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Informist, Monday, Sep 16, 2024

By Gowri Lakshmi and Pratiksha

MUMBAI – The rupee settled unchanged against the dollar amid lacklustre trading volume, as the impact of a weak dollar index was neutralised by some state-owned banks' dollar purchases on behalf of oil marketing companies, dealers said. 

"The market was so quiet today that if somebody had wanted to take the market on one side with large flows, it would have moved sharply," said a dealer at a state-owned bank. 

After trading in a tight range of 6 paise throughout the day, the Indian currency settled at 83.8875 a dollar, unchanged from its previous closing. Other emerging market units gained 0.2-0.8% against the dollar, with the South Korean won being the top gainer. 

The rupee started the day steady at 83.8850 a dollar as market participants remained cautious ahead of the keenly-awaited US Federal Open Market Committee's meeting outcome, due Wednesday. 

Currently, the odds of a 25-basis-point interest rate cut by the US Federal Reserve this week have fallen to 41% compared to 57% on Friday, while those of a 50-bps rate cut have risen to 59% from 43%, according to the CME FedWatch tool.

The dollar index fell, hitting a fresh one-week low of 100.62 today, owing to rising expectations of a larger rate cut by the US Federal Reserve at its meeting on Wednesday. Several media reports saying that Fed officials may be mulling a 50-bps cut have prompted investors to ramp up bets on a larger rate cut on Wednesday.

At 1530, the dollar index which measures the strength of the dollar against six major currencies was 100.65, compared to the previous close of 101.11 on Friday and 101.23 on Thursday. 

However, the Indian unit did not receive much support from weakness in the dollar index, as some oil marketing companies bought dollars, noting relatively lower dollar/rupee levels, dealers said. The rupee touched a high of 83.8650 a dollar earlier in the day.

"We saw some oil bids (oil importers buying dollars) below 83.90 (a dollar). But it was not a lot. Oil importers have been on the side for sometime, but now they are coming back it seems," said a dealer at a state-owned bank. 

Volume in the currency market was subdued today due to low attendance in the trading rooms. "The market was quiet today as there was low attendance in the dealer room, most traders planned a long weekend," a dealer at a private bank said. The Indian foreign exchange market was to be shut today on account of Milad-un-Nabi, but the Reserve Bank of India on Saturday notified that the holiday was postponed to Wednesday.

Most traders were also away attending the Forex Association of India's annual assembly at Prague in the Czech Republic. Closure of multiple Asian financial markets today also led to subdued volume, dealers said. "Most (financial) centres except for Mumbai and Kolkata were also shut, keeping the trade in thin volume," he added.  

Dealers said volume was also dull as traders avoided placing large bets ahead of the outcome of the US Fed's policy on Wednesday.

Some foreign banks sold dollars for deliverables accumulated in their Nostro accounts after the weekend, which provided some support to the rupee, dealers said.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at an over 16-month high today as odds of a 50-bps rate cut by the US Federal Reserve at its policy meeting this week increased, dealers said.

Several media reports saying that Fed officials may be mulling a 50-bps cut have prompted investors to ramp up bets on a larger rate cut on Wednesday. In fact, this has led to the probability of a 50 bps cut now being higher than a 25 bps one. Currently, the odds of a 25-bps interest rate cut by the US Fed this week have fallen to 41% compared to 57% on Friday, while those of a 50-bps rate cut have risen to 59% from 43%, according to the CME FedWatch tool.

However, volume in the market was lower than usual today due to low attendance in the trading rooms, dealers said. The currency market was earlier supposed to be shut today on account of Milad-un-Nabi. However, the Reserve Bank of India on Saturday notified in a circular that the holiday had been postponed, and the market would now be shut on Wednesday instead.

Meanwhile, some banks sold dollars for forward delivery noting relatively higher levels, which capped gains in the premiums, dealers said. "See, there are still chances that a 50 bps cut may not happen, so in that case, levels may fall. It's good to book these levels," said a dealer at a private bank. 

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 goes for a 25 bps rate cut instead of 50 bps, I think the forwards (one-year dollar/rupee forward premium) will crash to 2.10%," said a dealer at a state-owned bank.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 192.93 paise, against 192.28 paise on Friday. On an annualised basis, the premium was 2.30%, against Friday's close of 2.29%. Premium touched an over 16-month high of 2.31% earlier today. 

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. 

