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Informist, Friday, Oct. 4, 2024

By Gowri Lakshmi

MUMBAI – The rupee ended steady against the dollar on Friday as state-owned banks, likely on behalf of the Reserve Bank of India, sold dollars which offset the impact of a rise in the dollar index, dealers said. RBI's dollar sales prevented the rupee from inching to its lifetime closing low of 83.9825 it hit on Sept. 5. The rise in crude oil prices also weighed on the Indian unit as oil marketing companies purchased the greenback in anticipation of a further increase in crude prices amid escalating geopolitical tensions in West Asia, they said.

"The rupee was weighed by all global cues including dollar index and crude prices. The rupee was also weighed down by the movement in Asian currencies and fall in domestic equities," a dealer at a state-owned bank said. The rupee settled at 83.9725 a dollar on Friday, just a whisker away from its lifetime low of 83.9900 which it hit on Sept. 5. The rupee moved in a tight range of 3 paise throughout the day.

Most Asian currencies were down 0.1-0.5%, tracking a rise in the dollar index, with the Taiwan dollar being the worst hit. However, some banks sold the greenback on behalf of exporters, which capped the loss on the Indian unit, dealers said.

The rupee opened steady against the dollar Friday as the Reserve Bank of India sold dollars in the non-deliverable offshore market near 83.97 a dollar levels, minutes before the domestic spot market opened. The rupee opened at 83.9425 a dollar, as RBI's intervention through dollar sales offset the impact of the rise in the dollar index and crude oil prices.  

The dollar index rose to an over six-week high on Thursday after data showed that US services sector activity climbed to a one-and-a-half year high in September amid strong growth in new orders. The dollar index also gained as the pound sterling fell over 1% against the greenback on Thursday after Bank of England Governor Andrew Bailey's comments on the future rate cut path. The dollar was also supported by safe-haven bets as geopolitical tensions in West Asia continue to worry investors. 

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 101.86, compared to 101.94 on Thursday and 101.60 on Wednesday. The dollar index had risen to an over a six-week high of 102.10 on Thursday. 

Shortly after the market opened, oil marketing companies rushed to purchase the greenback in anticipation that crude prices may rise further as geopolitical tensions in West Asia escalated. It weighed on the Indian unit, dealers said. Crude oil prices edged higher Thursday, rising over $4 a barrel amid concern that escalating conflict in West Asia may potentially disrupt the global supply chain. Reports suggest that Israel, in retaliation for the Iranian attack on Tuesday, might target Iranian oil infrastructure, which may further escalate the war in the region. 

As India is the second-largest crude oil importer after China in Asia, a rise in crude oil prices increases India's import bill. At 1530 IST, the December Brent Crude contract on the Intercontinental Exchange was at $78.81 per barrel, compared to its previous close of $77.88 a barrel on Thursday. It was at $73.9 a barrel on Wednesday.

The Indian unit further came under pressure as foreign banks purchased the greenback on behalf of foreign portfolio investors looking to pull out money from domestic equities as risk-off sentiment of investors was triggered amid the escalation of conflict in West Asia. Both the domestic indices, Nifty 50 and Sensex, settled 0.9% and 1% lower, respectively. "Outflows in equities is weakening the rupee further. Inflows are in low volume, having limited impact to support the rupee," a dealer at a state-owned bank said.

However, the losses on the Indian unit were capped as banks sold the greenback on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, which aided the Indian currency, dealers said. 

Traders keenly await the US non-farm payrolls data for more cues on the quantum of further interest rate cuts by the US Federal Reserve. "The NFP (non-farm payrolls) data is expected to be and will likely be higher than the forecast, if so then the rupee will maintain the current level, however breaching 84 will be difficult," a dealer at a private bank said. 

Economists forecast the non-farm payrolls data to show an addition of 140,000 jobs in September, slightly down from August's rise of 142,000 jobs, according to a Reuters poll. Currently, Fed fund futures see a 30.5% probability of a 50-basis-point rate cut by the Fed in November, whereas the probability of a 25-bps cut is seen at 69.5%, according to the CME FedWatch tool.

FORWARDS

Premium on the one-year dollar/rupee forward contract ended steady as banks purchased the greenback for forward delivery, which offset the downward pressure from a rise in the benchmark US Treasury yield, dealers said. Yield on the 10-year US Treasury note rose by 6 basis points on Thursday after data released the same day suggested an underlying strength in the US economy. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

While the expectations around the quantum of the Fed rate cut might have decreased, dealers said they were still expecting the interest rate differential between the US and India to rise further, thus giving a boost to the dollar/rupee forward premiums. 

Moreover, dealers said, with the forward premium rising, it has also attracted interest from banks who wanted to sell dollars for forward delivery. Due to relatively higher levels, such banks sold forward dollars, restricting a rise in the dollar/rupee forward premiums. Further, a rise in liquidity surplus in the system also limited the rise in forward premiums. The surplus liquidity in the banking system was at INR 2.88 trillion on Thursday, the highest since July 2022, according to data from the Reserve bank of India.

