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Informist, Wednesday, Sep 25, 2024

By Gowri Lakshmi and Pratiksha

MUMBAI – Even as the rupee ended higher against the dollar today, it erased a considerable portion of its gains as state-owned banks purchased dollars, likely on behalf of the Reserve Bank of India and importers, dealers said. "There were strong bids (buying of dollars) around 83.50-83.52 (a dollar). There was strong resistance at 83.50 (a dollar)," said a dealer at a private bank. 

However, dollar sales by banks for foreign fund inflows, weakness in the dollar index, and a rising offshore Chinese yuan during the day supported the Indian unit, dealers said.

After touching a high of 83.5025 a dollar during the day, the rupee settled at 83.5925 a dollar today, as compared to its previous close of 83.6700. The Indian unit moved in a range of 14 paise today. Most other Asian currencies rose 0.1-0.6% against the dollar today, with the South Korean won being an outlier, falling 0.2%.

The Indian currency started the day 9 paise stronger against the greenback today due to a sharp rise in the offshore Chinese yuan and a slump in the dollar index, dealers said.

The dollar index weakened after data released on Tuesday showed that US consumer confidence declined sharply in September, which led to a rise in expectations of a larger rate cut by the US Federal Reserve at the November policy meeting. US consumer confidence unexpectedly fell to 98.7 in September from an upwardly revised 105.6 in August; it was below the 104.0 estimated by a Reuters poll.

As per the CME FedWatch tool, Fed fund futures show a 56.3% probability of a 50-bps rate cut and a 43.7% chance of a 25-bps cut by the Federal Open Market Committee in November. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 100.49, compared to its previous close of 100.35 on Tuesday and 100.91 on Monday. The dollar index fell to 100.22 today, the lowest since Sep 18. 

The yuan rose to a 16-month high against the dollar during early trade, which also supported the rupee, dealers said. The Chinese currency rose on the back of the People's Bank of China's announcement of multiple measures to support the sluggish economy.

Shortly after the market opened, the Indian currency appreciated further as weakness in the dollar index prompted traders to sell the greenback to cut their existing long dollar bets, dealers said. "There was a general dollar sell off after yesterday's (Tuesday) data. There are chances now that the dollar may fall more in the coming days," said a dealer at a foreign bank. 

Moreover, foreign banks actively sold dollars on behalf of foreign portfolio investors looking to invest in initial public offerings of domestic companies, which gave support to the local unit, dealers said. Manba Finance Ltd's offer opened for subscription on Monday and ends today. KRN Heat Exchanger and Refrigeration Ltd's public offer opened for subscription today and will close on Friday.

However, as soon as the domestic unit rose to the day's high, state-owned banks stepped in to purchase the greenback, likely on behalf of the Reserve Bank of India, which weighed on the Indian unit, dealers said. They said the central bank may have intervened to prevent any sharp appreciation in the Indian unit.

"The rupee opened at 83.58, gained up to 83.50 before RBI stepped in to buy dollars and ensured no further strength," Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. "There have been good IPO inflows along with other bond inflows and with exporters also selling, the flows have been decent. Importers have been buying (dollars) at lower levels.

Further, state-owned banks also rushed to purchase the greenback on behalf of importers, who bought dollars to take advantage of the relatively lower dollar/rupee levels, which also weighed on the domestic currency, dealers said. However, the dollar purchases by importers, including oil marketing companies, were not aggressive, they said. 

FORWARDS

Premium on the one-year dollar/rupee forward contract ended off its high as banks sold dollars for forward delivery, noting the relatively higher levels, dealers said. The premium had risen to a near 18-month high of 2.42% during the day, tracking a fall in US Treasury yields on Tuesday. 

US yields fell as weak consumer confidence data on Tuesday led to a rise in expectations of another 50 bps rate cut by the FOMC at its next meeting. 

With the Fed expected to go for a larger rate cut at its next meeting, and no sight of a rate cut by the RBI 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 201.54 paise, against 199.36 paise on Tuesday. On an annualised basis, the premium was 2.40%, against Tuesday's close of 2.38%. 

