing companies, who wanted to make the most of the relatively lower dollar/rupee levels, which also weighed on the Indian currency, dealers said. Importers purchased the greenback, noting the RBI's intervention, as they now do not expect the Indian unit to appreciate sharply in the near term and want to make the most of the current levels, they said.

"The tight range movement (of the rupee) will go on," said a dealer at another private bank. "They (RBI) are going to be present at both sides and not let it (rupee) move."

Meanwhile, some traders exercised caution ahead of the release of the key US core personal consumption expenditures index due later today. However, most market participants said that unless the economic data surprises on either side, there will be no impact on the Indian currency. A soft inflation report would likely reinforce expectations of an aggressive rate cut by the US Federal Reserve in September, leading to a weaker dollar.

The dollar index strengthened after multiple economic data released on Thursday pointed towards resilience in the world's largest economy and led to investors trimming bets on an aggressive rate cut by the Fed. This weighed on the Indian unit, dealers said. 

At 1530 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.37 compared with 101.04 on Wednesday. The index had strengthened to 101.37 on Thursday after the data releases.  

Currently, the odds of the US central bank cutting interest rates by 50 basis points at its September policy meeting are 32.5%, while the odds for a 25-bps rate cut are seen at 67.5%, as per the CME FedWatch Tool.

FORWARDS

Premium on the one-year dollar/rupee forward contract ended steady as traders were cautious and avoided placing large bets ahead of the release of the US personal consumption expenditure price index data later today, dealers said. Market participants await the key economic data for more cues on the Fed's easing cycle, they said. 

The US personal consumption expenditures price index is likely to show a rise of 2.5% on year in July, unchanged from the previous month. On a monthly basis, it is expected to rise 0.2% in July, after rising 0.1% in the month before, according to a poll by Dow Jones.

Meanwhile, a rise in US Treasury yields on Thursday weighed on the forward premiums, dealers said. Yields on the benchmark US Treasury note rose after the release of US GDP figures and weekly unemployment claims, both of which showed that the world's largest economy was resilient. However, investors were firm in their expectation of a rate cut by the US Federal Open Market Committee at its meeting in September.

With the Fed likely to go for a rate cut in September, and no sight of a rate cut by the Reserve Bank of India yet, as expected by the market, 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. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 178.54 paise, compared with 178.79 paise on Thursday. On an annualised basis, the premium was 2.13%, unchanged from Thursday's close. 

OUTLOOK

On Monday, the rupee will take cues from the movement in the dollar index after the release of the US personal consumption expenditure price index later today, dealers said.

"It is going to be the same old range play unless the data actually changes anything for us," said a dealer at a brokerage firm. Traders will closely watch the evolving geopolitical developments in West Asia and their impact on crude oil prices.

Dealers expect the Reserve Bank of India to continue to keep the Indian unit from falling beyond its psychologically-crucial level of 84-per-dollar through its dollar sales interventions. On the other hand, they expect the central bank to intervene through dollar purchases if the rupee rises above 83.80 a dollar.  

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 - World FX: Yen down as Jul retail sales lower than view

MUMBAI – The Japanese yen fell 0.1% against the dollar after the data released today showed retail sales across the country rose 2.6% in July, lower than the rise of 3.8% in June. The fall of the Japanese currency was limited as Tokyo's core inflation rose 2.4% in August, higher than the estimate of 2.2% in a Dow Jones poll.

The pound sterling was up 0.1% after UK's house price index rose 2.4% annually in August, marking the steepest rise since 2022. Market participants are now assessing the timing of a rate cut by the Bank of England. After cutting rates by 25 basis points on Aug 1, Bank of England was widely expected to cut rates once more this calendar year.

The euro was steady against the dollar, erasing early gains, after data showed that the Eurozone's inflation rose 2.2% on year in August, down from the previous month's 2.6% rise. Core inflation was 2.8% on year in the current month, as compared with last month's 2.9% rise.

The Australian dollar was up 0.1% against the greenback despite retail sales remaining unchanged on month in July against expectations of a 0.3% rise. In June, retail sales rose 0.5%.

The dollar index rose on Thursday on stronger-than-expected US GDP data and softer-than-expected weekly unemployment claims.

The unemployment report for the week ended Saturday showed state unemployment benefits fell 2,000 to 231,000 claims, lower than the expectation of 232,000 claims in a Reuters poll. This made investors confident about the country's labour market.

Data released by the US commerce department on Thursday showed GDP grew 3.0% in Apr-Jun, higher than the previous estimate of 2.8% reported last month. These data sets boosted confidence globally about the underlying strength in the US economy.

Today, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.36 at 1524 IST, compared to 101.37 on Thursday and 101.04 on Wednesday.

Market participants are now waiting for US core personal consumption expenditure data. The core personal expenditures price index is expected to rise 2.7% annually in July. The index was 2.6% in June.

The data will show the health of the US economy and give an indication to market participants about the likely quantum of interest rate cut in September by the US Federal Reserve. The odds of a 50 basis point rate cut are 32.5%, and the odds of a 25 bps rate cut are 67.5%, according to CME FedWatch tool. (Gowri Lakshmi)

India Rupee: Premiums steady ahead of key US inflation data today

MUMBAI – Premium on the one-year dollar/rupee forward contract was steady as market participants refrained from placing large bets ahead of the release of the US personal consumption expenditure price index, later today, dealers said.

"Premiums have not moved, people are waiting for US inflation data," a dealer with a state-owned bank said. "Even after stronger data yesterday (Thursday), I think our premiums will stay higher."

