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Informist, Thursday, Sep 12, 2024

By Pratiksha

NEW DELHI – Notwithstanding a strengthening dollar index, the rupee ended steady against the dollar today as the Reserve Bank of India's active intervention through dollar sales ensured that the Indian currency did not test the psychologically-crucial level of 84-per-dollar, dealers said.  

After trading in a tight range of 3 paise throughout the day, the Indian currency settled at 83.9650 a dollar, within spitting distance from its lifetime low of 83.9900 a dollar, against Wednesday's closing of 83.9775 a dollar. Other Asian currencies fell 0.1-0.4% against the dollar, tracking a rise in the dollar index.

"Nothing happened in the market. It was just them (the RBI) protecting the figure (84 a dollar). What do you do in a 2-paisa range?" a dealer at a foreign bank said. 

The Indian unit opened steady at 83.9675 a dollar, even as the dollar index jumped to an over one-week high in early trade, because the RBI likely intervened through dollar sales in the offshore non-deliverable forwards market to prevent the Indian unit from touching the key level of 84-per-dollar at open, dealers said. 

The dollar index rose after data released on Wednesday showed that US core inflation rose more than expected, dashing expectations of a 50-basis-point rate cut by the US central bank next week. The core CPI, which excludes the volatile food and energy components, was up 0.3% on month in August, more than the expectation of a 0.2% rise. In July, the core CPI had risen 0.2%. The US CPI rose 0.2% last month, unchanged from July, and in line with expectations. 

The odds of the US central bank easing interest rates by 50 bps this month have gone down to 13% from 33% before the release of the US inflation print, while the odds for a 25-bps rate cut are now at 87%, up from 67% before, as per the CME FedWatch Tool.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 101.75, compared with the previous close of 101.72 on Wednesday and 101.66 on Tuesday. The index rose to an over a week high of 101.84 earlier today. 

The central bank also rushed to intervene through dollar sales in the domestic spot market, shortly after the market opened, dealers said. "See, it's all about the 84 level now. We don't know when it will break, but the build up is a lot now," said a dealer at a private bank. 

Most dealers don't expect the Indian unit to breach the 84-per-dollar mark in the near term, looking at the central bank's strong intent to protect the key level since last month. The rupee hit a lifetime low of 83.9900 a dollar on Sep 5. 

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

Some banks also bought the US unit on behalf of oil importers, who wanted to meet their payment requirements, which weighed on the Indian currency, according to dealers. At 1530, the November Brent crude contract on the Intercontinental Exchange was at $71.76 per barrel, compared to its previous close of $70.61 per bbl on Wednesday.  

Dealers said there was enough demand for dollar in the market to push the Indian currency beyond the 84-per-dollar mark. However, the central bank ensured that did not happen. The rupee touched a low of 83.9850 a dollar today. 

A surge in domestic equities gave some support to the Indian unit, dealers said. Today, the Nifty 50 and the Sensex closed at their record closing highs after hitting lifetime highs of 25433.35 points and 83116.19 points, respectively. The Nifty 50 closed 1.9% higher at 25388.90 points and the Sensex closed 1.8% higher at 82962.71 points. 

FORWARDS

Premium on the one-year dollar/rupee forward contract ended lower today, tracking a rise in US Treasury yields, dealers said. US Treasury yields rose after data released on Wednesday showed that the US core inflation for August surprised slightly on the upside, reducing the odds of a 50 bps rate cut by the US Federal Reserve at its meeting next week. 

Meanwhile, some banks bought dollars for forward delivery, taking advantage of the relatively lower levels, which limited the losses, dealers said. 

With the Fed likely to go for a rate cut, and the RBI not expected to opt for a rate cut anytime soon, the interest rate differential between the US and India is likely to rise, pushing dollar/rupee forward premiums higher.  

Market participants now await the release of India's headline CPI inflation data, due later today. CPI inflation is seen at 3.6% in August, below the RBI's target of 4% for the second consecutive month, according to a poll by Informist. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 188.48 paise, against 190.49 paise on Wednesday. On an annualised basis, the premium was 2.24%, against Wednesday's close of 2.26%.

OUTLOOK

On Friday, the rupee will take cues from movement in the dollar index after the release of the US August producer price index and initial unemployment claims report later today, dealers said. The local unit may also take cues from movement in crude oil prices, they said.

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.

"Till FOMC, this range (of the rupee) will go on, we may see some movement only after that," said a dealer at a state-owned bank. 

Market participants also await the outcome of the European Central Bank's policy meeting later today, where a 25-bps rate cut is widely expected. Investors will look for cues on how soon the ECB will cut rates in the future.

