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Informist, Wednesday, Sep 4, 2024

By Pratiksha

NEW DELHI - The rupee traded in a tight 4 paise range throughout the day today and ended steady against the dollar as the Reserve Bank of India's active intervention through dollar sales managed to keep the pressure from oil companies' dollar purchases off the Indian currency, dealers said. 

"There is nothing left for us to do in the market, they (RBI) are there the whole time and keeping it (the rupee) in a range," said a dealer at a state-owned bank. "Where is the opportunity to trade?"

Today, the Indian currency settled at 83.9650 a dollar, just shy of its record closing low of 83.9725 a dollar. It had ended at 83.9675 on Tuesday.  

The Indian unit started the day broadly unchanged against the greenback as the impact of a slump in crude oil prices was offset by dampened risk appetite among investors after renewed concerns of a slowdown in the US, dealers said. 

Risk appetite among investors took a beating, with equities across the globe falling sharply, after lower-than-expected US manufacturing data on Tuesday stoked concern about the US economy's growth outlook. A survey by the Institute for Supply Management showed its manufacturing purchasing managers' index in August rose to 47.2 from the previous month's reading of 46.8. Although the index improved from an eight-month low in July, investors found the rise moderate. 

The economic data also increased market participants' expectation of a larger rate-cut by the Federal Open Market Committee in its September meeting than what the market had factored in. Following Tuesday's data, the odds of the US central bank cutting interest rates by 50 basis points on Sep 18 rose to 41% from 31% a day before, while the odds for a 25-bps rate cut are seen as having a 59% probability, as per the CME FedWatch Tool.

As soon as the market opened, the RBI marked its presence via dollar sales as it looked to keep the Indian unit from hitting a record low and falling beyond its psychologically-important level of 84-per-dollar. The rupee hit a lifetime low of 83.9800 a dollar on Aug 12. 

However, the rupee remained under pressure throughout the day, as banks purchased the greenback on behalf of oil marketing companies, noting a sharp fall in prices of the commodity, dealers said. Today, crude oil prices extended decline from Tuesday, when they had fallen nearly 4%, due to expectations that the political dispute that has halted Libyan exports may be resolved and on worries over reduced global demand growth. At 1530 IST, the November Brent crude oil contract on the Intercontinental Exchange was $73.40 bbl compared with $73.75 bbl on Tuesday and $77.52 bbl on Monday.

Further, risk aversion sentiment prompted foreign portfolio investors to withdraw money from domestic equities, which also weighed on the Indian unit, dealers said. 

"The Indian rupee was again stopped near 83.9750, possibly by the RBI as it sold dollars to ensure it (rupee) remains a touch away from the psychological level of 84.00. Risk off sentiment ensured that the market kept buying dollars and RBI supplying them," Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP said.

Most traders expressed their displeasure over the central bank's strong grip on the currency, saying the same has led to a lack of trading opportunities for them. 

"It is frustrating that the RBI is protecting just a 2-3 paisa movement here. There is no undue volatility in the market, why so much action?" said a dealer at a private bank. 

The central bank likely sold almost $1 bln in the domestic spot market today, some dealers said. Noting the central bank's active intervention, some exporters also stepped in to sell dollars, which gave support to the Indian unit, dealers said.

"Exporters tend to miss the bus most of the time because they keep waiting. But when the message is so clear that 84 will not break easily, they will of course start coming in," said a dealer at a private bank. 

FORWARDS

The premium on the one-year dollar/rupee forward contract ended near a 16-month-high, tracking a fall in US Treasury yields, dealers said. US Treasury yields fell on Tuesday after the release of the US manufacturing purchasing managers' index.

With the Fed likely to go for a rate cut, 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 a currency pair's forwards reflect the interest rate differential between the two countries. 

However, gains in premiums were limited as banks and exporters stepped in to sell dollars for forward delivery, noting the relatively higher levels, dealers said. The one-year dollar/rupee forward premium rose to a near 16-month high of 2.16% earlier today. 

