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Informist, Tuesday, Sep 17, 2024

By Gowri Lakshmi and Pratiksha

MUMBAI – Logging its biggest single-day rise in almost three months, the rupee settled at its highest level in over six weeks today due to continuous dollar sales for foreign fund inflows and a weakening dollar index, dealers said. This was despite some state-owned banks buying dollars, likely on behalf of the Reserve Bank of India.

Foreign banks' dollar sales on behalf of foreign portfolio investors and weakness in the dollar index led to stop-losses being triggered on long dollar bets around the 83.80-83.75-a-dollar level, dealers said. 

After appreciating 0.2% against the US unit, the rupee settled at 83.7500 a dollar today. Other Asian currencies gained between 0.2-1.0% against the greenback, with the Malaysian ringgit being the best performer.  

The rupee started the day steady at 83.8700 a dollar as market participants remained cautious ahead of the US Federal Open Market Committee meeting outcome due Wednesday.

Market participants' expectations of a larger rate cut by the US Federal Reserve on Wednesday have increased, with the odds of a 50-basis-point rate cut now seen at 69%, while that of a 25-bps rate cut seen at 31%, according to the CME FedWatch tool. 

The dollar index has been on a falling spree owing to expectations of a larger quantum of rate cut by the Fed on Wednesday. "The dollar is in a weaker position, and we expect it to diminish further after the FOMC (outcome)," a dealer at a private bank said.

The Indian unit was supported by foreign banks', including a UK-based bank's, dollar sales on behalf of foreign portfolio investors looking to invest in domestic equities. Following this, the Indian unit rose past the key 83.80-per-dollar level. However, some state-owned banks stepped in to purchase dollars, likely on behalf of the Reserve Bank of India, which capped further gains in the Indian unit, dealers said. 

The central bank purchased the US unit to prevent excessive volatility in the exchange rate and a sharp appreciation in the Indian unit, dealers said. However, the apex bank's dollar purchases were not aggressive in nature, they said. 

Some dealers said the foreign fund inflows were on account of overseas investment in the initial public offerings of domestic companies. The IPO of Western Carriers India opened for subscription on Friday and will close on Wednesday. Arkade Developers Ltd and Northern Arc Capital Ltd's public issue opened for subscription on Monday and will close on Thursday. 

The dollar index fell further and hit a three-week low of 100.57 during European trade today. Noting the broad-based weakness in the dollar index, traders sold the greenback to cut existing long dollar bets, which also aided the Indian currency, dealers said. 

Following this, some banks' stop-losses were triggered on long dollar bets around the 83.80-83.75-a-dollar level. The Indian currency rose to a high of 83.7000 a dollar today. 

At 1530, 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 100.71 on Monday and 101.11 on Friday. 

Some banks also bought the greenback on behalf of importers, particularly oil marketing companies, who wanted to take advantage of the relatively lower dollar/rupee levels. This also weighed on the local unit, they said. 

"The flows went through the market and allowed rupee to gain though importers hedged their import positions which they had been waiting for long to hedge," Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, said. "However, in-flows were sufficient enough to diminish all the buying by importers as market awaited for Fed's interest rate decision." 

Dealers said the RBI's lack of aggressive dollar purchases also led to the appreciation in the Indian unit. "There are strong flows in equity almost every day. But today, the RBI's absence pushed it (rupee) to the high," said a dealer at a foreign bank. In the past, the RBI had been intervening actively through dollar purchases around the 83.80 a dollar level.  

FORWARDS

Premium on the one-year dollar/rupee forward contract ended at a near 17-month-high today as US Treasury yields fell on growing expectation that the US Federal Open Market Committee will opt for a larger rate cut on Wednesday, 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.

Meanwhile, a few banks stepped in to sell dollars for forward delivery to take advantage of the relatively higher levels, which limited the rise in premiums, dealers said. The one-year dollar/rupee forward premium rose to a high of 2.32% earlier today, its highest level since May 4, 2023. 

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 on Wednesday, 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 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 194.26 paise, against 192.93 paise on Monday. On an annualised basis, the premium was 2.32%, against Monday's close of 2.30%. 