"It will be quiet tomorrow (Tuesday) as well. The FOMC is going to be the focus," said a dealer at a private 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 to 1-wk low before FOMC meet

MUMBAI – The dollar index fell to an over-one-week low today ahead of the outcome of the Federal Open Market Committee meeting on Wednesday. The dollar weakened as expectations of a 50-basis-point rate cut rose over the weekend. Traders now price their bets for a larger rate cut by the US Fed, with the odds of a 25 basis point rate cut at 41% and 50 bps at 59%, according to CME FedWatch tool. 

The Japanese yen was up 0.7% against the greenback, ahead of the latest interest rate decision by the Bank of Japan on Friday. According to market expectations, the Bank of Japan is not expected to raise interest rates this week but may hike by the end of this year. Trade volume in the Japanese market was subdued today as the financial market was closed on account of Respect for the Aged Day. 

The New Zealand dollar was up 0.6% against the dollar. Market participants await the GDP data for the second quarter due later this week to get more cues on the Reserve Bank of New Zealand's monetary policy outlook. 

The Euro was up 0.5% against the greenback driven by a weakness in the dollar index. At 1445 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was 100.64, compared to the previous close of 101.11 on Friday and 101.23 on Thursday. The dollar index fell to a low of 100.62 today, the lowest since Sep 6.  

The pound sterling was up 0.5% against the dollar ahead of key economic data and the Bank of England's monetary policy decision. Inflation data is due on Wednesday and the Bank of England is expected to keep interest rates unchanged at 5.0% on Thursday, according to reports. All 65 economists polled in a survey by Reuters expect the Bank of England to hold rates steady. (Gowri Lakshmi)

 India Rupee: Premium hits over 16-mo high on bets of big Fed rate cut

NEW DELHI - The premium on the one-year dollar/rupee forward contract jumped to an over 16-month high today as odds of a 50-basis-point rate cut by the US Federal Reserve at its policy meeting this week increased, dealers said.

"The chances of a 50 bps rate cut (by the Fed) have increased quite a lot. There is a lot of uncertainty now (on the Fed policy outcome)," said a dealer at a big state-owned bank. "I think the correction (in one-year dollar/rupee forward premium level) may come after 2.40%."

Several media reports saying that Fed officials may be mulling a 50 bps cut have prompted investors to ramp up bets on a larger rate cut on Wednesday. In fact, this has led to the probability of a 50 bps cut now being higher than a 25 bps one. Currently, the odds of a 25-bps interest rate cut by the US Fed this week have fallen to 41% compared to 57% on Friday, while those of a 50-bps rate cut have risen to 59% from 43%, according to the CME FedWatch tool.

However, volume in the market was lower than usual today due to low attendance in the trading rooms, dealers said. The currency market was earlier supposed to be shut today on account of Milad-un-Nabi. However, the Reserve Bank of India on Saturday notified in a circular that the holiday had been postponed, and the market would now be shut on Wednesday instead.

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. 

At 1350 IST, the premium on the one-year exact-period dollar/rupee contract was 193.43 paise, against 192.28 paise on Friday. On an annualised basis, the premium was 2.31%, against Friday's close of 2.29%. (Pratiksha)

India Rupee: Remains steady amid low volume; oil cos' dlr buys weigh

MUMBAI – The rupee remained steady against the dollar as dollar purchases by some state-owned banks, likely on behalf of oil marketing companies, offset the impact of a weak dollar index, dealers said.

Volume was lower than usual due to low attendance in the trading rooms. "Trade volume remains largely subdued as it was supposed to be a holiday," a dealer at a state-owned bank said. The Indian foreign exchange market was to be shut today on account of Milad-un-Nabi, but the Reserve Bank of India on Saturday notified that the holiday was postponed to Wednesday.

Volume was also dull as some dealers were away attending the Forex Association of India's annual assembly at Prague in the Czech Republic. Closure of multiple Asian financial markets today also led to subdued volume, dealers said.

The dollar index has been on a falling spree, hitting a fresh one-week low of 100.71 today, owing to rising expectations of a larger rate cut by the US Federal Reserve at its meeting on Wednesday. The odds of a 25-basis points interest rate cut by the Fed this week have fallen to 41% compared to 57% last week, while those of a 50-bps rate cut have risen to 59% from 43% as of Friday, according to the CME FedWatch tool.

"The rupee is not reacting to global cues like a weak dollar index as much as it should," a dealer at a state-owned bank said. "Market participants are waiting for the FOMC results; if the rate cut is 50 basis points, then we expect the rupee to appreciate further," he added.