"If the upcoming data (in the US) further points towards a 50 bps rate cut in September, we may see more rise in levels. Maybe till 2.20-2.25%," said a dealer at a private bank. 

Dealers see one-year dollar/rupee forward premiums rising further to 2.20% in the near term. At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 181.88 paise, compared with 179.22 paise on Tuesday. On an annualised basis, the premium was 2.15%, against Tuesday's close of 2.13%.

OUTLOOK

On Thursday, the rupee will take cues from the movement in the dollar index after the release of the US job openings data and labor turnover survey or the JOLTS report, later today, dealers said.

Market participants await the US economic data for more cues on the health of the US economy and the quantum of the Fed's rate cut this month. 

The local unit will also take cues from movement in crude oil prices, they said. If crude oil prices continue on their downward trajectory, oil marketing companies may further demand the greenback to stock up on the commodity, according to dealers.

However, dealers expect the RBI to continue to keep the Indian unit from falling beyond its psychologically-crucial level of 84-per-dollar through its dollar sales interventions. 

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 up on robust econ data; US jobs data eyed
 

MUMBAI – The Japanese yen was up 0.2% against the dollar after data released today indicated resilience in the island nation's services sector. The Jibun Bank services Purchasing Managers' Index was 53.7 in August, unchanged from July. A reading above 50 indicates expansion in the sector, while a reading below it suggests contraction. Further, a sustained rise in activity and new business led to employment rising for the 11th consecutive month in Japan, Dow Jones reported. 

The Canadian dollar was steady against the greenback ahead of the Bank of Canada's rate decision later today. A Reuters poll showed that the country's central bank would reduce the overnight rate by 25 basis points, to 4.25%. It would be the third consecutive rate cut by Canada's central bank.

The euro was up 0.1% against the dollar after data showed that the eurozone services purchasing managers' index in August rose to 52.9, softer than the forecast of 53.3 in a Dow Jones poll. However, the data point rose on month from 51.9 in July. 

The US purchasing manager's index released on Tuesday showed a slowdown in the US economy. The ISM survey compiled by S&P showed that the US manufacturing purchasing managers' index rose to 47.2 in August, after falling to a low of 46.8 in July. The manufacturing sector, which accounts for 10.3% of the economy, showed a contraction in the sector as the reading was below 50. 

The data led to heightened speculation of a larger interest rate cut. Currently, the odds of a 50 bps rate cut has risen to 37%, compared to 30% on Friday, while the odds of a 25 bps cut are at 63%, according to the CME FedWatch tool.

Market participants await the US job openings and labor turnover survey or the JOLTS report, due later today. However, traders will focus largely on the non-farm payrolls data, due Friday, to get cues on the quantum of interest rate cuts at the Federal Reserve Open Market Committee's meeting in September.

At 1603 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 101.66, compared to 101.77 on Tuesday and 101.64 on Monday.

The New Zealand dollar was down 0.1% against the dollar for the fourth consecutive trading session. The New Zealand dollar continues to weaken as economic data from China shows a slump in its economy. Any change in the Chinese economy is reflected in the New Zealand dollar movement due to their close bilateral trade relations. 

The pound sterling was flat against the dollar. (Gowri Lakshmi)

India Rupee: Premiums near 16-mo high as US ylds dn post US mfg PMI

MUMBAI – The premium on the one-year dollar/rupee forward contract rose to a near 16-month-high, as US Treasury yields fell, dealers said. The yield on the benchmark 10-year US Treasury note fell 7 basis points to 3.84% on Tuesday, after data showed the US manufacturing sector contracted for the fifth month in a row.

"Premiums were high because of weak data (in the US), but some receiving (selling forward dollars) was seen," a dealer with a state-owned bank said. The one-year dollar/rupee forward premium rose to 2.16% today, the highest since May 15, 2023, before reversing slightly.

