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Informist, Thursday, Sep 5, 2024

By Pratiksha

NEW DELHI - The Reserve Bank of India's active dollar sales notwithstanding, the rupee ended at a record closing low against the dollar today as banks persistently bought the greenback on behalf of oil marketing companies and foreign portfolio investors, dealers said. 

"It was notable how they (the RBI) protected that 1 paisa movement to stop 84 (a dollar)," said a dealer at a state-owned bank. "Looks like it will take a lot of time for the level to break."

After falling to a lifetime low of 83.9900 a dollar during the day, the Indian unit settled at 83.9825 a dollar, against 83.9650 on Wednesday. Along with the South Korean won, the Indian currency was the worst performing emerging market currency today. Other Asian currencies rose between 0.2-1.0% against the US unit tracking weakness in the dollar index, with the Thai baht being the best performer. 

The Indian unit started broadly steady at 83.9700 a dollar, and remained under pressure throughout the day. 

The central bank stepped in to sell dollars soon after the market opened, and tried to keep the Indian unit from hitting a lifetime low. The rupee, however, came under pressure due to dollar purchases by some big state-owned and foreign banks ahead of the daily reference rate fixing. 

"There was a lot of buying (of dollars) by foreign banks and nats (PSU banks) during the fixing hour. That's why RBI had to be there in the market full day," said a dealer at another state-owned bank. 

Further, banks bought dollars on behalf of oil importers, noting the recent fall in crude oil prices, which also put pressure on the Indian unit, dealers said. Crude oil prices were steady today, after falling almost 5% in the last two days, as the impact of a potential delay to output increases by the Organization of the Petroleum Exporting Countries and allies and a decline in US inventories was offset by persisting concerns over demand.

At 1530 IST, the November Brent crude contract was $73.0 per barrel on the Intercontinental Exchange, against $72.70 per bbl on Wednesday. Prices were at $73.75 per bbl on Tuesday. 

Banks also bought the greenback on behalf of foreign portfolio investors, who wanted to withdraw funds from domestic equities. Following this, the Indian unit finally hit a record low of 83.9900 a dollar. 

The central bank continued with its dollar sales intervention throughout the day, and managed to keep the Indian unit from touching the psychologically-significant level of 84-per-dollar, even if just by a paisa. 

"There is no way they (the RBI) should be managing a paisa movement here and there, but they are," said a dealer at a private bank. "Looking at the kind of action, I don't think there will be any shift in the market dynamics even if the figure (84 a dollar) is hit. Because they will be there as well." However, most traders anticipate a sharp knee-jerk reaction towards 84.25-84.30 a dollar if the key level breaks. 

Meanwhile, the dollar index fell further, hitting a week's low, during European trade after the July US job openings data on Wednesday pointed towards a softening labour market. However, the Indian currency did not take much comfort from the fall in the dollar index, dealers said.

"There was absolutely no impact from the global cues," said a dealer at a brokerage firm. "So, even if the NFP (non-farm payroll data) leads to more dollar fall, I don't think we are looking at any major impact here."

Market participants await Friday's crucial US non-farm payrolls report for further cues on the timing and pace of rate cuts by the Fed. Economists surveyed by Reuters expect the report to show an increase of 165,000 US jobs in August, after a rise of 114,000 in July.

At 1530 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.17 compared with 101.27 on Wednesday, and 101.77 on Tuesday. The index fell to a week's low of 101.14 earlier today.

Some banks also sold the greenback on behalf of exporters, noting the strong technical support at 84-per-dollar, which gave support to the Indian unit, dealers said.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at a near 16-month-high today due to a sharp fall in US Treasury yields, dealers said. US yields fell as investors assessed job openings data, which fell to a three-and-a-half-year low in July. 

"The whole rise in premiums is predominantly coming from the fall in US yields. Now the thing to see is how far it will rise. Maybe once there is clarity on the quantum of rate cut (by Fed), levels will start consolidating," a dealer at a foreign bank said. 

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. 

Following Wednesday's economic data, the odds of the US central bank cutting interest rates by 50 basis points on Sep 18 rose to 45% from 38% a week ago, while the odds of a 25-bps rate cut are at 55%, as per the CME FedWatch Tool.

Meanwhile, some banks stepped in to sell dollars for forward delivery to take advantage of the relatively higher forward premium levels, which capped the rise in premiums, dealers said. The one-year dollar/rupee forward premium rose to a near 16-month high of 2.19% earlier today. 

Dealers see the one-year dollar/rupee forward premiums rising further to 2.25% in the near term. At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 183.77 paise, compared with 181.88 paise on Wednesday. On an annualised basis, the premium was 2.19%, against Wednesday's close of 2.15%. 

OUTLOOK

On Friday, the rupee will take cues from the movement in the dollar index after the release of the US weekly jobless claims data, 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. "At this point, no matter what happens on the global front, I don't think any volatility will come back to the market," said a dealer at a foreign bank. "The RBI will ensure a stable move."

