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Informist, Friday, Sep 13, 2024

By Pratiksha

NEW DELHI – The rupee settled at a two-week high against the dollar today due to weakness in the dollar index, dealers said. However, dollar purchases by some banks on behalf of importers capped gains for the Indian currency, they said. 

"It was all the impact of the dollar index," said a dealer at a state-owned bank. "Finally, it (rupee) was tracking the dollar today."

After appreciating 0.1% against the greenback, the rupee settled at 83.8875 a dollar. However, the Indian unit was the worst performer amongst its Asian peers. Other emerging market units gained 0.3-1.1% against the US dollar, with the South Korean won being the best performer.

The Indian unit also started the day a tad higher at 83.9100 a dollar, tracking weakness in the dollar index. The dollar index fell sharply owing to increasing bets of a large rate cut by the US Federal Reserve at its meeting next week. 

Following comments by several analysts overnight, the odds of the US central bank easing interest rates by 50 basis points next week have gone up to 43% from 15% a day before, while the odds for a 25-bps rate cut are now at 57%, down from 85% earlier, as per the CME FedWatch Tool.

A rise in the euro against the dollar also weighed on the index. The euro rose against the dollar after the European Central Bank cut interest rates on Thursday but ECB President Christine Lagarde dampened expectations for another cut next month, saying the bank will let economic data dictate the next policy move.

The Indian unit traded around 83.91-83.92 a dollar for most of the day. Volume in the currency market was lacklustre today as traders avoided placing large bets ahead of the long weekend. The currency market is closed on Monday on account of Milad-un-Nabi.

"There was nothing happening in the market after the morning's movement today," said a dealer at a private bank. "I don't think anything will happen till the FOMC meeting." Market participants are now waiting for the outcome of the US Fed's policy on Wednesday. 

Volume in the currency market was also dull as many currency dealers were away attending the Forex Association of India's annual forex assembly in Prague in the Czech Republic. 

Some banks sold dollars on behalf of foreign portfolio investors looking to invest in domestic equities, which also supported the rupee, dealers said.

The dollar index fell further in European trade, hitting a week's low, which pushed the Indian unit to the day's high of 83.8400 a dollar. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 100.98, compared with the previous close of 101.23 on Thursday and 101.72 on Wednesday.

Some banks rushed to purchase the greenback on behalf of importers, taking advantage of the relatively lower dollar/rupee levels, which limited gains for the Indian unit, dealers said. However, a lack of intervention by the Reserve Bank of India through dollar purchases, aided the Indian unit, according to dealers. 

"After the outflows yesterday (Thursday) it was time for inflows as the RBI did not buy the dollars as the rupee rose to 83.85 before closing at 83.8875," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. "With most Asian currencies up, Indian rupee also gained as RBI remained out of the market." 

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at an over 16-month high today after US Treasury yields fell due to increased bets of a larger rate cut by the US Federal Reserve at its policy meeting next week, dealers said. 

However, volume in the market was dull today as traders avoided placing large bets ahead of the long weekend. Data released on Thursday showed India's annual inflation rate based on the CPI in August was marginally higher than expectations at 3.65%. The inflation print firmed expectations that the Reserve Bank of India is unlikely to commence its rate cut cycle in October. 

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. With the Fed likely to go for a rate cut next week, and no sight of a rate cut by the RBI yet, as viewed by the market, the interest rate differential between the US and India is likely to rise, driving dollar/rupee forward premiums higher. 

If the Fed opts for a 50-bps rate cut next week, most dealers expect the one-year dollar/rupee forward premium to jump to at least 2.35%. At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 192.28 paise, against 188.48 paise on Thursday. On an annualised basis, the premium was 2.29%, against Thursday's close of 2.24%. 

OUTLOOK

On Tuesday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said. They expect volume to remain lacklustre as traders may refrain from placing fresh bets ahead of the US Fed policy outcome on Wednesday. 

"Now, it all depends on what the FOMC does. There is still a lot of uncertainty there," said a dealer at a foreign bank. 

Dealers expect the RBI to continue its interventions to reduce volatility. They expect the Indian unit to continue to move in a narrow range against the greenback.

During the day, the rupee is seen in a range of 83.85-83.99 a dollar, with strong technical support pegged at 84.00.

India Rupee - World FX: Dlr index falls on bets of larger Fed rate cut

MUMBAI – The dollar index fell further during European trade due to increased bets of a larger rate cut by the US Federal Reserve at its policy meeting next week.  

