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Informist, Monday, Sep 9, 2024

By Pratiksha

NEW DELHI – The rupee ended steady against the dollar today as the Reserve Bank of India's active intervention through dollar sales neutralised the impact of a rise in the dollar index and oil companies' dollar purchases, dealers said.  

"They (the RBI) are present every time the rupee moves to 83.95 (a dollar)," a dealer at a foreign bank said. "The market knows that these levels will not break." 

After moving in a tight range of 4 paise throughout the day, the Indian currency settled at 83.9550 a dollar, against Friday's closing of 83.9475. The Indian unit was the best performing emerging market unit today, as other Asian units fell between 0.3-1.0% against the greenback, tracking a rise in the dollar index. The Philippines peso and the Malaysian ringgit were the worst performing emerging market units. 

The Indian unit started the day flat against the US unit but rose to the day's high of 83.9225 a dollar shortly afterwards as foreign banks, including a UK-based bank, sold dollars for foreign fund inflows, dealers said. 

Foreign fund inflows were on account of overseas investment into the ongoing initial public offerings of domestic companies. Bajaj Housing Finance Ltd's offer opened for public subscription today and will close on Wednesday. Shree Tirupati Balajee Agro's public offer opened for subscription on Thursday and will close today, while Kross Ltd's issue also opened today and will close on Wednesday.

"There was selling (of dollars) pressure in the morning. Initial public offering flows were there. I think we should see this for the rest of the week as well," a dealer at a private bank said. 

However, banks stepped in to buy dollars on behalf of oil importers, including a large state-owned oil company, which weighed on the Indian unit, dealers said. 

Oil marketing companies bought dollars as they expect crude prices to rise after declining almost 7% last week, dealers said. Crude prices jumped almost 1% today in response to a potential hurricane approaching the US Gulf Coast.

At 1530 IST, the November Brent crude contract was $71.40 per barrel on the Intercontinental Exchange, compared with the previous close of $71.06 per bbl on Friday. Prices rose to a high of $72.21 a bbl earlier today. 

Further, some banks bought dollars on behalf of foreign portfolio investors looking to withdraw funds from domestic markets, which also weighed on the Indian unit, some dealers said. 

Dealers said some traders avoided placing large bets as they now await the outcome of the US Federal Reserve's policy outcome next week and the European Central Bank's policy outcome on Thursday. The ECB is widely expected to cut rates by 25 bps at the upcoming meeting. 

Currently, the odds of the US central bank slashing interest rates by 50 basis points this month are 25%, while the odds for a 25-bps rate cut are seen as having a 75% probability, as per the CME FedWatch Tool.

"The market looks stuck to me, it is mostly preparing for FOMC and ECB decisions now," a dealer at another private bank said. "We have some oil companies buying (dollars) though." 

Meanwhile, the dollar index rebounded from an over one-week low in early trade and rose further during European trade ahead of the US inflation data due this week and after Friday's mixed non-farm payrolls report stoked uncertainty about the quantum of the Fed's rate cut next week. This also 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 101.60 compared with 101.19 on Friday, and 101.06 on Thursday. The index fell to a week's low of 100.58 on Friday.

As the Indian unit fell to the day's low of 83.9600 a dollar, state-owned banks stepped in to sell the greenback on behalf of the central bank, dealers said. The apex bank sold dollars around 83.95-83.96 a dollar during the second half of the day, to keep the Indian unit from falling beyond its psychologically-important level of 84-per-dollar, they said. 

"We had expected some movement (in the rupee) after the NFP data (non-farm payrolls data), but it looks like the 84 figure is not going to break anytime soon," a dealer at a state-owned bank said. Most currency traders do not expect the domestic unit to fall below 84-per-dollar in the near term and even if it does, they don't expect a knee-jerk reaction in the rupee. 

Noting the strong support for the Indian unit at 84-per-dollar, some exporters also sold the greenback, which aided the local unit, dealers said. 

FORWARDS

Premium on the one-year dollar/rupee forward contract ended at an over 16-month-high 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 next week, dealers said.

However, some banks sold the greenback for forward delivery to take advantage of the relatively higher levels, dealers said. This capped the rise in premiums, they said. Today, the one-year dollar/rupee forward premium rose to 2.22%, its highest level since May 11, 2023. 

Friday's data showed employment in the US grew less than expected in August, but indicated only a steady slowdown in the labour market, likely supporting gradual interest rate cuts by the US Fed.

The US non-farm payrolls rose by 142,000 jobs in August after a downwardly revised rise of 89,000 in July. The US jobs data came softer than expected as economists had forecast payrolls to increase by 160,000 in a Reuters poll. However, the unemployment rate fell to 4.2% in August from 4.3% in July, suggesting an orderly labour market slowdown. 