A fall in the benchmark 10-year US Treasury yield gave an upward push to premiums, dealers said. The Institute for Supply Management's survey released on Tuesday showed the US manufacturing purchasing managers' index for August came in at 47.2, against the previous month's reading of 46.8. A reading below 50 indicates contraction in the sector, while a reading above it indicates expansion.

The data sparked fears of a slowdown in the US economy, and led to a rise in traders' expectations of a larger rate cut by the US Federal Open Market Committee at its two-day meeting starting Sep 17. While most market participants were expecting a rate cut this month, the opinion on the quantum was divided. After Tuesday's data, the odds of a 50-basis-point rate cut improved to 43% from 30% on Friday, according to the CME FedWatch tool. Odds of a 25-bps rate cut at the two-day meeting starting Sep 17 were at 57%.

With the Fed likely to go for a rate cut, 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 a currency pair's forwards reflect the interest rate differential between the two countries. 

Dealers see one-year dollar/rupee forward premiums rising further to 2.20% on an annualised basis this month. At 1337 IST, the premium on the one-year exact-period dollar/rupee contract was 182.13 paise, compared with 179.22 paise on Tuesday. On an annualised basis, the premium was 2.16%, up from Tuesday's close of 2.13%.  (Sourabh Kumar)

India Rupee: In thin band; RBI's likely dlr sales avert record low

MUMBAI – The rupee moved in a thin band against the dollar as the state-owned bank's dollar sales, likely for the Reserve Bank of India, offset the impact of dollar purchases by oil importers, dealers said. The rupee has moved in a range of only 3 paise so far today. 

"There is strong resistance after 83.97 (a dollar)", a dealer at a state-owned bank said. "Buying (of dollars) pressure is there, but the resistance is holding." 

The central bank is likely selling dollars continuously at around 83.97 a dollar to prevent the rupee from hitting a record low and falling beyond the psychologically-crucial level of 84-a-dollar, dealers said. The rupee hit a record low of 83.9800 a dollar on Aug 12. 

On other hand, banks purchased the greenback on behalf of oil marketing companies, noting the sharp fall in crude oil prices, dealers said. Today, crude oil prices extended fall from Tuesday, when it had declined nearly 4%, due to expectations that the political dispute that has halted Libyan exports may be resolved and on worries over reduced global demand growth. At 1230 IST, the November Brent Crude Oil contract on the Intercontinental Exchange was $73.34 bbl, compared with $73.75 bbl on Tuesday and $77.52 bbl.

Further, noting the RBI's active dollar sale intervention, some exporters also sold the greenback, which supported the Indian unit, dealers said. "Exporters are now selling (dollars), they were waiting earlier. Now that the 83.97 level is not breaking, they do not want to lose the gains (in dollar/rupee)," a dealer at a state-owned bank said. 

Most market participants are in a "wait and watch" mode ahead of key economic data from the US to get more cues on the quantum of interest rate cuts in the September Federal Open Market Committee meeting, dealers said. The US job openings data is due later today, but the most crucial data being eyed on is the non-farm payroll, due on Friday. 

"Currently the market expects 25 bps cut (by the Fed), but if the jobs data comes weaker, a 50 bps rate cut can be expected," a dealer at a private bank said. "A 50 bps rate cut means further weakness (for the dollar)." Currently, the probability of the US central bank cutting interest rates by 50 basis points on Sep 18 is 41%, while the probability for a 25 bps rate cut is 59%, as per the CME FedWatch Tool. 

Looking at the RBI's active dollar sale intervention, traders do not expect the 84-a-dollar-level for the rupee to be broken anytime soon, dealers said. For the rest of the day, the rupee is seen at 83.90-83.98 against the dollar, dealers said. They peg key technical support for the Indian currency at 84.00 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Sep 4

MUMBAI – At 0900 IST, the rupee was at 83.9525 a dollar, against the previous close of 83.9675. At 1055 IST, the rupee was at 83.9600 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- Most up as dlr index comes off 2-week high

MUMBAI – Most Asian currencies were up against the dollar today as the dollar index came off slightly from the two-week high it hit on Tuesday, after lower-than-expected US manufacturing data. However, a slump in Asian equities limited gains for the currencies. 

