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Informist, Monday, Sept. 30, 2024

By Gowri Lakshmi and Pratiksha

MUMBAI – The rupee ended at its lowest level in two weeks against the dollar on Monday as banks persistently purchased the greenback on behalf of oil marketing companies and other importers, dealers said. A slump in domestic equities also weighed on the Indian currency, they said. However, weakness in the dollar index after weaker-than-expected personal consumption expenditure data on Friday limited losses for the local unit, they said.

"The buying (of dollars) came in morning itself," said a dealer at a private bank. "It was there throughout the day. But we saw strong support at 83.80 (a dollar)." After depreciating 0.1% against the dollar, the rupee settled at 83.7925 a dollar Monday, falling for the third consecutive session. The rupee moved in a range of 9 paise throughout the day. 

The rupee fell shortly after opening flat against the dollar, as banks stepped in to buy dollars on behalf of importers, including oil marketing companies, to meet their month-end payment obligations, dealers said.

Further, oil marketing companies also bought the greenback in order to stock up on the commodity in anticipation of further rise in crude oil prices, dealers said. Crude oil prices rose on Monday as geopolitical tensions escalated in West Asia. On Sunday, Israel attacked Houthi targets in Yemen, expanding its confrontation after the killing of Hezbollah leader Sayyed Hassan Nasrallah in Lebanon on Friday. At 1530 IST, the November Brent Crude contract on the Intercontinental Exchange was $71.39 per barrel, compared with the previous close of $71.21 per barrel. 

The rupee was also weighed by a sharp decline in domestic share indices, dealers said. Monday, the Nifty 50 and Sensex settled 1.4% and 1.5% lower, respectively. "Equities are negative, so that is creating pressure on the rupee," said a dealer at a brokerage firm. "Overall geopolitical tensions are also creating pressure."

Some foreign banks purchased the greenback on behalf of foreign portfolio investors, looking to pull out money from domestic equities, dealers said. Following this, the domestic unit fell to the day's low of 83.8050 a dollar. 

However, losses in the Indian unit were limited, due to a weak dollar index, dealers said. The dollar index remained weak after falling to an over 14-month low on Friday, as weaker-than-expected US August personal consumption expenditure data increased expectations of another 50-basis-point rate cut by the US Federal Reserve at its November policy meeting. Currently, Fed fund futures show a 39.8% probability of a 50-bps rate cut and a 60.2% chance of a 25-bps rate cut in November, according to the CME FedWatch tool.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 100.36, compared to its previous close of 100.42 on Friday and 100.57 on Thursday. The dollar index fell to a 14-month low of 100.16 on Friday, its lowest level since Jul. 20, 2023.

Market participants now await US Federal Reserve Chair Jerome Powell's speech, due later Monday, for more cues on the US central bank's policy easing cycle. Powell will deliver his speech at the National Association for Business Economics conference, where he will discuss the US economic outlook. 

Meanwhile, some dealers speculated that the Reserve Bank of India possibly sold the greenback around 83.80 a dollar, to prevent a sharp fall in the Indian unit and curb excessive volatility. "Rupee fell to 83.80 today (Monday) where RBI was possibly selling dollars as month-end demand and FPI outflows ensured that there was a good demand for the greenback," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

FORWARDS

Premium on the one-year dollar/rupee forward contract ended steady on Monday as traders refrained from placing fresh bets ahead of US Fed Chair Jerome Powell's speech, due later Monday, dealers said. 

Market participants also await multiple economic data in the US, due this week, including the US September manufacturing and services PMI, and the August Job Openings and Labor Turnover Survey, for more cues on the US central bank's policy easing cycle. The key US September employment report, due Friday, is also keenly awaited. 

Further, a slight rise in US Treasury yields intraday weighed on premiums, dealers said. The 10-year US Treasury yield rose to 3.77% from 3.75% on Friday. Premiums on forwards of a currency pair are reflective of the interest rate differential between two countries.