OUTLOOK

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

Dealers expect foreign banks to continue to sell dollars on behalf of overseas investors looking to invest in domestic companies' initial public offers. However, they also expect the RBI to intervene through dollar purchases to absorb inflows, as well as to prevent any sharp appreciation in the local unit. 

However, they expect state-owned banks to purchase the greenback on behalf of importers, including oil marketing companies to take advantage of the relatively lower dollar/rupee levels, which is expected to weigh on the Indian rupee. 

Market participants await speeches by several Fed officials, including Fed Chair Jerome Powell, scheduled this week, for more cues on the Fed's rate cut cycle. During the day, the rupee is seen at 83.50-83.70 a dollar, with technical resistance pegged at 83.50.

India Rupee - World FX:Yen down 0.7% as Japan rate hike seen delayed

MUMBAI – The Japanese yen slipped 0.7% against the US dollar due to expectations that a further rate hike by Bank of Japan might be delayed. Such expectations started building as Sanae Takaichi, a member of the ruling Liberal Democratic Party and an opponent of a further rate hike, was seen as one of the three front-runners in the race to become the country's next prime minister.

Elections for the Liberal Democratic Party's leadership role and, therefore, for the post of prime minister, will be held on Friday. The election would take place to replace outgoing prime minister Fumio Kishida.

With support from the falling Japanese yen, and a drop in the US consumer confidence index, the dollar index recovered slightly today. US consumer confidence unexpectedly fell to 98.7 in September from an upwardly revised 105.6 in August. Economists polled by Reuters had forecast the index rising to 104.0 from the previously reported 103.3.

The weak data led to a rise in market participants' expectations of another large rate cut by the US Federal Reserve at its November policy meeting. The US Fed slashed interest rates by 50 basis points last week. 

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 100.49 at 1455 IST, after falling to a low of 100.22 earlier today. On Tuesday, the index was 100.35.

The pound sterling fell 0.3% against the US unit. However, losses in the pound sterling were limited after the Organisation for Economic Cooperation and Development raised its economic growth forecast for the UK to 1.1% this year from its previous forecast of 0.4%. For 2025 too, the OECD now sees the UK's economy growing 1.2%, up from its previous forecast of 1.0%.

The Australian dollar was down 0.3% against the greenback as the country's inflation slowed to a three-year low in August. The country's consumer price index rose 2.7% in August, down from a 3.5% rise in July.

The euro was steady against the US currency. The OECD projected the European Central Bank cutting the deposit rate by another 125 basis points this year to 2.25%.  (Sourabh Kumar)

India Rupee: Erases some gains on banks' dollar buys likely for RBI

MUMBAI – After rising sharply in early trade, the rupee erased some gains against the dollar, as banks purchased the greenback, likely on behalf of the Reserve Bank of India, dealers said. Importers' dollar buys also capped the gains in the Indian unit, they said.

"53 (83.53 a dollar) is a protected level today, and then at these levels, we also see importers coming in," a dealer with a foreign bank said.

The RBI purchased dollars to absorb foreign fund inflows, dealers said. Some foreign banks were continuously selling dollars for inflows into currently open initial public offerings of domestic companies.

Manba Finance Ltd's IPO opened for subscription on Monday and will close today. KRN Heat Exchanger and Refrigeration Ltd's public offer opened for subscription today and will close on Friday.

Importers, including oil marketing companies, purchased the US unit, taking advantage of relatively lower dollar/rupee levels, dealers said. Importers purchased the greenback after the Indian unit rose due to a weak dollar index. At 1415 IST, the dollar index, which measures the strength of the greenback against six major currencies, was at 100.42, compared with 100.35 on Tuesday and 100.91 on Monday. The index touched a high of 101.05 on Tuesday.

For the rest of the day, the rupee is seen at 83.50-83.70 a dollar, dealers said. They peg immediate technical resistance for the Indian currency at 83.50 a dollar.  (Sourabh Kumar)

India Rupee: Premium tad up but fwd dollar sales by banks limit rise

MUMBAI – Premium on the one-year dollar/rupee forward contract was a tad higher today as the benchmark US Treasury yield fell slightly on Tuesday, following the release of the US consumer confidence report, dealers said.

