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Informist, Tuesday, Sep 10, 2024

By Pratiksha

NEW DELHI – The rupee ended broadly unchanged against the dollar today as the Reserve Bank of India's strong grip on the currency managed to offset the downward pressure from a rise in the dollar index, dealers said. 

"It is only expected that they (RBI) have been intervening. It's an everyday story now, nothing new," a dealer at a foreign bank said. 

After moving in a tight range of 4 paise throughout the day, the Indian currency settled at 83.9750 a dollar, within spitting distance from its record low of 83.9900 a dollar. It settled at 83.9550 a dollar on Monday. 

The rupee started the day steady against the dollar at 83.9450 a dollar as traders remained cautious ahead of the US inflation data, which is due Wednesday, dealers said.

The headline US CPI is expected to have risen 0.2% on a month-on-month basis in August, according to a Reuters poll, unchanged from the previous month. Traders await the key economic data to assess the quantum of the likely rate cut by the US Federal Reserve at its meeting next week. 

Currently, the odds of the US central bank cutting interest rates by 50 basis points this month are 29%, while the odds for a 25-bps rate cut are seen as having a 71% probability, as per the CME FedWatch Tool.

"See it is not necessary that we (the rupee) will be impacted by the US CPI numbers," a dealer at a state-owned bank said. "It (rupee) has not been looking at the global cues."

Shortly after the currency market opened, the central bank marked its presence through dollar sales to keep the Indian unit from hitting the psychologically-crucial level of 84-a-dollar, dealers said. The RBI has been steadfast in keeping the local currency from breaching the key level since last month. 

Further, some foreign banks bought the greenback on behalf of importers looking to meet their payment requirements, which weighed on the Indian currency, dealers said. However, the dollar demand today was not aggressive in nature. Currency traders said the current dollar/rupee levels are not lucrative for importers to buy dollars. 

"Dollar demand is still getting protected by the RBI which has not allowed a move beyond 83.99," Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP said. "For tomorrow (Wednesday), our range for the rupee is expected to be between 83.90 to 84.05."

Moreover, noting the RBI's active intervention, banks sold dollars on behalf of exporters, which supported the Indian unit, dealers said. "I think the exporters are coming back also because forward premiums levels are good now," a dealer at a private bank said. 

Meanwhile, the dollar index strengthened ahead of the US inflation data and as expectations of a larger rate cut by the US Federal Reserve next week faded, which kept the Indian unit under pressure, dealers said. 

At 1530, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was 101.60, compared with its previous close of 101.61 on Monday and 101.19 on Friday. The index rose to a high of 101.72 during the day.

Most traders avoided placing large bets ahead of the key US economic data and ahead of the first debate between US presidential election Democrat candidate Kamala Harris and Republican challenger Donald Trump today. 

Investors anticipate that Trump coming to power would mean lower corporate taxes, stricter trade relations, leading to higher stock prices and bond yields, strengthening the dollar. Trump's win is also expected to bring about strict restrictions on immigration and hikes in tariffs on imports, leading to stagflation in the economy.

FORWARDS

The 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.

Meanwhile, a few banks sold dollars for forward delivery to take advantage of higher dollar/rupee forward premiums, which weighed on the premium, dealers said. The one-year dollar/rupee forward premium has risen almost 10 bps this month. 

Most traders remained on the sidelines ahead of the US inflation data on Wednesday for further cues on the quantum of rate cut by the US Fed, dealers said. Market participants also await the European Central Bank, which is likely to cut its deposit rate by 25 bps to 3.50% on Thursday.

With the Fed expected to start cutting rates, and no sight of a rate cut by the RBI yet, 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 186.43 paise, against 185.79 paise on Monday. On an annualised basis, the premium was 2.22%, compared to Monday's close of 2.21%.

OUTLOOK

On Wednesday, the rupee will take cues from movement in the dollar index ahead of the US inflation data for August, dealers said. Traders are also keeping a close eye on US presidential election Democrat candidate Kamala Harris and Republican challenger Donald Trump's first debate today ahead of the US presidential election on Nov 5.

Dealers expect the RBI to continue to keep the Indian currency 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 narrow range against the greenback. 

"There is nothing bad poised for the rupee as such, so going beyond 84 (a dollar) does not look likely. I don't see why the rupee should depreciate from here," Sajal Gupta, executive director and head of forex and commodities at Nuvama Institutional Desk 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: Pound sterling up 0.2% post UK labour data

MUMBAI – The pound sterling was up 0.2% against the dollar even after the UK labour market data led to expectations that the Bank of England may cut interest rates one more time before the end of this year.