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: Japanese yen up 0.1% after strong wages data

MUMBAI – The Japanese yen was up 0.2% after data released today by the labour ministry showed inflation-adjusted wages rose for the second consecutive month in July. The real wages rose 0.4% in July, a slower pace than June's 1.1% growth. Nominal wages grew 3.6% in July, compared with a 4.5% increase in June. The economic data raised market participants' expectations of another potential rate hike by the Bank of Japan later this year.

"The Bank of Japan must stay on course to raise interest rates further, but tread carefully to ensure volatile markets do not badly hurt businesses," Hajime Takata, BoJ board member, said in a speech today.

The euro was up 0.1% against the dollar after the eurozone composite Purchasing Managers' Index rose to 51.0 in August, compared with 50.2 in July. The August final Services Purchasing Managers' Index climbed up to 52.9 from 51.9 in July. However, the business expectations recorded the lowest this year, with the index falling to 59.1 from 60.4 in July.

The pound sterling was up 0.1% against the greenback after the UK recorded a stronger-than-expected Services Purchasing Managers' Index. The services Purchasing Managers' Index climbed to 53.7 in August from 52.5 previously.

The Canadian dollar was flat against the dollar after the Bank of Canada on Wednesday cut its benchmark policy rate by 25 bps to 4.25%, in line with expectations. Bank of Canada Governor Tiff Macklem, citing weak economic growth, hinted at further rate cuts later this year, if necessary. "If inflation continues to ease broadly in line with our July forecast, it is reasonable to expect further cuts in our policy rate. We will continue to assess the opposing forces on inflation, and take our monetary policy decisions one at a time", Macklem said at a press conference.

The Australian dollar was flat against the greenback after Reserve Bank of Australia Governor Michele Bullock said in a speech today that "it is too early to consider rate cuts". 

The dollar index weakened after the US jobs opportunities and labour turnover survey, released Wednesday, showed the July US job openings data pointing to a softening labour market. At 1432 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.15, compared with 101.27 on Wednesday, and 101.77 on Tuesday. The index hit a week's low of 101.14 today.

Market participants keenly await the US non-farm payrolls data due Friday, which is expected to give further cues on the quantum of likely interest rate cuts by the US Federal Reserve at its meeting on Sep 18.  (Gowri Lakshmi)

India Rupee: Hits record low, RBI dollar sales keep rupee above 84/$1

MUMBAI – The rupee hit a lifetime low of 83.9900 a dollar as banks bought the greenback for foreign fund outflows and oil marketing companies. However, dollar sales by state-owned banks, likely on behalf of the Reserve Bank of India, limited the rupee's fall, they said.

"The rupee is depreciating regularly, 1 paisa every day, so that the market gets comfortable when it (the rupee) hits the 84 level," a dealer at a state-owned bank said.

The RBI is likely selling dollars continuously at 83.97-83.98 a dollar to prevent the rupee from falling beyond the psychologically crucial level of 84-a-dollar, dealers said.

"The rupee may touch 84 but will not break the level," a dealer at another state-owned bank said. Dealers said if the RBI lets the Indian currency break the 84-per-dollar mark, the rupee may fall to 84.20-84.25 a dollar.

Banks bought dollars on behalf of oil importers as crude oil prices fell almost 5% in the last two days, dealers said. At 1355 IST, the November Brent crude contract was $73.14 per barrel on the Intercontinental Exchange, against $72.7 per bbl on Wednesday.

Foreign banks bought dollars for foreign fund outflows from domestic equities, which also weighed on the Indian unit, dealers said. The rupee was also weighed down by dollar purchases by some big state-owned and foreign banks ahead of daily reference rate fixing, said dealers.

On the other hand, rise in Asian currencies due to a weak dollar index supported the rupee, they said. The dollar weakened after the US jobs opportunities and labour turnover survey, released Wednesday, showed the US job openings in July pointed to a softening labour market.

At 1355 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was 101.22, compared to 101.27 on Wednesday and 101.77 on Tuesday. The dollar index fell to a week's low of 101.20 early today.

Market participants keenly await the US weekly jobless claims data due today and the non-farm payrolls due Friday, for more cues on the quantum of likely interest rate cut by the US Federal Reserve at its meeting on Sep 18. Currently, the odds of a 25 basis point rate cut by the Fed this month is 55%, while that of a 50 bps rate cut is 45%, according to CME FedWatch tool.

For the rest of the day, the rupee is seen at 83.90-84.00 against the dollar, dealers said. They peg key technical support for the Indian currency at 84.00 a dollar.  (Gowri Lakshmi)

India Rupee: Premium near 16-month high as US yields down post weak econ data

NEW DELHI – The premium on the one-year dollar/rupee forward contract rose to a near 16-month-high today due to a sharp fall in US Treasury yields, dealers said. 