"There was some fall in US yields, and that led to a rise in our premiums," a dealer with a private bank said. "However, there is good receiving happening at higher levels as well."

Dealers said while premiums have risen since the US Federal Reserve cut its benchmark rate by 50 basis points last week, the rise was limited as banks sold dollars for forward delivery, noting relatively higher dollar/rupee forward premiums. The one-year dollar/rupee forward premium has been constantly touching multi-month highs, since the expectation started building around the Fed cutting rates this month.

"I see one year (dollar/rupee forward premium) going to around 2.50%, now that there are expectations of further rate cuts by the Fed," a dealer with another private bank said. After the Fed started its rate cut cycle, market participants now await the Reserve Bank of India Monetary Policy Committee's rate decision, to assess the interest rate differential between the US and India. Premiums on forwards of a currency pair are reflective of the interest rate differential between two countries. The RBI's Monetary Policy Committee is scheduled to meet on Oct 7-9.

The Summary of Economic Projections, released alongside the Federal Open Market Committee statement, showed that the Fed may cut the federal funds rates by another 50 bps by the end of this calendar year. Meanwhile, with a rate cut by the RBI not in sight, the interest rate differential between the US and India is likely to keep widening, providing an upward push to dollar/rupee forward premiums, dealers said.

At 1354 IST, the premium on the one-year exact-period dollar/rupee contract was 201.54 paise, against 199.36 paise on Tuesday. On an annualised basis, the premium was 2.40%, against Tuesday's close of 2.38%.  (Sourabh Kumar)

India Rupee: Up on FX inflows, weak dlr index; 83.50/$1 key resistance

MUMBAI – The rupee remained up against the dollar today as foreign banks continuously sold dollars for foreign fund inflows and the dollar index remained weak, dealers said. However, some state-owned banks purchased the greenback, likely on behalf of the Reserve Bank of India and importers, which capped gains in the Indian currency, they said. 

Dealers said the foreign fund inflows were on account of overseas investors looking to invest in the initial public offerings of domestic companies. Manba Finance Ltd's IPO opened for subscription on Monday and will close today. KRN Heat Exchanger and Refrigeration Ltd's public offer opened for subscription today and will close on Friday.

Further, the dollar index fell to a week's low today after data released on Tuesday showed that US consumer confidence declined the most in three years in September. The weak economic data increased expectations of another large rate cut by the US Federal Reserve at its November policy meeting.

Weakness in the dollar index prompted traders to sell the greenback to cut their existing long dollar bets, which also aided the Indian currency, dealers said. At 1259 IST, the dollar index, which measures the strength of the greenback against six major currencies, was at 100.36, compared to 100.35 on Tuesday and 100.91 on Monday. The dollar index fell to a one-week low of 100.22 today. 

Also aiding the Indian unit was a strong Chinese yuan, dealers said. The Chinese yuan rose to a 16-month high against the dollar today as the People's Bank of China on Tuesday announced multiple policy easing measures to support the slowing economy. 

"There is so much selling (of dollars) by the foreign banks, the Chinese stimulus to boost their economy and the weak dollar index have all acted as a 'chain of effect' for the rising rupee today," a dealer at a private bank said.

Meanwhile, some state-owned banks purchased dollars around 83.50 a dollar, likely for the Reserve Bank of India, which limited gains for the rupee. They said the central bank may have intervened to prevent any sharp appreciation in the Indian unit.

Banks also bought dollars on behalf of importers, including oil marketing companies, to take advantage of the relatively lower dollar/rupee levels, dealers said. However, the dollar purchases were not aggressive in nature, they said. 

"The rupee is range bound today at 83.50. There are both inflows and outflows, which is why the rupee is not able to have a particular directional movement," a dealer at a private bank said. 