US Treasury yields rose on Thursday, which weighed on the forward premiums. Yields on the benchmark US Treasury note rose after the release of US GDP figures and weekly unemployment claims, both of which showed that the world's largest economy was resilient. However, investors were firm in their expectation of a rate cut by the US Federal Open Market Committee at its meeting in September.

Now that market participants were waiting for the release of key US inflation data, dealers said one-year dollar/rupee forward premiums may rise if the data comes on expected lines.

The US personal consumption expenditures price index is likely to show a rise of 2.5% on year in July, unchanged from the previous month's figure. On a monthly basis, it is expected to rise 0.2% in July, after rising 0.1% in the month before.

They are waiting for this data to assess the quantum of rate cuts next month. As of today, the odds of a 25-basis-point rate cut in September were 67%, with 33% chances of a 50-bps cut, according to the CME FedWatch tool.

Gains in the one-year dollar/rupee forward premiums are expected to be capped as banks would sell dollars for forward delivery, taking advantage of higher premiums, dealers said.

With the Fed likely to go for a rate cut in September, and no sight of a rate cut by the Reserve Bank of India yet, as viewed by the market, 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. 

At 1328 IST, the premium on the one-year exact-period dollar/rupee contract was 178.58 paise, compared with 178.79 paise on Thursday. On an annualised basis, the premium was 2.13%, similar to Thursday's close.  (Sourabh Kumar)

India Rupee - Asia FX: Most down as dlr index rebounds post econ data

MUMBAI – Most Asian currencies were down as the dollar index rebounded after data showed strong US GDP growth in Apr-June and a fall in weekly jobless claims in the week ended Saturday. 

US GDP rose 3% on an annual basis, fuelled by strong consumer spending and business investment. Consumer spending rose 2.9%, while business investment expanded 7.5% annually. The weekly jobless claims data, too, showed unemployment claims fell 2,000 to a seasonally adjusted 231,000, weaker than the forecast of 232,000 claims in a Reuters poll. The dollar index, which measures the strength of the dollar against six major currencies, was at 101.38 at 0913 IST compared with 101.37 on Thursday and 101.04 on Wednesday.

The Indonesian rupiah was the worst hit among its Asian peers, as the currency slipped 0.4% against the greenback. The Taiwan dollar was down 0.2% against the dollar. The South Korean won fell 0.2% against the greenback after a monthly survey showed South Korea's annual inflation likely slowed to 2% in August. The inflation data is due on Sep 3. 

The Thai baht fell 0.1%. The loss was limited as the central bank governor and finance minister are scheduled to meet in early September to set the inflation target for 2025, with an eye on the interest rate cut which the government has been pushing the central bank for months. 

Bucking the trend, the Philippine peso was up 0.2% as the benchmark PSEi index was up 0.6% in early Asian trade today.

Market participants now await the US personal consumption expenditure price index, due today. The index is expected to rise 0.2% on a quarterly basis, against the rise of 0.1% the previous quarter. The annual projection is estimated at 2.5%, in line with last year's data. The PCE index is expected to influence the quantum of the interest rate cuts by the US Federal Reserve. The odds of a 50-basis-point rate cut are now 33%, while those for a 25-bps rate cut are 67%, according to the CME FedWatch tool.  (Gowri Lakshmi)

India Rupee:Steady; importers' dlr buys offset MSCI-linked FX inflows

MUMBAI – The rupee was steady against the dollar as purchases of the greenback by importers offset the support from some banks' dollar sales for foreign fund inflows, dealers said. Foreign fund inflows were on account of changes in the MSCI Global Standard Indices, they said.

"There is quite a bit of selling pressure, and it's related to MSCI only," a dealer with a state-owned bank said. "But these are good levels for importers as well, and then they have month-end payments, so the demand (for dollars) is present."

Foreign fund inflows were on account of a reorganisation in the MSCI Global Indices after an upward revision in HDFC Bank's weightage. On Aug 12, MSCI said it would raise the adjustment factor for HDFC Bank in its indices in a staggered manner in two phases.

It said it would raise the adjustment factor for HDFC Bank in its indices to 0.75 from the current 0.5, which would take effect from Sep 2. The remaining float adjustment to 1 from 0.75 would be announced in its November rejig. As part of its index review for August, the index provider also said it would add seven Indian stocks to its MSCI global standard indices.

The Reserve Bank of India may intervene in the market, should the rupee rise above 83.80 a dollar. "I think recently we have seen the central bank is not that active, so I believe they would come around 76-78 levels (83.76-83.78 a dollar)," a dealer with another state-owned bank said.

Dealers said importers, including oil marketing companies, purchased the greenback, taking advantage of relatively lower dollar/rupee levels. The rupee touched a high of 83.82 in early trade today.

A rise in the dollar index weighed on the rupee, dealers said. The index rose after data showed US GDP growth in Apr-Jun came in higher than the previous estimate. Investors also gained confidence about the labour market in the world's largest economy after unemployment claims for the week ended Saturday fell more than expected. This allayed fears among investors of a recession in the US.

After the release of the data, the dollar index rose to a high of 101.58 on Thursday, before closing at 101.37. On Wednesday, it was at 101.04. The index, which measures the strength of the greenback against a basket of six major currencies, was 101.39 at 0930 IST. 

A rise in oil prices also weighed on the Indian currency, dealers said. Oil prices rose after a report by Reuters that Iraq planned to cut its oil production in September. The October Brent crude contract on the Intercontinental Exchange was at $80.12 per bbl at 0929 IST, compared with Thursday's close of $79.94 a bbl. On Wednesday, it closed at $78.46 a bbl.

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 30

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 Saji George Titus

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