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Informist, Tuesday, Sep 24, 2024

By Gowri Lakshmi and Pratiksha

MUMBAI – The rupee ended down against the dollar today as state-owned banks continuously bought dollars on behalf of oil marketing companies and other importers, dealers said. Earlier in the day, banks also bought the greenback, likely for the Reserve Bank of India, they said. 

"It is month-end, so a lot of demand (for dollars) came in today. The levels were also good," said a dealer at a state-owned bank. 

After depreciating 0.1% against the dollar, the rupee settled at 83.6700 a dollar today. The Indian currency moved in a range of 15 paise throughout the day. 

The rupee opened flat against the dollar today despite a rise in the offshore Chinese yuan. The Chinese currency rose tracking gains in local equities after the People's Bank of China earlier today announced a slew of policy easing measures to boost the slowing economy. The central bank said it will cut banks' reserve requirement ratio by 50 basis points, and the seven-day reverse repo rate by 20 bps to 1.5%.

"See, ideally the yuan should have helped the rupee today, but the demand (for dollars) was strong," said a dealer at a private bank. 

Shortly after the market opened, the rupee came under pressure from dollar purchases on behalf of importers, including oil marketing companies, who wanted to meet their month-end payment requirements, dealers said. Some importers also bought the greenback on expectation that the Indian unit may depreciate going ahead, they said. 

Some state-owned banks' heavy dollar purchases ahead of daily reference rate fixing also weighed on the Indian unit, dealers said. Some dealers said public-sector banks also bought dollars, likely on behalf of RBI, earlier in the day, which also weighed on the Indian unit. RBI may have bought the greenback to absorb the foreign fund inflows coming into Indian markets, they said.

Foreign banks continued to sell dollars on behalf of foreign portfolio investors looking to invest in domestic equities and the debt market, dealers said. So far this month, foreign portfolio investors have net infused almost $10 bln into Indian markets, the highest in a month this calendar year, according to latest data by the National Securities Depository Ltd.

"Foreign banks were there, selling (dollars) for FIIs (foreign institutional investors), but the intensity has gone down now. It was a lot in the last few weeks, maybe that was the peak," said a dealer at a foreign bank. 

The domestic unit was also supported by a broadly weak dollar index, dealers said. The dollar index fell during early European trade after comments by multiple US Federal Reserve officials on Monday led to expectations of further rate cuts by the Fed this year. 

Minneapolis Fed President Neel Kashkari called the 50-bps rate cut by the Fed last week the "right decision", while Bank of Chicago President Austan Goolsbee said he anticipated "many more rate cuts over the next year". Atlanta Federal Reserve President Raphael Bostic said the US economy was close to normal rates of inflation and unemployment and the Fed needs monetary policy to "normalise" as well.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 100.81, compared to its previous close of 100.91 on Monday and 100.74 on Friday. 

FORWARDS

The premium on the one-year dollar/rupee forward contract ended slightly lower, tracking a slight rise in US Treasury yields, dealers said. However, some foreign banks stepped in to buy the greenback for forward delivery, noting the relatively lower levels, which limited the fall in premiums, dealers said. 

"It (one-year dollar/rupee forward premium) has been rising every day, so when it falls, dips (in levels) will be bought," said a dealer at a big state-owned bank. The one-year dollar/rupee forward premium has jumped almost 28 bps so far this month.

With the Fed expected to go for more rate cuts this year, and no sight of a rate cut by the Reserve Bank of India yet, the interest rate differential between the US and India is likely to rise, driving dollar/rupee forward premiums higher. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 199.36 paise, against 200.46 paise on Monday. On an annualised basis, the premium was 2.38%, against Monday's close of 2.40%.  

OUTLOOK

On Wednesday, the rupee will take cues from movement in the dollar index and offshore Chinese yuan, dealers said. The local unit may also take cues from movement in crude oil prices, they said. 

Dealers expect the state-owned banks to purchase dollars on behalf of importers to meet their month-end payment needs, which may weigh on the local unit. "Now that it is the festive season, gold importers will also purchase the dollar actively, which will weigh on the Indian rupee in the coming weeks," a dealer at a private bank said.

Dealers also expect the Indian unit to continue to receive support from dollar sales on behalf of foreign investors. "There are multiple IPOs (initial public offerings) lined up this week and next week, more inflows are expected which will help the rupee appreciate," a dealer at a private bank said. Manba Finance Ltd's IPO opened for subscription on Monday and will close on Wednesday. KRN Heat Exchanger and Refrigeration Ltd's public offer will open for subscription on Wednesday and will close on Friday.

They expect the RBI to also continue intervening in the market in order to limit excessive volatility in the exchange rate. During the day, the rupee is seen at 83.55-83.70 a dollar, with technical support pegged at 83.70.