Following comments by several analysts overnight, the odds of the US central bank easing interest rates by 50 basis points next week have gone up to 43% from 15% a day before, while the odds for a 25-bps rate cut are now at 57%, down from 85% earlier, as per the CME FedWatch Tool.

At 1421 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 101.03, compared to the previous close of 101.23 on Thursday and 101.72 on Wednesday.

The Japanese yen rose 0.7% against the dollar on growing expectations of a rate hike by the Bank of Japan at its policy meeting in December. According to a Bloomberg survey, 87% of 53 economists said that the BoJ will raise borrowing costs by the end of January, with 53% saying a hike is likely in December. 

The euro gained 0.1% against the dollar after comments by European Central Bank President Christine Lagarde dampened expectations of another rate cut by the central bank next month. Lagarde said the bank will let economic data dictate the next policy move. The ECB on Thursday slashed its deposit rates by 25 basis points to 3.5%, in line with expectations. However, gains in the euro were capped as data released today showed the Eurozone industrial output decreased 0.3% on month in July, in line with expectations. 

The pound sterling was up 0.2% against the dollar on growing expectations of a shallow rate cut cycle by the Bank of England. Economists polled by Reuters are of the view that the BoE is likely to keep rates unchanged at 5.0% in its policy meeting on Thursday. 

The New Zealand dollar was flat against the dollar even after the country's Business Purchasing Manager's Index improved to 45.8 in August, from 44.4 in July. (Gowri Lakshmi)

 India Rupee: Premiums jump to over 16-mo high as US yields fall

NEW DELHI – The premium on the one-year dollar/rupee forward contract rose to an over 16-month high today after US Treasury yields fell due to increased bets of a larger rate cut by the US Federal Reserve at its policy meeting next week, dealers said. 

Following comments by several analysts overnight, the odds of the US central bank easing interest rates by 50 bps next week have gone up to 43% from 15% a day before, while the odds for a 25-bps rate cut are now at 57%, down from 85% earlier, as per the CME FedWatch Tool.

However, volume in the market was dull today as traders avoided placing large bets ahead of the long weekend. The currency market is closed on Monday on account of Milad-un-Nabi. 

"There was some paying initially in the market but after that it has been pretty quiet," said a dealer at a private bank. "The next trigger is going to be the FOMC." Traders are now keenly waiting for the US Federal Open Market Committee's rate decision on Wednesday.

Back home, data released on Thursday showed India's annual inflation rate based on the Consumer Price Index remained largely unchanged at 3.65% in August. The August inflation print firmed expectations that the Reserve Bank of India is unlikely to commence its rate cut cycle in October. 

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. With the Fed likely to go for a rate cut next week, and no sight of a rate cut by the RBI yet, as viewed by the market, the interest rate differential between the US and India is likely to rise, driving dollar/rupee forward premiums higher. 

If the Fed opts for a 50-bps rate cut next week, most dealers expect the one-year dollar/rupee forward premium to jump to at least 2.35%. At 1405 IST, the premium on the one-year exact-period dollar/rupee contract was 191.29 paise, against 188.48 paise on Thursday. On an annualised basis, the premium was 2.28%, against Thursday's close of 2.24%. The premium rose to an over 16-month high of 2.29% earlier today. (Pratiksha)

India Rupee: Remains tad up as dollar index weakens; volume dull

MUMBAI - The rupee remained slightly higher against the dollar today amid low volume as the dollar index weakened after investors ramped up bets of a larger quantum of interest rate cut by the US Federal Reserve at its policy meeting next week, dealers said. The index was also weighed down by a rise in the euro against the greenback.

Several analysts' comments led to odds of a 50-bps rate cut by the US Fed at its meeting next week rising to 43% from 15% at 2100 IST on Thursday, according to the latest CME FedWatch tool. Fed funds futures reflected a 57% chance of a modest 25-bps rate cut.

The euro gained against the US unit after comments by European Central Bank President Christine Lagarde dampened expectations of another rate cut by the central bank next month. Lagarde said the bank will let economic data dictate the next policy move. The ECB on Thursday cut its benchmark interest rates by 25 bps. 

At 1330 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 101.07, compared with the previous close of 101.23 on Thursday and 101.72 on Wednesday.