Dealers said most traders are now avoiding selling dollars for forward delivery around the current levels as they expect higher premium levels in the near term. With the Fed expected to opt for further rate cuts this year, and no sight of a rate cut by the RBI yet, the interest rate differential between the US and India is likely to go up, pushing 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 199.43 paise, against 199.34 paise on Friday. On an annualised basis, the premium was 2.38%, unchanged from Friday's close. 

OUTLOOK

On Tuesday, the rupee will take cues from the movement in the dollar index after US Fed Chair Jerome Powell's speech, dealers said. Investors keenly await Powell's speech to get further cues on the quantum of interest rate cuts at its policy meeting in November. The Indian unit will also take cues from movement in crude oil prices, dealers said. 

"Since we are seeing strong resistance (in dollar/rupee) at 83.80 (a dollar), I am expecting now selling (of dollars) will come around these levels," another dealer at a private bank said. Dealers expect the RBI to keep the Indian unit from falling sharply and touching its psychologically-crucial level of 84-per-dollar, through its dollar sales interventions. 

During the day, the rupee is seen in a range of 83.65-83.85 a dollar, with strong technical support pegged at 83.80.  

India Rupee - World FX: Dlr subdued before Powell speech; euro, sterling up

MUMBAI – The dollar remained subdued against other major currencies on Monday ahead of the US Federal Reserve Chairman Jerome Powell's speech. Investors are anticipating that Powell will offer new insights regarding the potential magnitude of interest rate cuts by the Fed during its November policy meeting. Powell is slated to speak at 2325 IST at the National Association for Business Economics' annual meeting in Nashville, Tennessee.

According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 basis points in the November meeting is 41.6%. The likelihood has decreased from nearly 53% on Friday after the release of the US Personal Consumption Expenditures Price Index report for August. The PCE price index report released on Friday indicated that the yearly inflation rate slowed more rapidly to 2.2%, down from the anticipated 2.3% and July's figure of 2.5%. This marks the lowest level recorded since Feb. 2021.

Nevertheless, this effect seemed to be counterbalanced by the annual core PCE inflation – which omits the fluctuating prices of food and energy – that rose to 2.7% from the previous release of 2.6%, as predicted, reducing the likelihood of a significant rate cut in the upcoming meeting. At 1544 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 100.34, compared to its previous close of 100.42 on Friday and 100.57 on Thursday. The dollar index fell to a 14-month low of 100.16 on Friday, its lowest level since Jul. 20, 2023.

The euro was up 0.3% against the dollar ahead of European Central Bank President Christine Lagarde's speech, scheduled at 1830 IST. A continued easing of inflationary pressures in the region has led to market anticipations that the European Central Bank will reduce interest rates once more during the October meeting.  

The Japanese yen was down 0.2% against the dollar. Market participants digested comments from newly-elected Prime Minister Shigeru Ishiba who said that the Bank of Japan's monetary policy should continue to be supportive in order to bolster a delicate economic recovery. Further, investors digested the latest data from Japan. The country's August retail sales rose 2.8% on year, beating a Reuters poll estimate of a 2.3% rise, and up from a revised 2.7% rise in July. 

The pound sterling was up 0.2% against the dollar as investors expect the quantum and pace of rate cuts by the Bank of England to be lower than that of other developed economies. According to FX Street, market participants expect the central bank to cut rates by just 25 basis points for the rest of the year. Investors will pay close attention to the speech by Megan Greene, an external member of the nine-member monetary policy committee of the Bank of England, scheduled for Monday. Greene previously voted to maintain the current interest rates during the monetary policy meetings held on Aug. 1 and Sept. 19. (Kabir Sharma)

India Rupee: Premium steady as traders avoid large bets before US econ data

MUMBAI – Premium on the one-year dollar/rupee forward contract was steady on Monday as traders refrained from placing large bets ahead of the release of multiple economic data from the US, dealers said. The US purchasing managers index and the job opening and labour turnover survey data, among others, are due this week.

"We are seeing people not paying in the market for the past couple of days," a dealer with a state-owned bank said. "This week we have a lot of data to come, so they are waiting for that."