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 200.63 paise, against 200.98 paise on Thursday. On an annualised basis, the premium was 2.39%, similar to Thursday's close.

OUTLOOK

On Monday, the rupee will take cues from movement in the dollar index. "The rupee is expected to open steady even if the (US non-farm payrolls) data comes out stronger-than-expected. It may inch 3 paise up or down," a dealer at a private bank said. Investors will also cautiously watch geopolitical developments in West Asia and its impact on crude oil prices. 

Dealers expect the RBI to continue selling dollars to keep the Indian unit from falling sharply and touching the psychologically-crucial level of 84-per-dollar. During the day, the rupee is seen in a range of 83.90-83.99 a dollar, with strong technical support pegged at 84.00.

India Rupee - World FX: Pound sterling rises 0.3% post UK construction data

MUMBAI – The pound sterling was up 0.3% against the greenback as data released earlier on Friday showed that the UK's construction sector grew at its fastest pace in September since April 2022. The S&P Global/Chartered Institute of Procurement & Supply UK Construction Purchasing Manager's Index jumped to 57.2 in September, from 53.6 in August. The sterling also found support from comments by Bank of England chief economist Huw Pill. He said the UK central bank should gradually cut rates only gradually. His comments came after a day when the Bank of England governor Andrew Bailey said the central bank may cut rates aggressively.

The Swiss franc was up 0.1% against the dollar upon safe haven demand, triggered by the possibility of a further escalation of geopolitical tensions in West Asia. However, gains in the currency were capped as inflation in the country fell to a three-year low of 0.3% on year in September. The softer-than-expected inflation data raised worries among investors that the Swiss National Bank may cut rates again in December. The Swiss National Bank eased their benchmark rate by 25 basis points to 1.00% on Sept. 26.

The New Zealand dollar was down 0.2% against the dollar ahead of the next monetary policy meeting by the Reserve Bank of New Zealand. Market participants expect the central bank to slash its official cash rate by 25 bps to 5.0% from 5.25% on Oct. 9.

The Australian dollar was up 0.1% against the greenback as the commodity-linked currency was supported by a rise in global crude oil prices. Crude oil prices edged higher Thursday, rising over $4 a barrel amid concerns that escalating conflict in West Asia may potentially disrupt the global supply chain.  

The Japanese yen was up 0.3% against the dollar as Japan's economy minister Ryosei Akazawa hinted at a further interest rate hike by the central bank. Akazawa said the newly elected Prime Minister Shigeru Ishiba and Bank of Japan governor Ueda Kazuo had agreed that the top priority of the policymakers would be overcoming deflation. "No change to the interpretation of the government-Bank of Japan accord targeting 2% inflation," Akazawa added.

The dollar index strengthened after data showed the services sector in the US expanded at a much faster rate than expected, and hit over a-year-and-a-half high. Data released by the Institute for Supply Management showed that the US Non-Manufacturing Purchasing Managers Index rose to 54.9 in September, more than economists' forecast of 51.7 in a Reuters poll. It was also higher than 51.5 in August.

At 1508 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 101.92, compared to 101.94 on Thursday and 101.60 on Wednesday. The dollar index rose to over a six-week high of 102.10 on Thursday. 

Traders now keenly await the US non-farm payrolls data to get more cues on the US interest rate trajectory. Currently, Fed fund futures see a 34.6% probability of a 50-basis-point rate cut in November, whereas the probability of a 25-bps cut is seen at 65.4%, according to the CME FedWatch tool. Economists had forecast the world's largest economy to have added 140,000 jobs last month, down from a rise of 142,000 jobs in August, according to a Reuters poll.  (Gowri Lakshmi)

India Rupee: Flat; RBI's likely dlr sales offset impact of oil cos' dlr buys

MUMBAI – The rupee remained steady against the dollar as state-owned banks persistently sold dollars, likely on behalf of the Reserve Bank of India, which offset the impact of dollar demand by oil marketing companies, dealers said. "The RBI intervened in NDF (non-deliverable forwards) market in the morning, and now they are active in spot," a dealer at a private bank said. 

The central bank likely sold the greenback to prevent the Indian unit from hitting the psychologically-significant 84-per-dollar level, as it has been doing in the past, dealers said. At 1330 IST, the rupee was at 83.9650 a dollar, just shy of its lifetime low of 83.9900 a dollar hit on Sept. 5.

Meanwhile, oil marketing companies actively purchased the greenback, in fear of a further increase in crude oil prices, amid anticipation of escalation in geopolitical tensions in West Asia. At 1323 IST, the December Brent Crude contract on the Intercontinental Exchange was $78.22 per dollar, compared with its previous close of $77.88 on Thursday. It was at $73.90 a barrel on Wednesday. 

The dollar index rose to an over six-week high on Thursday as data showed US services sector activity climbed to a one-and-a-half year high in September amid strong growth in new orders. Further, the dollar was also supported by safe-haven bets as geopolitical tensions in West Asia continue to worry investors. This also weighed on the Indian unit, dealers said. 