Some banks bought the greenback on behalf of importers, who wanted to take advantage of the relatively lower dollar/rupee levels, which limited gains for the Indian unit, dealers said. However, the dollar purchases were not aggressive in nature, they said. 

Volume in the currency market was lower than usual today as traders avoided placing large bets ahead of the long weekend. The currency market is closed on Monday on account of Milad-un-Nabi. Market participants are now waiting for the outcome of the US Fed's policy on Wednesday. 

Further, some banks sold dollars on behalf of foreign portfolio investors, which also supported the rupee, dealers said. "There is high selling pressure (of dollars) for the rupee, more FPIs are expected later today", 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 resistance to the Indian currency at 83.90 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Sep 13

MUMBAI – At 0900 IST, the rupee was at 83.9100 a dollar, against the previous close of 83.9650. At 1109 IST, the rupee was at 83.9275 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee: Rises slightly as dollar index weakens post rise in euro

MUMBAI – The rupee was a tad up against the dollar today due to weakness in the dollar index after a rise in the euro, dealers said. An increase in expectations of a larger interest rate cut by the US Federal Reserve at its meeting next week also weighed on the dollar index.

The euro gained 0.2% against the dollar today after the European Central Bank on Thursday decided to slash its interest rates but ECB President Christine Lagarde dampened expectations for another cut next month. Analysts' comments increased bets of a 50-bps rate cut by the US Fed at its meeting next week to 43% from 15% at 2100 IST on Thursday, according to the CME FedWatch tool. Fed funds futures reflected a 57% chance of a modest 25-bps rate cut. At 1005, the dollar index, which measures the strength of the dollar index, was 101.03, compared to the previous close of 101.23 on Thursday and 101.72 on Wednesday.

However, most traders don't see the Indian unit holding on to these gains as importers may step in to buy dollars to take advantage of the relatively lower dollar/rupee levels. 

"Despite these favourable developments, the Indian Rupee appears to be moving in its own orbit, refusing to appreciate and continuing to trade within a tight range, as the RBI maintains a firm grip on the domestic currency," Amit Pabari, managing director at CR Forex, said in a note. 

Traders expect the Reserve Bank of India to continue intervening through their dollar sales if the rupee inches closer to the psychologically crucial level of 84-a-dollar. "RBI is expected at 83.97-83.98 levels, they will not let the level break anytime soon," dealers said. 

Meanwhile, crude oil prices rose due to output disruptions in the US Gulf of Mexico owing to hurricane Francine, which weighed on the Indian unit, dealers said. At 1005 IST, the November Brent Crude contract on the Intercontinental Exchange was $72.37 per barrel, compared with the previous close of $71.97 per bbl on Thursday. 

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.  (Gowri Lakshmi)

India Rupee - Asia FX: Most up as dlr index falls, Asian shrs rise

MUMBAI – Most Asian currencies rose against the dollar today as the dollar index weakened after a rise in the euro against the greenback, and as expectations of a larger interest rate cut by the US Federal Reserve at its meeting next week increased. Gains in domestic equities also supported the Asian units. 

The euro gained against the greenback after the European Central Bank cut its benchmark interest rates by 25 basis points on Thursday, even though ECB President Christine Lagarde dampened expectations for another rate cut next month. Further, bets of a 50-bps rate cut by the US Fed at its meeting next week increased to 43% from 15% at 2100 IST on Thursday, according to the latest CME FedWatch tool. Fed funds futures reflected a 57% chance of a modest 25-bps rate cut. At 0857 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 101.06, compared to the previous close of 101.23 on Thursday and 101.72 on Wednesday. 

The South Korean won rose 0.7% against the greenback, the most amongst its peers. The Bank of Korea said on Thursday that it will consider the timing to slash its benchmark interest rate while keeping its policy restrictive. The Bank of Korea has kept its interest rate at 3.5% since early 2023 and is now mulling a rate cut as data points show inflation to have cooled.

The Malaysian ringgit was up 0.3% against the dollar. The Indonesian rupiah rose 0.3% against the dollar. Bank Indonesia is expected to leave its interest rate unchanged next week in order to support the domestic currency. Over 90% of economists polled by Reuters expect the central bank to leave the seven-day reverse repurchase rate unchanged at 6.25%. 

The Thai baht was up 0.3% and the Chinese yuan rose 0.1% against the dollar. (Gowri Lakshmi)

India Rupee : Expected range for rupee - Sep 13

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

(Pratiksha)

End

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

Edited by Saji George Titus

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