For the rest of the day, the rupee is seen at 83.50-83.65 a \dollar, dealers said. They peg immediate technical resistance for the Indian currency at 83.50 a dollar.(Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Sep 25

NEW DELHI – At 0900 IST, the rupee was at 83.5800 a dollar, against the previous close of 83.6700. At 1036 IST, the rupee was at 83.5275 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee - Asia FX: Rise as dollar index slips, Asian equities gain

NEW DELHI – Asian currencies rose against the dollar today as the dollar index fell sharply on Tuesday after data showed US consumer confidence fell by the most in three years in September amid increasing worries over the labour market.  

US consumer confidence unexpectedly fell to 98.7 in September from an upwardly revised 105.6 in August. Economists polled by Reuters had forecast the index rising to 104.0 from the previously reported 103.3. The weak data led to a rise in market participants' expectations of another large rate cut by the US Federal Reserve at its November policy meeting. The US Fed slashed interest rates by 50 basis points last week. 

Fed fund futures show a 60.4% probability of a 50-bps rate cut by the Fed in November, up from 50% a day ago, and a 39.6% chance of a 25-bps cut, according to the CME FedWatch tool. At 0940 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 100.30, compared to 100.35 on Tuesday and 100.91 on Monday.

Asian equity indices gained after China on Tuesday unveiled stimulus measures to support its economy. The announcement included a planned 50-basis-point cut in banks' reserve requirement ratios, among others. This also aided emerging market units. The offshore Chinese yuan rose 0.2% against the dollar, hitting a 16-month-high, on the back of the People's Bank of China's recent policy easing measures. 

The Malaysian ringgit gained 0.8% against the greenback, the most among its Asian peers. Both the Philippine peso and the Indonesian rupiah rose 0.6% against the dollar. The Taiwan dollar was up 0.5% against the dollar, helped by gains in local equities. As of 0930 IST, Taiwan's Taiex was up 1.3%. 

Market participants now await speeches by several Fed officials, including Fed Chair Jerome Powell, scheduled this week, for more cues on the Fed's rate cut cycle. (Pratiksha)

India Rupee: Rises as Chinese yuan surges, dollar index weakens

NEW DELHI – The rupee rose against the greenback today, in line with its Asian peers, due to a sharp rise in the offshore Chinese yuan and a slump in the dollar index, dealers said. The Chinese yuan rose to a 16-month high against the dollar in early trade after the People's Bank of China on Tuesday announced multiple policy easing measures to boost the slowing economy. 

The measures include the central bank cutting banks' reserve requirement ratio by 50 basis points and the seven-day reverse repo rate by 20 bps to 1.5%, lowering the rate on existing mortgage loans, and cutting the minimum down payment ratio for second homes to 15%. 

Further, the dollar index weakened after data released on Tuesday showed US consumer confidence declined by the most in three years in September amid rising concerns about the labour market. The weak economic data increased expectations of another large rate cut by the US Federal Reserve at its November policy meeting.

Fed fund futures show a 60.4% probability of a 50-bps rate cut by the Fed in November, up from 50% a day ago, and a 39.6% chance of a 25-bps cut, according to the CME FedWatch tool. At 0930 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 100.26, compared to 100.35 on Tuesday and 100.91 on Monday.

However, most dealers don't expect the Indian unit to rise above 83.50 a dollar as banks may rush to buy dollars on behalf of importers to make the most of the relatively lower dollar/rupee levels. Moreover, the Reserve Bank of India may also purchase the greenback around the key level to prevent the Indian unit from rising sharply and avoid excessive volatility, they said. 

"83.50 to 83.65 (a dollar) is the range I am seeing (for the rupee). 83.50 (a dollar) may be a hard stop as there has been heavy buying (of dollars) in the market," said a dealer at a state-owned bank. "RBI has also been quite active."

Amit Pabari, managing director at CR Forex, is also of the view that in the current setup, the dollar/rupee pair is expected to find strong support around 83.50, with a potential to rebound towards 83.75 to 83.80 a dollar. "This could offer another selling (of dollars) opportunity for those who missed out at similar levels earlier," Pabari said in a note. 

For the rest of the day, the rupee is seen at 83.45-83.65 against the dollar, dealers said. They see immediate technical resistance for the Indian currency at 83.50 a dollar. (Pratiksha)

India Rupee : Expected range for rupee - Sep 25

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 Aditya Sakorkar

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