The one-year dollar/rupee forward premium was steady, also due to a largely unchanged US Treasury yield, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between two countries. With more rate cuts by the US Federal Open Market Committee on the cards and no sight of a rate cut by the Reserve Bank of India yet, as seen by market participants, the interest rate differential between the US and India is expected to widen, thus driving the forward premiums higher. 

Dealers said a lot of banks were waiting for the one-year dollar/rupee forward premium to rise further, before selling the greenback for forward delivery. Since the US Federal Reserve announced its 50-basis-point cut, premiums have been rising. This rise in premiums was met by some banks' dollar sales for forward delivery, taking advantage of higher dollar/rupee forward premium levels, dealers said.

"I think the premium (on the one-year dollar/rupee forward contract) will go (up) till at least 2.50%, because we see the IRD (interest rate differential) will rise going forward," the dealers with the state-owned bank said.

At 1436 IST, the premium on the one-year exact-period dollar/rupee contract was 200.19 paise, against 199.34 paise on Friday. On an annualised basis, the premium was 2.39% against Friday's close of 2.38%.  (Sourabh Kumar)

India Rupee: Remains down as importers buy dollars; 83.80/$1 key support

MUMBAI – The rupee remained lower against the dollar as banks persistently bought the greenback on behalf of oil marketing companies and other importers, looking to meet their month-end payment obligations, dealers said. A slump in domestic share indices also weighed on the Indian unit, they said. 

"The bid (buying of dollars) pressure is pretty high. If it continues, the rupee can go as down as 83.85-83.90 (a dollar) levels," a dealer at a state-owned bank said. "Since oil prices are also at the rise, investors are in a 'risk off' mode," he added. Oil prices rose on Monday as tensions in West Asia continued to escalate, increasing the likelihood of supply-side disruptions. At 1355 IST, the November Brent Crude contract on the Intercontinental Exchange was $72.91 per barrel, compared to its previous close of $71.98 per barrel on Friday.

Further, domestic share indices fell sharply today, tracking weak global cues, which also weighed on the Indian unit, dealers said. "The rupee is also seen reacting to domestic and Asian equities, they have been down since morning," a dealer at a state-owned bank said. At 1355 IST, both domestic benchmark indices, the Nifty 50 and the Sensex, were down 1.1% and 1.2% respectively. 

However, losses in the Indian unit were limited, due to a weak dollar index. The dollar index fell on Friday after weaker-than-expected US August personal consumption expenditure data increased expectations of another 50-basis-point rate cut by the US Federal Reserve at its November policy meeting. Currently, Fed fund futures show a 52.2% probability of a 50-bps rate cut and a 47.8% chance of a 25-bps rate cut in November, according to the CME FedWatch tool. At 1355 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 100.34, compared to its previous close of 100.42 on Friday and 100.57 on Thursday. The dollar index fell to a 14-month low of 100.16 on Friday, its lowest level since Jul. 20, 2023.

Further, some dealers speculated that state-owned banks sold dollars, likely on behalf of the Reserve Bank of India around the 83.80 a dollar level, which also limited losses for the Indian unit. Market participants now await US Fed Chair Jerome Powell's speech, due later Monday, for more cues on the US central bank's policy easing cycle. Powell will deliver his speech at the National Association for Business Economics conference, where he will discuss the US economic outlook. 

For the rest of the day, the rupee is seen in a range of 83.70-83.85 against the dollar, dealers said. They see immediate technical support for the Indian currency at 83.80 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Sept 30

MUMBAI – At 0900 IST, the rupee was at 83.7150 a dollar, against the previous close of 83.7000. At 1108 IST, the rupee was at 83.7800 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: Mixed ahead of Fed Chair Powell's speech today

MUMBAI – Asian currencies moved on a mixed note against the dollar as market participants await US Federal Reserve Chair Jerome Powell's speech, due later Monday, for more cues on the US central bank's policy easing cycle. Powell will deliver his speech at the National Association for Business Economics conference, where he will discuss the US economic outlook. Market participants also await several economic data in the US, due this week, including the US September manufacturing and services PMI, and the August Job Openings and Labor Turnover survey. The key US September employment report, due Friday, is also keenly awaited. 