India Rupee - World FX: Yen down 0.7% after BoJ Ueda's comments

MUMBAI – The Japanese yen was down 0.7% against the dollar after Bank of Japan Governor Kazuo Ueda's comments today indicated that the central bank was in no rush to hike interest rates further. "We must conduct policy in a timely, appropriate fashion without having any preset schedule in mind, taking into account various uncertainties," Ueda said in a speech in Osaka.

He added that the central banck would raise interest rates if underlying inflation climbs to its 2% target, as projected. The bank next meets for a policy meeting on Oct 30-31.

The dollar index fell in European trade after comments by US Federal Reserve officials on Monday led to expectations of further rate cuts by the Fed this year. Minneapolis Fed President Neel Kashkari called the 50-bps rate cut by the Fed last week the "right decision", while Bank of Chicago President Austan Goolsbee said he anticipated "many more rate cuts over the next year". Atlanta Federal Reserve President Raphael Bostic said the US economy was close to normal rates of inflation and unemployment and the Fed needs monetary policy to "normalise" as well.

At 1519 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 100.77, compared to 100.91 on Monday and 100.74 on Friday.

After falling almost 0.5% on Monday, the euro was up 0.3% against the greenback, tracking weakness in the dollar index. The Swiss franc was down 0.1% against the greenback ahead of the Swiss National Bank's policy decision on Thursday, when it is expected to cut interest rates by 25 basis points, according to a Reuters poll. 

The Australian dollar was down 0.1% against the dollar after the central bank held its benchmark interest rates unchanged at a 12-year high of 4.35%, in line with market expectations, but eased its hawkish stance by saying a rate hike was not considered. (Gowri Lakshmi)

 India Rupee: Dn on bks' dlr buys for oil cos, likely for RBI as well

MUMBAI – The rupee fell against the dollar as state-owned banks purchased dollars for oil marketing companies and other importers, dealers said. Some banks' dollar purchases, likely on behalf of the Reserve Bank of India, also weighed on the Indian unit, they said.  

"The rally you saw (in the rupee) was overdone, so some covering is happening, and the dollar is in demand. Importers and oilers (oil importers) are going heavy on the dollar today," a dealer at a brokerage firm said.

Oil marketing companies and other importers purchased dollars to meet their month-end payment requirements, dealers said. Some importers also bought the greenback on fear that the Indian unit may depreciate going ahead, they said. 

Further, some state-owned banks bought the dollar, likely on behalf of the RBI, which also weighed on the Indian unit. The RBI may have bought the greenback likely to absorb the foreign fund inflows into Indian markets, dealers said. 

Foreign banks continued to sell dollars on behalf of foreign portfolio investors looking to invest in domestic equities and the debt market, dealers said. 

A rise in the offshore Chinese yuan also aided the rupee, dealers said. The yuan rose 0.2% against the dollar, tracking a sharp rise in domestic equities after the People's Bank of China Governor Pan Gongsheng stated in a briefing today that the central bank will cut banks' reserve requirement ratio by 50 basis points and seven-day reverse repo rate by 20 bps to 1.5% to support the economy. 

Earlier today, some state-owned banks' dollar buying ahead of daily reference rate fixing weighed on the Indian unit, said dealers.

For the rest of the day, the rupee is seen at 83.50-84.70 against the dollar, dealers said. They peg key technical support for the Indian currency at 83.70 a dollar. (Gowri Lakshmi)

India Rupee: Premium steady; banks' fwd dlr buys offset US yld rise

MUMBAI – The premium on the one-year dollar/rupee forward contract was steady as a few foreign banks purchased the greenback for forward delivery, which offset the downward pressure from a slight rise in the benchmark US Treasury yield on Monday, dealers said.

"Some foreign banks were paying, and in general, people are paying on every dip now," a dealer with a state-owned bank said. Dealers said banks were purchasing dollars for forward delivery as they expected premiums to rise further, noting the likelihood of an increase in the interest rate differential between the US and India, now that the US Federal Reserve has started the rate cut cycle. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

Yield on the 10-year US Treasury note rose slightly on Monday due to an ease in investors' concerns around the recession in the US.

Majority of dealers expect the one-year dollar/rupee forward premium to rise to about 2.48%, on an annualised basis. At the same time, the rise is expected to be capped by banks' continuous dollar sales for forward delivery, noting such a high premium, dealers said. The one-year forward premium has been constantly rising since the consensus around a rate cut by the Fed started building.

After cutting the Fed funds futures target rate by 50 bps to 4.75-5.00%, the Summary of Economic Projections, released along with the Federal Open Market Committee statement, showed that the median Federal Reserve official expects another 50 bps of rate cuts in 2024.