The ISM survey compiled by S&P showed that the US Manufacturing Purchasing Manager's Index rose to 47.2 in August, after falling to a low of 46.8 in July. However, a further decline in new orders and rise in inventory indicated factory activity could remain subdued for a while. The manufacturing sector, which accounts for 10.3% of the economy, showed a contraction as the Purchasing Manager's Index was below 50. A reading above 50 denotes expansion.

The dollar index had risen to a two-week high on Tuesday owing to safe-haven demand after the economic data renewed concerns of a slowdown in the world's largest economy. However, the index eased in early trade today. Following Tuesday's data, the odds of the US central bank cutting interest rates by 50 basis points on Sep 18 rose to 41% from 31% a day before, while the odds for a 25 bps rate cut are seen as having a 59% probability, as per the CME FedWatch Tool.

The dollar index, which measures the strength of the dollar against a basket of six major currencies, stood at 101.67 at 0921 IST, compared to 101.77 on Tuesday and 101.64 on Monday. The index rose to a two-week high of 101.92 on Tuesday. 

The Malaysian ringgit was up 0.4%, the most amongst its peers. Malaysia's central bank, Bank Negara Malaysia, is scheduled to meet on Thursday and is expected to keep the interest rate unchanged, atleast through 2025, according to a Reuters poll. The bank is expected to maintain the interest rate as Malaysia records robust growth and inflation remains under control, currently at 2.0%.

The Thai baht was up 0.1% against the dollar. The minutes of the August central bank meeting today suggested that the current inflation target range of 1% to 3% has been effective in anchoring expectations and in handling price shocks. 

The Indonesian rupiah and Chinese yuan were up 0.2% against the dollar. Bucking the trend, the Taiwan dollar was down 0.2% against the dollar due to a slump in domestic equities. At 0930 IST, Taiwan's Taiex was down 3.9%. The South Korean won was also down 0.2% against the dollar tracking a slump in local shares. At 0930 IST, South Korea's Kospi was down 2.9%. 

Traders now await the non-farm payrolls, due Friday, to get cues on the quantum of interest rate cuts by the US Federal Reserve at the Federal Open Market Committee meeting this month. (Gowri Lakshmi)

 India Rupee:Steady as weak risk appetite offsets fall in crude prices

NEW DELHI – The rupee was largely steady against the dollar as the impact of a sharp fall in crude oil prices was offset by a dampened risk sentiment among investors after renewed worries of a slowdown in the US, dealers said. 

Risk appetite among investors took a beating, with equities across the globe falling sharply, after lower-than-expected US manufacturing data on Tuesday stoked worries about the US economy's growth outlook. At 0930, both the Sensex and Nifty 50 were down 0.7% each. 

Following the economic data, the odds of the US central bank cutting interest rates by 50 basis points on Sep 18 rose to 41% from 31% a day before, while the odds for a 25-bps rate cut are seen as having a 59% probability, as per the CME FedWatch Tool.

"I think the impact of all this will be minimal. The pressure for the rupee to go towards 84 may increase. That is all. But we know that will not happen easily," a dealer at a state-owned bank said.

Some dealers speculated that the central bank is possibly intervening through dollar sales around the current levels, as the Indian unit inches closer to the psychologically-crucial level of 84-per-dollar. 

"Around 83.97-83.98 (a dollar), they (RBI) should come for sure, unless they decide to let it go to the figure (84 a dollar)," a dealer at a private bank said. 

Market participants now keenly await the monthly US jobs report, due on Friday, for more cues on the health of the US economy and the quantum of the US Federal Reserve's rate cut this month. 

For the rest of the day, the rupee is seen at 83.80-83.98 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 - Sep 4

MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecast by leading banks and brokerages in an Informist poll:

(Sourabh Kumar)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Vandana Hingorani

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