At 1323 IST, the dollar index which measures the strength of the dollar against six major currencies, was 101.85, compared with 101.94 on Thursday and 101.60 on Wednesday. The index rose to over a six-week high of 102.10 on Thursday. 

Some banks also sold dollars on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, which aided the Indian currency, dealers said. For the rest of the day, the rupee is seen in the range of 83.90-83.99 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.00 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Oct 4

MUMBAI – At 0900 IST, the rupee was at 83.9425 a dollar, from its previous close of 83.9675. At 1112 IST, the rupee was at 83.9600 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 down as dollar index rises, risk appetite weak

NEW DELHI – Most Asian currencies fell against the dollar on Friday as the dollar index hit an over six-week high on Thursday. Weak risk sentiment among investors amid the widening geopolitical conflict in West Asia also weighed on the Asian units.  

The dollar index surged after data released on Thursday showed US services sector activity rose to a one-and-a-half year high in September amid strong growth in new orders. The US non-manufacturing purchasing managers index rose to 54.9 last month from 51.5 in August. 

Recent economic data in the US has been indicating a resilient economy, dampening expectations of the US Federal Reserve cutting rates by another 50 basis points in November. Currently, Fed fund futures see a 32.6% probability of a 50-bps rate cut in November, whereas the probability of a 25-bps cut is 67.4%, according to the CME FedWatch tool.

The dollar index also received a boost from safe haven demand amid concerns about rising tensions in West Asia. At 1045 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 101.90, compared to 101.94 on Thursday and 101.60 on Wednesday. The index rose to over a six-week high of 102.10 on Thursday. 

Concerns about escalation in geopolitical tensions related to West Asia heightened after US President Joe Biden on Thursday said the US was discussing strikes on Iran's oil facilities as retaliation for Tehran's missile attack on Israel, according to reports.

The Taiwan dollar fell 0.5% against the greenback, the most among its peers. Typhoon Krathon rapidly moved closer to Southwestern Taiwan on Thursday. The typhoon has left two dead, 123 injured and two missing in Taiwan, media reports said.

The Indonesian rupiah fell 0.3% against the dollar, while the Malaysian ringgit was down 0.2%. The offshore Chinese yuan was down 0.1% against the US currency. 

Bucking the trend, the Thai baht was up 0.5% against the US unit. Thailand's finance minister met Bank of Thailand chief Sethaput Suthiwartnarueput on Thursday and discussed the issue of high household debt, the need for liquidity, and made a case for a rate cut to spur revival of a sluggish economy, reports said. The South Korean won was up 0.2% against the greenback. (Pratiksha) 

India Rupee: Steady; RBI's dlr sales in NDF mkt offset dlr index, crude rise

MUMBAI – The rupee was steady against the dollar, but hovered near its all-time low, as likely intervention by the Reserve Bank of India in the offshore non-deliverable forwards market offset the impact of a rise in the dollar index and crude oil prices, dealers said. The rupee hit a record low of 83.9900 a dollar on Sept. 5. "Everything is on the rise; the dollar index, crude, gold prices, which are weighing down the (Indian) currency," a dealer at a state-owned bank said. 

The rupee traded around 83.96-83.97 a dollar in the offshore market 10 minutes before it opened at 83.9425 a dollar in the domestic spot market at 0900 IST. The central bank has been steadfast in keeping the rupee from hitting the psychologically-crucial level of 84 per dollar. Dealers expect the RBI to continue doing the same. Some dealers speculated that the central bank may be intervening in the spot market as well through dollar sales. 

The dollar index rose to an over six-week high on Thursday after data showed that US services sector activity climbed to a one-and-a-half year high in September amid strong growth in new orders. The dollar index also gained as the pound sterling fell over 1% against the greenback on Thursday after Bank of England Governor Andrew Bailey said that the central bank could be "a bit aggressive" in slashing their interest rate or "more activist" if inflation remains in check. The dollar was also supported by safe-haven bets as geopolitical tensions in West Asia continue to worry investors. 

At 1015 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 101.89, compared to 101.94 on Thursday and 101.60 on Wednesday. The index rose to over a six-week high of 102.10 on Thursday. 

A fall in domestic equities also weighed on the rupee, dealers said. At 0949 IST, both the Nifty 50 and the Sensex were down 0.2%. Crude oil prices edged higher on Thursday, rising over $4 a barrel amid concerns that the escalating conflict in West Asia may potentially disrupt the global supply chain. Dealers expect the rupee to be weighed down by oil importers' dollar purchases in anticipation of further increases in crude prices. 

At 1017 IST, the December Brent crude contract on the Intercontinental Exchange was $77.54 per dollar, compared to its previous close of $77.62 on Thursday.

However, dealers expect some exporters to sell the greenback to take advantage of the relatively higher dollar/rupee levels, which may support the local unit. For the rest of the day, the rupee is seen in the range of 83.90-83.99 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.00 a dollar. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Oct 4

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 Akul Nishant Akhoury

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