OUTLOOK

The currency market will be shut on Wednesday on account of Id-e-Milad. On Thursday, the rupee will track movement in the dollar index after the US Federal Open Market Committee meeting outcome on Wednesday.

Dealers expect the rupee to appreciate to the 83.60 a dollar level if the Fed opts for a 50-bps rate cut this week. However, if the US central bank goes for a small 25-bps rate cut, the Indian unit may be back to its old range of 83.90-83.99 a dollar, with the RBI preventing the key 84-per-dollar level from hitting. "The market may react sharply if the Fed does not do a 50 bps cut," said a dealer at another private bank. "People have prices in 50 bps cut quite a lot at this point."

The local unit may also take cues from movement in the crude oil prices, they said. Dealers expect the Reserve Bank of India to continue its interventions to reduce volatility in the exchange rate. 

During the day, the rupee is seen in a range of 83.70-83.95 a dollar, with strong technical resistance pegged at 83.70.

India Rupee - World FX: Dlr index hits 3-wk low before FOMC outcome

MUMBAI – The dollar index fell to a three-week low in European trade owing to growing expectations of a steeper rate cut by the US Federal Open Market Committee on Wednesday.

Currently, the odds of a 50 basis-point rate cut are at 67%, while those of a 25-bps cut are 33%, according to the CME FedWatch tool. At 1457 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was 100.60, compared to the previous close of 100.71 on Monday and 101.11 on Friday. The index fell to a three-week low of 100.57 earlier today.

For more cues on the US central bank's easing cycle, traders now await the release of US retail sales data later today.

The Japanese yen was flat against the dollar ahead of the Bank of Japan's monetary policy outcome on Friday. Market participants expect the central bank to keep interest rates unchanged this month, but they see an interest rate hike before the end of this year.

Japan's Finance Minister Shunichi Suzuki stated earlier today that the government would continue to assess the impact of the strengthening yen on the economy and respond appropriately. "Our stance has been that currency rates should be determined by markets reflecting fundamentals, but rapid fluctuations are not desirable," Suzuki said. 

The Australian dollar was up 0.2% against the greenback, with the commodity-linked currency supported by a rise in gold prices globally owing to weakness in the dollar index.

The euro was up 0.1% against the US unit even after data showed that the German ZEW economic sentiment index declined to 3.6 in September, way below the market expectation of 17.1.

The pound sterling was flat against the greenback ahead of Bank of England's policy outcome on Thursday, when it is expected to leave rates unchanged at 5.00%. Market participants also look forward to the UK consumer price index reading on Wednesday.  (Gowri Lakshmi)

 India Rupee: Rises as stop losses hit on FX inflows, weak dlr index

MUMBAI - The rupee rose further against the dollar today after foreign banks' dollar sales on behalf of foreign portfolio investors and weakness in the dollar index led to stop-losses being triggered on long dollar bets around the 83.80-a-dollar level, dealers said. The Indian unit rose to 83.7525 a dollar during the day, its highest level since Aug 20.

Dealers said foreign banks, including a UK-based bank, persistently sold dollars on behalf of foreign portfolio investors looking to invest in domestic equities. At 1345 IST, both the Nifty 50 and the Sensex were up 0.2% each.

Further, broad-based weakness in the dollar index prompted traders to sell the greenback to cut existing long dollar bets, which also aided the Indian currency, dealers said. The dollar index remained weak due to rising expectations of a larger rate cut by the US Federal Reserve at its policy meeting decision on Wednesday, with the odds of a 50 basis point rate cut now seen at 69%, while those of a 25 bps rate cut are seen at 31%, according to CME FedWatch tool.

"Before FOMC, flows are coming. Foreign banks have been selling (dollars) since morning," said a dealer at a state-owned bank. At 1345 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 100.62, compared to 100.71 on Monday and 101.11 on Friday.

However, state-owned banks stepped in to purchase dollars, likely on behalf of the Reserve Bank of India, which capped further gains in the Indian unit, dealers said. "They've (RBI) been accumulating the dollars, but not that heavily," said a dealer at a private bank. 

Some banks also bought the greenback on behalf of importers, who wanted to take advantage of the relatively lower dollar/rupee levels. This also weighed on the local unit, they said. 