At 1330 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 100.72 against 101.11 on Friday and 101.23 on Thursday. Earlier today, the index fell to a low of 100.67, its lowest level since Sep 6.

However, the market did not take much comfort from the weakness in the US currency, as some oil marketing companies stepped in to buy dollars, noting relatively lower dollar/rupee levels, dealers said. The rupee touched a high of 83.8675 a dollar earlier in the day.

Traders are now keenly waiting for the outcome of the US Fed's policy on Wednesday. "We expect some volatility in the market tomorrow (Tuesday) ahead of the (FOMC) decision," a dealer at another state-owned bank said.

For the rest of the day, the rupee is seen at 83.85-83.95 against the dollar, dealers said. They peg immediate technical resistance for the Indian currency at 83.80 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Sep 16

MUMBAI – At 0900 IST, the rupee was at 83.8850 a dollar, against the previous close of 83.8875. At 1108 IST, the rupee was at 83.9000 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee: Steady as traders cautious ahead of US FOMC outcome

MUMBAI – The rupee was steady against the dollar today as market participants remained cautious ahead of the keenly-awaited US Federal Open Market Committee's meeting outcome, due on Wednesday, dealers said. Currently, the odds of a 25-bps interest rate cut by the US Fed this week have fallen to 41% compared to 57% last week, while those of a 50-bps rate cut have risen to 59% from 43% on Friday, according to the CME FedWatch tool.

The dollar index fell to an over one-week low in early trade as traders bet aggressively on a larger quantum of interest rate cut by the Fed this week. However, the Indian unit did not take much comfort from this, dealers said. 

At 0945, the dollar index, which measures the strength of the dollar against six major currencies, was 100.80, compared to its previous close of 101.11 on Friday and 101.23 on Thursday.

Traders expect volume in the currency market to remain lacklustre today as financial markets in Japan, China and South Korea are closed for holidays. 

“There is not much movement expected in the market today, most thought it would be a holiday,” a dealer at a state-owned bank said. The Indian forex market was earlier supposed to be shut today on account of Milad-un-Nabi. However, the Reserve Bank of India on Saturday notified in a circular that the holiday has been postponed, and the market would now be shut on Wednesday instead. 

Some dealers said that a rise in gold prices is expected to weigh on the Indian unit. Gold prices hit an all-time high on Friday owing to weakness in the dollar index. "The rise in gold prices may weigh on the Indian rupee, it has shot up sharply," a dealer at a state-owned bank said.
 

Market participants also await the Bank of England and Bank of Japan's policy decisions, due on Thursday and Friday, respectively. The Bank of England is mostly expected to leave rates unchanged at 5.00%, while some see chances of another rate cut. The Bank of Japan is widely expected to hold rates steady, though investors expect the central bank to provide hints of further tightening in October.

For the rest of the day, the rupee is seen at 83.85-83.95 against the dollar, dealers said. They peg immediate technical resistance for the Indian currency at 83.80 a dollar. (Gowri Lakshmi)

 India Rupee - Asia FX: Up on weak dlr; several Asian mkts shut today

MUMBAI – Asian currencies were up owing to weakness in the dollar index ahead of the keenly awaited US Federal Reserve Open Market Committee's meeting decision on Wednesday. However, volume in the Asian foreign exchange market is lacklustre today, as markets in Japan, China, Indonesia, Malaysia and South Korea are closed for holidays. 

The dollar index fell to an over one-week low in early trade as odds of a 50-basis point rate cut by the US Fed this week increased over the weekend. Currently, the odds of a 25-bps interest rate have fallen to 41% compared to 57% last week, while those of a 50-bps rate cut have risen to 59% from 43% on Friday, according to the CME FedWatch tool. 

At 0940 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was AT 100.93, compared to its previous close of 101.11 on Friday and 101.23 on Thursday.

The Thai baht rose 0.3% against the dollar. Thailand central bank's Assistant Governor Chayawadee Chai-Anant told the media that the baht's volatility has been driven by external factors and the central bank would closely monitor the currency in the coming weeks to ensure its movement does not impact the country's business sector, reports said on Sunday. 

Meanwhile, data released over the weekend showed China's industrial production and retail sales fell less than expected in August. Unemployment rose, while house prices declined for the second straight month.  

The Taiwan dollar and the Philippine peso were up 0.5% and 0.2%, respectively, against the dollar. (Gowri Lakshmi)

 India Rupee : Expected range for rupee - Sep 16

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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