Data released today showed that wage growth slowed to 5.1% annually in the three months ended July, in line with a forecast by Reuters. It was the lowest reading since the three months to June 2022. Further, 265,000 jobs were added in the UK in the quarter ended June, higher than the forecast of 123,000 by a Reuters poll.

The Bank of England is scheduled to meet on Sep 19. However, analysts polled by Reuters expect an interest cut in the November meeting rather than this month. Investors are waiting for UK's GDP data on Wednesday before the central bank's meeting.

The euro was flat against the greenback even after data released today showed that inflation in Germany, which is the largest economy in Europe, fell to its lowest level of 2.0% in more than three years in August. Market participants are keenly waiting for the European Central Bank's meeting on Thursday and expect a rate cut for the second time this year by 25 basis points.

The Australian dollar was flat against the US dollar despite the Westpac consumer price index report showing that consumer confidence in the country declined to 84.6 in September, compared to analysts' forecast of 84 and the previously reported 85.0 in August.

The dollar index remained strong ahead of key US inflation data on Wednesday. The headline US CPI is expected to have risen 0.2% on a month-on-month basis in August, according to a Reuters poll, unchanged from the previous month. 

Currently, the odds of the US central bank slashing interest rates by 50 bps this month are 27%, while the odds for a 25-bps rate cut are seen as having a 73% probability, as per the CME FedWatch Tool.

At 1431 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was 101.66, compared with its previous close of 101.61 on Monday and 101.19 on Friday. (Gowri Lakshmi)

India Rupee: Premiums steady before US CPI; banks' forward dollar sales weigh

MUMBAI – The premium on the one-year dollar/rupee forward contract was largely steady today as market participants were waiting for the release of US inflation data on Wednesday for further cues on the quantum of rate cut by the US Federal Reserve, dealers said.

"It's largely steady before the (US) CPI, and I think going ahead, it is going to rise only," a dealer with a state-owned bank said. A few banks sold dollars for forward delivery, taking advantage of a higher dollar/rupee forward premium, which weighed on the premium, dealers said.

They said the one-year dollar/rupee forward premium is likely to rise going ahead, given the chances of a rate cut by the US Federal Reserve next week. The odds of the US Federal Open Market Committee cutting rates by 25 basis points at its two-day meeting starting Sep 17 were 73% as of today, as per CME FedWatch tool. The chances of a 50-bps rate cut were 27%.

If the Fed delivers on its 25-bps rate cut expectation, dealers said, the one-year dollar/rupee forward premium, on an annualised basis, may rise to around 2.30%, a level last seen on May 4, 2023. 

Before the FOMC meets next week, market participants will be keeping an eye on the European Central Bank, which is likely to cut its deposit rate by 25 bps to 3.50% on Thursday.

Before both the central banks' rate decisions, investors await the US inflation reading, due Wednesday, to weigh the chances of a 50 bps rate cut by the Fed. The headline CPI in the US is expected to rise 0.2% on month in August, unchanged from the previous month, as per a poll by Reuters. On a yearly basis, inflation was seen at 2.6% last month, down from 2.9% in July.

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 1304 IST, the premium on the one-year exact-period dollar/rupee contract was 186.43 paise, against 185.79 paise on Monday. On an annualised basis, the premium was 2.22%, compared to Monday's close of 2.21%.  (Sourabh Kumar)

India Rupee: In thin band; RBI's likely dollar sales prevent 84/$1

MUMBAI – The rupee moved in a thin band against the dollar today as few state-owned banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset the impact of dollar purchases on behalf of importers, dealers said. The rupee has moved in a range of 3 paise so far today. 

Dealers said the central bank intervened through dollar sales to prevent the rupee from falling below the psychologically-crucial level of 84-per-dollar. The rupee touched a low of 83.9750 a dollar today. Traders expect the RBI to continue selling the greenback for the rest of the day, and in turn keep the Indian unit in a tight range. 

Taking note of the RBI's active intervention, banks also sold dollars on behalf of exporters, which supported the Indian unit, dealers said. "Exporters are also selling (dollars) today. Previously they used to wait for the rupee to break the 84 level, but today they are booking the prices".  

Meanwhile, some foreign banks bought dollars on behalf of importers, looking to meet their payment requirements, which weighed on the Indian currency, dealers said. 