Premiums on a currency pair's forwards reflect the interest rate differential between the two countries. 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, pushing dollar/rupee forward premiums higher. Premiums on a currency pair's forwards reflect the interest rate differential between the two countries. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 185.79 paise, compared with 184.66 paise on Friday. On an annualised basis, the premium was 2.21%, against Friday's close of 2.20%. 

OUTLOOK

On Tuesday, the rupee will take cues from the movement in the dollar index and crude oil prices, dealers said. Market participants now await the US inflation data for August, due Wednesday, for further cues on the timing and pace of rate cuts by the US Fed.

Traders are also keeping a close watch on US presidential election Democrat candidate Kamala Harris and Republican challenger Donald Trump's first debate on Tuesday ahead of the US presidential election on Nov 5.

Dealers expect the RBI to continue to keep the Indian unit from falling beyond the key level of 84-per-dollar through its dollar sales interventions. They expect the Indian unit to continue to move in a tight range against the greenback. 

Foreign banks may continue to sell dollars on behalf of foreign investors looking to invest in ongoing initial public offerings of domestic companies, which may support the Indian currency, dealers said.

During the day, the rupee is seen in a range of 83.90-83.99 a dollar, with strong technical support pegged at 84.00. 

India Rupee - World FX: Yen down as Japan Apr-Jun GDP revised lower

MUMBAI – The Japanese yen fell 0.8% against the dollar after data released today showed the Japanese economy growing at a slower rate in Apr-Jun than initially reported. The GDP rose by 2.9% in the quarter ended June, against the earlier estimate of 3.1%. The economists had forecast a 3.2% growth and 3.1% rise in the preliminary estimate, in a Reuters poll.

The revised quarterly data is likely to have little impact on the Bank of Japan's policy decision at the Sep 19-20 meeting. However, a majority of investors expect the BOJ to hike interest rates by next year.

The euro was down 0.3% against the greenback as the dollar index rebounded after the data released on Friday. The report from Bureau of Labor Statistics showed that the US non-farm payrolls rose by 142,000 jobs in August after a downwardly revised rise of 89,000 in July. However, the unemployment rate fell to 4.2% in August from 4.3% in July, suggesting an orderly labour market slowdown. 

At 1514, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was 101.53, compared with the close of 101.19 on Friday and 101.06 on Thursday.  

Market participants now await the US inflation data due this week for more cues on the quantum of rate cut by the Fed this month. Currently, the odds of a 25-basis-point rate cut by the Fed this month is 75%, while that of 50-bps is 25%, according to the CME FedWatch tool. 

The pound sterling was down 0.3% against the greenback ahead of key economic data due this week. The UK expects its monthly unemployment figures for August on Tuesday and monthly GDP estimates for July along with other data points on Wednesday. The Bank of England's next meeting is scheduled for Sep 19, with 25% of market participants expecting a likely interest rate cut. 

The New Zealand dollar was down 0.6% while the Australian dollar was down 0.2% against the greenback owing to weaker-than-expected economic data from China. China's consumer price index rose 0.6% annually, less than expectations of 0.7% in a Reuters poll. Any change in the Chinese economy is likely to impact New Zealand and Australia due to their close bilateral trade relations. (Gowri Lakshmi)

 India Rupee: In thin band as RBI dollar sales offset oil cos' buys

MUMBAI – The rupee moved in a thin band against the dollar today as a few banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset the impact of dollar purchases by oil marketing companies on the Indian unit, dealers said.

"The central bank seems to be present, because there is pressure from oilers," a dealer with a private bank said. The RBI intervened in the market by way of dollar sales to protect the rupee from falling below the psychologically-crucial level of 84 a dollar. The rupee has moved in a 4-paise range so far today.

Dealers said some banks also sold dollars for foreign fund inflows into ongoing initial public offerings. Bajaj Housing Finance Ltd's offer opened for public subscription today and will close on Wednesday. Shree Tirupati Balajee Agro's public offer opened for subscription on Thursday and will close today, while Kross Ltd's issue also opened today and will close on Wednesday. 

Dealers said there have been consistent foreign fund inflows since the morning. "More such (inflows) are expected this month," a dealer at another private bank said. 

Further, some exporters also sold the greenback as they see strong technical support for the Indian unit at 84.00-per-dollar level, dealers said. This also supported the Indian unit. 

Meanwhile, banks purchased the greenback on behalf of oil marketing companies, noting a rise in crude oil prices. Crude oil prices rose over $1 today, after declining almost 7% last week, as markets recovered from a sell-off following weaker than expected US jobs data on Friday. At 1453 IST, the November Brent Crude oil contract on the Intercontinental Exchange was $72.02 per barrel, compared with the previous close of $71.06 on Friday. 

A fall in other Asian currencies weighed on the Indian unit, dealers said. Most Asian currencies fell against the greenback as the dollar index rose ahead of the US consumer price index data, due this week. The dollar index, which measures the strength of the dollar against a basket of six major currencies, was 101.53 at 1453 IST, compared to the previous close of 101.18 on Friday and 101.06 on Thursday. 