Market participants also assessed the interest rate trajectory in India, and looked forward to the Reserve Bank of India's next rate decision. The RBI's Monetary Policy Committee is scheduled to meet on Oct 7-9.

At 1320 IST, the premium on the one-year exact-period dollar/rupee contract was 199.86 paise, against 200.46 paise on Monday. On an annualised basis, the premium was 2.39%, against Monday's close of 2.40%.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Sep 24

MUMBAI – At 0900 IST, the rupee was at 83.5500 a dollar, against the previous close of 83.5525. At 1120 IST, the rupee was at 83.6100 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 up as dlr index weak, Asian shrs rise

MUMBAI – Most Asian currencies rose against the dollar today due to broad-based weakness in the dollar index and gains in domestic share indices. The dollar index remained broadly weak on rising expectations that the US Federal Reserve may ease rates further this year.

Multiple Fed officials said on Monday that the 50-basis-point rate cut by the Fed last week was meant to try to sustain what they see as an emerging and healthy balance in the economy. The odds are currently evenly split on whether the US Fed will opt for another 50 bps cut or a 25 bps cut in November, according to CME Fedwatch tool. 

"Many more rate cuts are likely needed over the next year, rates need to come down significantly," Chicago Fed President Austen Goolsbee said on Monday. At 1010, the index, which measures the strength of the dollar against six major currencies, was 100.90, compared to the previous close of 100.91 on Monday and 100.74 on Friday.  

Further, Asian equities rose after the People's Bank of China today announced a series of policy easing measures to boost the slowing economy. The measures include reducing the reserve requirement for banks by 50 basis points, the seven-day reverse repo rate by 20 basis points to 1.5%, lowering the rate on existing mortgage loans, and cutting the minimum down payment ratio for second homes to 15%. 

The offshore Chinese yuan fell over 0.1% against the dollar right after the announcement, but has now recovered and was up 0.2%. At 0930 IST, both the China's Shanghai Composite and Shenzhen Composite were up 2.4%. Hong Kong's Hang Seng led gains with a rise of 3.2%.

The Malaysian ringgit rose 0.7% against the greenback, the most among its Asian peers. This was despite data on Monday showing that Malaysia's consumer price index rose 1.9% in August on year, against the expected rise of 2% in a Reuters poll. 

The Indonesian rupiah and the Thai baht were up 0.2% and 0.1% against the dollar, respectively. (Gowri Lakshmi) 

India Rupee:Steady as oil cos' dlr buys offset rise in yuan, weak dlr

India Rupee: Steady as oil cos' dlr buys offset rise in yuan, weak dlr

MUMBAI – The rupee was largely steady against the dollar today as the impact of a rise in the offshore Chinese yuan and a weak dollar index was offset by banks' dollar purchases on behalf of oil importers, dealers said.

After falling in early trade, the offshore Chinese yuan rose 0.2% against the dollar, tracking gains in local equities after the People's Bank of China earlier today announced a series of policy easing measures to boost the slowing economy. The central bank will cut banks' reserve requirement ratio by 50 basis points and the seven-day reverse repo rate by 20 bps to 1.5%. 

"The rupee is moving with the Chinese currency today, it (yuan) has appreciated after opening and the rupee is expected to appreciate further during the day following this," a dealer at a state-owned bank said. "Overall, the rupee will be in 83.50-83.48 range today, activities are normal, and the market is expected to be stable," he added. 

The dollar index remained broadly weak on expectations that the US Federal Reserve may ease rates further this year. Multiple Fed officials said on Monday that the 50-bps rate cut by the Fed last week was meant to try to sustain what they see as an emerging and healthy balance in the economy. 

"Many more rate cuts are likely needed over the next year, rates need to come down significantly," Chicago Fed President Austen Goolsbee said on Monday. Atlanta Federal Reserve President Raphael Bostic said the US economy is close to normal rates of inflation and unemployment and the Fed needs monetary policy to "normalise" as well.

The odds are currently evenly split on whether the US Fed will opt for another 50 bps cut or a 25 bps cut in November, according to CME Fedwatch tool. At 1000 IST, the dollar index which measures the strength of the dollar against six major currencies was 100.92, compared to its previous close of 100.91 on Monday and 100.74 on Friday.

Meanwhile, some banks bought dollars on behalf of oil marketing companies, noting a rise in crude oil prices, which weighed on the Indian unit, dealers said. At 1000, the November crude contract on the Intercontinental Exchange was $74.55 per barrel, compared to $73.90 per bbl on Monday. On Friday, it was $74.49 a bbl.

For the rest of the day, the rupee is seen at 83.45-83.65 against the dollar, dealers said. They peg immediate technical support for the Indian currency at 83.60 a dollar. (Gowri Lakshmi)

India Rupee : Expected range for rupee - Sep 24

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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