Volume in the currency market remained lacklustre as most traders remained on the sidelines waiting for US inflation data, due Wednesday, for more cues on the quantum of a likely interest rate cut by the US Federal Reserve at its meeting next week. Currently, the odds of a 50-basis-point rate cut by the Fed this month are 29%, while those of a 25-bps cut are 71%, according to CME FedWatch tool. 

For the rest of the day, the rupee is seen at 83.90-83.99 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 10

MUMBAI – At 0900 IST, the rupee was at 83.9450 a dollar, against the previous close of 83.9550. At 1100 IST, the rupee was at 83.9700 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 down as dlr index up before US CPI data

MUMBAI – Most Asian currencies were down against the dollar as the dollar index strengthened before the release of the US inflation data, due on Wednesday, and as expectation of a larger rate cut by the US Federal Reserve next week faded.  

The key US economic data is expected to give more clues on the quantum of the likely interest rate cut by the US Fed in its next Federal Open Market Committee meeting. The headline US CPI is expected to have risen 0.2% on a month-on-month basis in August, according to a Reuters poll, unchanged from the previous month.

Currently, the odds of the US central bank slashing interest rates by 50 basis points this month are 29%, while the odds for a 25-bps rate cut are seen as having a 71% probability, as per the CME FedWatch Tool.

At 1005, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was 101.64, compared with its previous close of 101.61 on Monday and 101.19 on Friday. 

The South Korean won fell 0.3% against the greenback, the most among its Asian peers. The Taiwan dollar was down 0.2% while the Philippine peso was down 0.1% against the US unit.

The offshore Chinese yuan was also down 0.1% against the greenback even after data today showed China's exports rose by 8.7% year-on-year in value in August, higher than the forecast for a growth of 6.5% year-on-year by Reuters. Imports grew by 0.5%, less than the expected 2% increase from a year ago in value by Reuters. 

Bucking the trend, the Malaysian ringgit was up 0.2% against the dollar after data on Monday showed that Malaysia's labour force showed steady improvement in July. The number of labour force in July improved further by recording an increase of 0.1% to 17.20 mln persons from June. Meanwhile, the labour force participation rate was unchanged at 70.4%, reports said. 

The Indonesian Rupiah and the Thai baht were flat against the greenback. (Gowri Lakshmi and Pratiksha) 

India Rupee: Largely steady as traders cautious ahead of US CPI data

MUMBAI – The rupee was largely steady against the dollar today as market participants exercised caution ahead of the US Consumer Price Index, due Wednesday, dealers said.

"The rupee is flat, not much movement is expected for today," a dealer at a state-owned bank said. "The highest it (rupee) could rise is 83.93 and the lowest may be 83.98."

Market participants await the US inflation data for more cues on the quantum of a likely interest rate cut by the US Federal Reserve at its meeting next week. Currently, the odds of a 50-basis-point rate cut by the Fed this month are 29%, while those of a 25-bps cut are 71%, according to CME FedWatch tool. 

US inflation is expected to have risen 0.2% on a month-on-month basis in August, according to a Reuters poll, unchanged from the previous month. 

The dollar index rose ahead of the release of the key economic data, which weighed on the Indian unit, dealers said. At 0939, the dollar index, which measures the strength of the dollar against six major currencies, was 101.63, compared to 101.61 on Monday and 101.19 on Friday.

"The US CPI data is not going to impact the rupee movement. The rupee is expected to stay the same till the FOMC (Federal Open Market Committee) meeting," the dealer at a state-owned bank said.

Some dealers speculated that the Reserve Bank of India may be selling dollars around the current level to keep the Indian unit from hitting the psychologically-crucial level of 84-a-dollar. "There is high resistance at the 83.97-83.98 level, the rupee is not breaking the big figure anytime soon," a dealer at a state-owned bank said.

Dealers expect foreign fund inflows for the ongoing initial public offering of domestic companies to support the Indian rupee during the day. Bajaj Housing Finance Ltd, Tolins Tyres Ltd, and Kross Ltd's offers opened for subscription on Monday and will close on Wednesday. 

For the rest of the day, the rupee is seen at 83.90-83.99 against the dollar, dealers said. They peg immediate technical support for the Indian currency at 84.00 a dollar. (Gowri Lakshmi)

India Rupee : Expected range for rupee - Sep 10

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 Vidhi Verma

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