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 wholesale inflation slows

MUMBAI – The Japanese yen was down 0.2% against the dollar after data released today showed the country's annual wholesale inflation slowed in August. The corporate goods price index, which measures the input prices charged by companies, rose 2.5% from a year earlier in August, lower than analysts' expectations of a 2.8% increase. From the previous month, prices dropped by 0.2%, the first decline in 10 months.

Market participants are of the view that the slowdown in wholesale inflation may influence the timing of the next rate hike by the Bank of Japan. Meanwhile, BoJ policymaker Naoki Tamura said today that the central bank must raise interest rates by at least 1% by the second half of the next fiscal year. 

The Bank of Japan is set to leave its benchmark interest rates unchanged at its next meeting on Sep 20, but more than half of economists polled by Reuters expect a further tightening by the central bank before the end of this year. 

The Euro was flat against the greenback ahead of the European Central Bank's policy meeting due later today. Investors expect the ECB to cut interest rates by 25 basis points, with the marginal lending facility likely to be lowered to 4.25% and the deposit facility lowered to 3.50%. 

The pound sterling was flat against the dollar after the UK's July GDP data remained unchanged on month, compared to a forecast of a 0.2% increase in a Reuters poll. 

The dollar index gained after data released on Wednesday showed a slight increase in US core inflation, reducing the odds of a 50 basis point rate cut by the US Federal Reserve at its meeting next week. The core CPI, which excludes the volatile food and energy components, was up 0.3% in August, more than the expectation of a 0.2% rise. In July, the core CPI had risen by 0.2%. The US August CPI rose 0.2%, in line with expectations. 

The odds of the US central bank cutting interest rates by 50 bps next week have gone down to 13% from 33% before the release of the US inflation print, while the odds for a 25-bps rate cut rose to 87% from 67% before, as per the CME FedWatch Tool.

At 1516 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was 101.75, compared with a previous close of 101.72 on Wednesday and 101.66 on Tuesday.  (Gowri Lakshmi)

India Rupee: Premiums down tracking rise in US ylds post US CPI data

NEW DELHI – Premium on the one-year dollar/rupee forward contract fell today, tracking a rise in US Treasury yields, dealers said. US Treasury yields rose after data released on Wednesday showed that the US core inflation for August surprised slightly on the upside, reducing the odds of a 50 basis point rate cut by the US Federal Reserve at its meeting next week. 

The odds of the US central bank slashing interest rates by 50 bps next week have gone down to 13% from 33% before the release of the US inflation print, while the odds for a 25-bps rate cut rose to 87% from 67% before, as per the CME FedWatch Tool.

The US consumer price index increased 0.2% last month after rising by a similar margin in July and in line with expectations. However, the core CPI, which excludes the volatile food and energy components, was up 0.3% in August, more than the expectation of a 0.2% rise in a Reuters poll. In July, the core CPI had risen by 0.2%.

Meanwhile, some banks bought dollars for forward delivery, taking advantage of the relatively lower levels, which limited the losses, dealers said. "There is paying on every dip (in the levels) before the FOMC meeting," said a dealer at a private bank. "Levels have been rising every day, so paying had to come in (around these levels)."

With the Fed likely to go for a rate cut, and the Reserve Bank of India not expected to opt for a rate cut anytime soon, the interest rate differential between the US and India is likely to rise, pushing dollar/rupee forward premiums higher.  

Market participants now await the release of India's headline CPI inflation data, due later today. CPI inflation is seen at 3.6% in August, below the RBI's target of 4% for the second consecutive month, according to a poll by Informist. 

At 1355 IST, the premium on the one-year exact-period dollar/rupee contract was 187.98 paise, against 190.49 paise on Wednesday. On an annualised basis, the premium was 2.24%, against Wednesday's close of 2.26%. (Pratiksha)

India Rupee: Technical Levels for rupee - Sep 12

NEW DELHI – At 0900 IST, the rupee was at 83.9675 a dollar, against the previous close of 83.9775. At 1140 IST, the rupee was at 83.9750 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee: Stays steady; RBI's presistent dlr sales prevent 84/$1

NEW DELHI – The rupee remained steady against the dollar as state-owned banks persistently sold dollars, likely on behalf of the Reserve Bank of India, which offset the impact of a rise in the dollar index, dealers said. 

Dealers said the central bank likely sold the greeback to prevent the Indian unit from testing the psychologically-crucial level of 84-per-dollar, like it has been doing since last month, they said. However, the RBI's dollar sales were not aggressive in nature, according to dealers. 

"It's routine now. They (RBI) are there whenever it (dollar/rupee) goes above 83.95 (a dollar)," said a dealer at a state-owned bank. "They are selling (dollars) in small lots."

Earlier in the day, the RBI also likely sold dollars in the offshore non-deliverable forwards market to prevent the Indian unit from hitting a record low and touching the key 84-per-dollar level at the open, dealers said. The rupee hit a lifetime low of 83.9900 a dollar on Sep 5. 