Data released on Friday showed the US August personal consumption expenditure data, which is the Federal Reserve's preferred measure of inflation, rose 0.1% on month in August after an unrevised 0.2% gain in July. A poll by Reuters had forecast personal consumption expenditure inflation rising 0.1%. In the 12 months through August, the personal consumption expenditure price index increased 2.2%.

Following this, the dollar index slumped, hitting an over 14-month low on Friday, as the economic data raised expectations of a 50-basis-point rate cut by the US Fed at its November policy meeting, which aided the Asian units. Currently, Fed fund futures show a 53.7% probability of a 50-bps rate cut and a 46.3% chance of a 25-bps rate cut in November, according to the CME FedWatch tool. At 0905 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 100.45, compared to the previous close of 100.42 on Friday and 100.57 on Thursday. 

The Indonesian rupiah was down 0.1% against the greenback tracking a fall in domestic equities. At 0930 IST, Indonesia's Jakarta Composite was down 1.4%. The Taiwan dollar was down 0.1% against the dollar despite data released Friday showing that the composite index of economic indicators rose four points in August to 39, the highest since November 2021, indicating a booming or even overheating Taiwan economy. 

The South Korean won was up 0.2% against the greenback after data released Monday showed industrial output rose 4.1% in August, after falling 3.9% in July. The data came in stronger than the 2.0% expected in a Reuters poll and recorded the biggest rise since August 2023. The Phillipines peso was also up 0.2% against the dollar. 

The Chinese yuan was flat against the dollar even after data released early Monday showed the country's manufacturing activity shrank sharply in September. The Caixin/S&P Global manufacturing PMI fell to 49.3 in September from 50.4 the previous month, missing analysts' forecasts in a Reuters poll of 50.5. The reading marked the lowest since July last year. (Gowri Lakshmi and Pratiksha)

India Rupee: Down as importers buy dlrs for month-end needs, local shrs fall

MUMBAI – The rupee was a tad lower against the dollar on Monday as banks purchased the greenback, likely for oil companies and other importers, who wanted to meet their month-end payment requirements, dealers said. "It's month-end, so importers and oilers (oil importers) are buying dollars which offset the weakness (in dollar index). It (rupee) would have been much higher if it was not month-end," a dealer at a state-owned bank said.  

A fall in domestic equities also weighed on the Indian unit, dealers said. At 0950 IST, both the Sensex and the Nifty 50 were down 0.7%. Meanwhile, the dollar index fell on Friday after US August personal consumption expenditure, the Federal Reserve's preferred measure of inflation, showed a rise of 0.1%, after an unrevised 0.2% gain in July. A poll by Reuters had forecast personal consumption expenditure inflation rising 0.1%. In the 12 months through August, the personal consumption expenditure price index increased 2.2%.

The weaker-than-expected data increased expectations of another 50-basis-point rate cut by the US Fed at its November policy meeting. Currently, Fed fund futures show a 53.7% probability of a 50-bps rate cut and a 46.3% chance of a 25-bps rate cut in November, according to the CME FedWatch tool. At 0955 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 100.42, compared to 100.42 on Friday and 100.57 on Thursday. The dollar fell to a 14-month low on Friday. The index fell to a low of 100.16 on Friday, its lowest level since Jul. 20, 2023. 

A rise in crude oil prices also weighed on the Indian unit, dealers said. Crude oil prices rose as geopolitical tensions escalated in West Asia. On Sunday, Israel attacked Houthi targets in Yemen, expanding its confrontation after the killing of Hezbollah leader Sayyed Hassan Nasrallah in Lebanon on Friday. "The oil prices have gone up slightly, it is expected to go up a bit more. However, it may not be more than $74-$75 per barrel due to weakness in demand," a dealer at a state-owned bank said. At 0932 IST, the November Brent Crude contract on the Intercontinental Exchange was $72.49 per barrel, compared to its previous close of $71.98 on Friday.

For the rest of the day, the rupee is seen in the range of 83.60-83.80 against the dollar, dealers said. They see immediate technical support for the Indian currency at 83.80 a dollar. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Sept 30

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 Manisha Baxla

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