US yields fell as investors assessed job openings data, which fell to a three-and-a-half-year low in July. US job openings fell by 237,000 to 7.67 mln during the month, the lowest since January 2021, the Bureau of Labor Statistics said in its Job Openings and Labor Turnover Survey on Wednesday. A Reuters poll of economists had projected job openings at 8.10 mln. 

The US economic data pointed towards a softening labour market, further increasing the odds of larger interest rate cuts by the Federal Reserve. Following Wednesday's data, the odds of the US central bank cutting interest rates by 50 basis points on Sep 18 rose to 45% from 38% a week ago, while the odds of a 25-bps rate cut are at 55%, as per the CME FedWatch Tool.

"The rise (in premium) is all due to the soft US data. Now the NFP (US non-farm payrolls) data will be looked at. Maybe, we will see more upward move (in premium) after that," said a dealer at a big private bank. "After NFP we should see some correction in the levels." Traders are now waiting for Friday's US non-farm payrolls data for further cues on the timing and pace of rate cuts by the Fed.

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. 

Meanwhile, some banks stepped in to sell dollars for forward delivery to take advantage of the relatively higher forward premium levels, which capped the rise in premiums, dealers said. The one-year dollar/rupee forward premium rose to a near 16-month high of 2.19% earlier today. 

Dealers see the one-year dollar/rupee forward premiums rising further to 2.25% in the near term. At 1319 IST, the premium on the one-year exact-period dollar/rupee contract was 183.52 paise, compared with 181.88 paise on Wednesday. On an annualised basis, the premium was 2.19%, against Wednesday's close of 2.15%. (Pratiksha)  

India Rupee: Technical Levels for rupee - Sep 5

MUMBAI – At 0900 IST, the rupee was at 83.9700 a dollar, against the previous close of 83.9650. At 1114 IST, the rupee was at 83.9725 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 dollar index falls to 1-week low

MUMBAI – Most Asian currencies were up against the dollar as the dollar index fell to a week's low after the July US job openings data signalled a softening labour market.

The data released on Wednesday, showed that the job openings in July dropped to a three and a half year low, falling by 237,000 to 7.673 mln in July, while data for June was revised lower to 7.910 mln unfilled positions from the previously reported 8.184 mln. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 101.32 at 1025 IST, compared to 101.27 on Wednesday and 101.77 on Tuesday. 

The Malaysian ringgit rose 0.5% against the dollar, the most amongst its Asian peers. The central bank of Malaysia, Bank Negara Malaysia's monetary policy outcome is due later today, where the central bank is expected to leave its key interest rate unchanged. 

The Indonesian rupiah gained 0.4% against the greenback, while the Philippines peso was up 0.3% even after data released today showed the country's annual inflation slowed to a seven-month low in August. The consumer price index rose 3.3% in August from a year earlier, below the previous month's 4.4% rise. 

The Thai baht was up 0.3%. Bucking the trend, the South Korean won was down 0.2% against the dollar after the central bank's revised data showed that the economy shrank 0.2% in Apr-Jun, unchanged from its advance estimate issued in July. South Korea recorded the sharpest contraction in a quarter since the fourth quarter of 2022.  (Gowri Lakshmi)

India Rupee: Steady; RBI's likely dollar sales prevent record low

NEW DELHI – The rupee was largely steady, hovering near a record low, as the impact of banks' dollar purchases, likely on behalf of oil marketing companies, was offset by state-owned banks' dollar sales, likely for the Reserve Bank of India, dealers said.

The central bank likely sold the greenback to keep the Indian unit from hitting a record low and falling beyond the psychologically-crucial level of 84-per-dollar, they said. The rupee had hit a lifetime low of 83.98 a dollar on Aug 12.

"Even if it's just a few paise from here, it seems like the 84-level will not break anytime soon. They (RBI) will not let it break," a dealer at a state-owned bank said. 

Noting a fall in crude oil prices, some banks purchased dollars, likely on behalf of oil marketing companies, and this weighed on the Indian unit, dealers said. Crude prices settled 1% lower on Wednesday. At 0945 IST, the November Brent crude contract on the Intercontinental Exchange was at $72.86 per bbl, compared with Wednesday's close of $72.7 a bbl. On Tuesday, it closed at $73.75 a bbl.

Most traders exercised caution ahead of the crucial US non-farm payrolls report, due Friday, for more cues on the likely size of the rate cut by the US Federal Reserve this month. 

A rise in Asian currencies, tracking a sharp fall in the dollar index, supported the Indian unit, dealers said. The dollar index hit a week's low in early trade after the July US job openings data pointed towards a softening labour market, increasing the odds further in favour of larger interest rate cuts by the Fed.

At 0945 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.35 compared with 101.27 on Wednesday, and 101.77 on Tuesday. The index fell to a week's low of 101.23 in early trade today.

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 : Expected range for rupee - Sep 5

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

End

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

Edited by Vandana Hingorani

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