Dealers don't expect the Indian unit to breach the 84-per-dollar mark in the near term, looking at the central bank's strong intent to protect the key level since last month. "The big figure (84 a dollar) is not breaking. I think we need a big trigger for that," a dealer at a private bank said. 

Meanwhile, the dollar index rose to over a one-week-high today after data released on Wednesday showed signs of some stickiness in US inflation, dashing hopes of a large rate cut by the US Federal Reserve next week.

At 1130, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 101.75, compared with the previous close of 101.72 on Wednesday and 101.66 on Tuesday. The index rose to over a week high of 101.84 earlier today. 

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.  (Pratiksha)

India Rupee - Asia FX: Most down as dlr index rises post US CPI data

MUMBAI – Most Asian currencies fell against the dollar as the dollar index rose to over a one-week high after signs of some stickiness in US inflation dented hopes of a large rate cut by the US Federal Reserve next week. However, losses in the Asian units were capped due to gains in Asian equity indices today, tracking a tech-driven rally on Wall Street. 

Data on Wednesday showed that the US CPI rose to 0.2% in August, unchanged from July, and in line with expectations. However, core CPI, which excludes the volatile food and energy components, was up 0.3% in August, higher than the expectation of a 0.2% rise by a Reuters poll. In July, the core CPI had risen by 0.2%. 

The odds of the Fed slashing interest rates by 50 basis points at its September meeting have gone down to 15% from 33% before the release of the US inflation print, while the odds for a 25-bps rate cut are now seen as having an 85% probability, up from 67% before, as per the CME FedWatch Tool.

At 1030, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 101.76, compared with the previous close of 101.72 on Wednesday and 101.66 on Tuesday. The index rose to over a week high of 101.84 earlier today. 

The Thai baht was down 0.2% against the greenback. Thailand's newly elected Prime Minister Paetongtarn Shinawatra is set to present her government policies in Parliament later today. One of the key policies is headlined by plans to give away 450 bln baht or $13.4 bln in handouts to boost growth.

The Indonesian rupiah was down 0.1% against the dollar. Indonesia recorded a foreign exchange reserve of $150.2 bln, the highest since December 2023. Destry Damayanti, senior deputy governor of Bank Indonesia, attributed the rise in reserves to foreign fund inflows into the domestic financial system.

The Philippines peso was down 0.1% against the dollar. However, losses were limited due to a rise in domestic equities. At 0930 IST, the Philippine Psei was up 1.2%. Both the South Korean won, and offshore Chinese yuan were flat against the dollar.  (Gowri Lakshmi)

India Rupee: Steady; RBI's likely dlr sales in offshore NDF mkt aid

MUMBAI – The rupee opened steady against the dollar today, despite the dollar index rising to over a one-week high in early trade, because the Reserve Bank of India likely intervened through dollar sales in the offshore non-deliverable forwards market, dealers said. The central bank likely intervened to prevent the Indian unit from testing the psychologically-crucial level of 84-per-dollar, they said. 

The rupee was at 83.99-83.98 a dollar in the offshore market 10 minutes before the domestic spot market opened at 0900 IST, when the Indian unit opened at 83.9675 a dollar. "They are trying to control the spot by intervening in NDF. 84 is the level for now," said a dealer at a private bank. Some dealers speculated that the central bank may also be intervening via dollar sales in the domestic spot market.

The dollar index rose after the US core inflation surprised slightly on the upside, dashing expectations of a 50 basis point rate cut by the US central bank next week. The core CPI, which excludes the volatile food and energy components, was up 0.3% in August, more than the expectation of a 0.2% rise. In July, the core CPI had risen by 0.2%. The US August CPI rose 0.2%, unchanged from July, and in line with expectations. 

Currently, the odds of a 25 basis point interest rate cut by the US Federal Reserve in its policy meeting next week are seen as having an 85% probability, up from 67% before, while that of a 50 bps cut has gone down to 15% from 33% last week. At 0928, the dollar index which measures the strength of the dollar against a basket of six major currencies was 101.75, compared to, previous close of 101.72 on Wednesday and 101.66 on Tuesday.

Further, a rise in crude oil prices is expected to weigh on the Indian unit, dealers said. Oil prices rose during early Asian trade today, owing to concerns about Hurricane Francine impacting production in the US, the world's biggest crude producer. At 0940, the November Brent Crude contract on the Intercontinental Exchange was $71.05 per barrel, compared to its previous close of $70.61 per bbl on Wednesday. "There are not many inflows today, crude and gold prices have gone up and outflows are expected," a dealer at a state-owned bank said.

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 12

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 Tanima Banerjee

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