Market participants now await US inflation data due this week for more cues on the quantum of the likely interest rate cut by the US Federal Reserve at its policy meeting next week. Currently, the odds of a 25-basis-point rate cut by the Fed this month are 75%, while that of a 50 bps cut are 25%, according to the 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 and Sourabh Kumar)

India Rupee: Technical Levels for rupee - Sep 9

MUMBAI – At 0900 IST, the rupee was at 83.9525 a dollar, against the previous close of 83.9475. At 1044 IST, the rupee was at 83.9325 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 dn as dlr index up post US payrolls data

MUMBAI – Most Asian currencies were down against the dollar as the dollar index rebounded from an over-one-week low after the US non-farm payrolls data on Friday. The economic data showed employment in the US grew less than expected in August, but indicated only a steady slowdown in the labour market, likely supporting gradual interest rate cuts by the US Federal Reserve. A decline in Asian share indices also weighed on the units. 

The report from the Labour Department's Bureau of Labour Statistics showed that the US non-farm payrolls rose by 142,000 jobs in August after a downwardly revised rise of 89,000 in July. The US jobs data came softer than expected as economists forecasted payrolls to increase by 160,000, in a Reuters poll. However, the unemployment rate fell to 4.2% in August from 4.3% in July, suggesting an orderly labour market slowdown. 

At 1010 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was 101.27, compared with Friday's close of 101.18 and 101.05 on Thursday.

The Philippines' peso was down 0.7% against the dollar, the most among its peers. Data released last week showed that the country's August headline inflation eased to a seven-month low of 3.3% from 4.4% in July. The inflation came well within the central bank's 2-4% target range. Market participants now expect the country's central bank, Bangko Sentral ng Pilipinas, to ease its monetary policy. 

The Malaysian ringgit slipped by 0.4% against the dollar. The Chinese yuan fell 0.2% against the greenback after China's Consumer Price Index rose 0.6% annually, less than expectation of 0.7% in a Reuters poll. On Friday, the People's Bank of China hinted at further monetary easing after announcing that it has more room to reduce reserve requirement ratios, reports said. 

Investors now await the US inflation data, due this week, for more cues on the quantum of the likely interest rate cut by the US Federal Reserve next week. Currently, the odds of a 25-basis-point rate cut by the Fed this month is 67%, while that of 50-bps cut is 33%, according to the CME FedWatch tool. 

The Taiwan dollar and Indonesian Rupiah were down 0.4% each against the greenback. At 0930 IST, Taiwan's Taiex was down 1.9%, while the Indonesia's Jakarta Composite was down 0.5%.  (Gowri Lakshmi)

 India Rupee: Largely steady as FX inflows offset dollar index rise

NEW DELHI – The rupee was largely steady against the dollar today as the impact of a rise in the dollar index was offset by dollar sales by foreign banks, including a UK-based bank, likely for foreign fund inflows, dealers said. 

"Foreign banks are actively selling (dollars). There are anticipated IPO flows," said a dealer at a private bank. "I am not sure how much this will support (the rupee), but 83.90 (a dollar) may be touched."

Dealers said the foreign fund inflows were on account of overseas investment into the ongoing initial public offerings of domestic companies. Bajaj Housing Finance Ltd's offer opened for public subscription today and will close on Wednesday. Shree Tirupati Balajee Agro's public offer opened for subscription on Thursday and will close today, while Kross Ltd's issue also opened today and will close on Wednesday. 

On the other hand, the dollar index rose after Friday's US non-farm payrolls data showed employment in the country grew less than expected in August, but indicated only a steady slowdown in the labour market, likely supporting gradual interest rate cuts by the Federal Reserve. 

The key economic data, however, failed to offer clarity to traders on whether the Fed would deliver a 25-basis-point rate cut or a 50 bps cut at its policy meeting next week. At 0930 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was 101.25, compared with 101.19 on Friday and 101.06 on Thursday. The index fell to an over-one-week low of 100.58 on Friday. 

Currently, the odds of the US central bank slashing interest rates by 50 bps this month are 31%, while the odds of a 25-bps rate cut are seen as having a 69% probability, as per the CME FedWatch Tool.

Further, some dealers speculated that the Reserve Bank of India is likely to have sold dollars today in the offshore non-deliverable forwards market to prevent the rupee from hitting a record low at the open. The rupee hit a lifetime low of 83.9900 a dollar on Thursday. They expect the central bank to sell dollars in the domestic spot market if the rupee inches closer to the psychologically-crucial level of 84-per-dollar. 

For the rest of the day, the rupee is seen at 83.90-83.99 against the dollar, dealers said. They peg immediate technical resistance for the Indian currency at 83.90 a dollar.  (Pratiksha)

India Rupee : Expected range for rupee - Sep 9

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 Vidhi Verma

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