For the rest of the day, the rupee is seen at 83.70-83.85 against the dollar, dealers said. They peg immediate technical resistance for the Indian currency at 83.75 a dollar. (Gowri Lakshmi and Pratiksha)

India Rupee: Technical Levels for rupee - Sep 17

NEW DELHI – At 0900 IST, the rupee was at 83.8700 a dollar, against the previous close of 83.8875. At 1054 IST, the rupee was at 83.8325 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee: Tad up as dollar index down ahead of FOMC outcome Wed

MUMBAI – The rupee was a tad up today against the dollar, in line with its Asian peers, due to weakness in the dollar ahead of the keenly awaited US Federal Open Market Committee's meeting outcome due on Wednesday, dealers said.

The dollar index remained lower on growing expectations of a larger quantum of rate cut by the US Fed on Wednesday. Currently, the odds of a 50-basis-point rate cut are seen at 69%, while those of 25-bps rate cut are seen at 31%, according to the CME FedWatch tool. 

At 0932 IST, the dollar index, which measures the strength of the dollar against six major currencies was at 100.73, compared to the previous close of 100.71 on Monday and 101.11 on Friday. "The rupee is expected to be range-bound, gains from (weakness in) the dollar index will be limited as outflows are expected", a dealer at a state-owned bank said. 

"The Indian rupee is largely steady compared to its Asian peers which are seen on the rise," a dealer at a state-owned bank said. "Some volatility can be expected at the opening on Thursday," he added. The Indian financial market is shut on Wednesday on account of Id-e-Milad. Other Asian currencies have gained 0.2-0.5% against the greenback today, with the Malaysian ringgit being an outperformer. 

However, the Indian unit may not be able to notch further gains due to demand for dollar from importers around these levels, dealers said. Further, the Reserve Bank of India may also step in to absorb dollars if the rupee moves to 83.80 a dollar, they said.  

Market participants also await the release of the US retail sales data, due later today for more cues on the US central bank's easing cycle. Further, monetary policy decisions of the Bank of England and Bank of Japan are due on Thursday and Friday, respectively. Traders expect the Bank of England to maintain the status quo and leave rates unchanged at 5.00%. The Bank of Japan is also seen keeping its policy steady on Friday, but investors expect a further interest rate hike before the end of this year.

For the rest of the day, the rupee is seen at 83.80-83.95 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: Most up as dlr index weak before FOMC outcome

MUMBAI – Most Asian currencies rose against the dollar today as the dollar index remained weak ahead of the outcome of the keenly-awaited US Federal Reserve Open Market Committee's meeting due on Wednesday. Financial markets in China and South Korea are closed on account of mid-autumn break.

The dollar index continued to weaken as expectations of a larger interest rate cut by the US Fed increased over the weekend. The US central bank is expected to begin loosening its monetary policy on Wednesday, the first interest rate cut since March 2020. Currently, the odds of a 50 basis point rate cut are seen at 67%, while those of a 25 bps rate cut are seen at 33%, according to the CME FedWatch tool. 

At 0920 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was 100.71, compared to its previous close of 100.71 on Monday and 101.11 on Friday. The index fell to an over one-week low of 100.59 on Monday. 

The Malaysian ringgit rose 0.6% against the dollar, the most amongst its Asian peers, while the Indonesian rupiah rose 0.5%. 

The Philippines peso was up 0.2% against the US unit. Data released on Monday showed that personal remittances from overseas into the Philippines reached $3.43 bln in July, a 3.2% rise on year. 

Bucking the trend, the Thai baht was down 0.1% as severe flooding affected northern Thailand. Flooding in northern Thailand has been the most severe in the past 80 years and impacted the economy by as much as $811 mln, according to reports.

Meanwhile, Thailand's new government urged the central bank to reduce interest rates. "The central bank's thinking may be outdated and too slow," Commerce Minister Pichai Naripthaphan said in a briefing on Monday. The Thai baht has strengthened over the months, gaining more than 10% this quarter, and is "hurting domestic exporters," Pichai added. (Gowri Lakshmi)

India Rupee : Expected range for rupee - Sep 17

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 Manisha Baxla

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