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Informist, Monday, Oct. 7, 2024

By Gowri Lakshmi and Pratiksha

MUMBAI – The rupee ended steady against the dollar on Monday as the Reserve Bank of India's active intervention, both verbally and through dollar sales, ensured that the local unit did not come under pressure due to a surge in the dollar index and sharp fall in domestic equities, dealers said. 

State-owned banks persistently sold the greenback on behalf of the central bank, which prevented the Indian unit from hitting the psychologically-important level of 84-per-dollar, they said. Moreover, dealers said that the RBI asked some state-owned and private banks Monday to avoid placing large bets against the rupee in the domestic spot market to keep the Indian currency from falling below the key level. "They (RBI) were active everywhere. So, there was no movement in the market," said a dealer at a private bank. 

The rupee settled at 83.9775 a dollar on Monday, its lowest level since Sept. 11, just shy of its lifetime low of 83.9900 a dollar. The rupee moved in a tight range of just 3 paise throughout the day. Other Asian currencies were down 0.4-1.5% against the greenback, with the Malaysian ringgit being the worst hit. Notably, the Indian unit was the second-best performing emerging market unit after the South Korean won.

The rupee opened at 83.9450 a dollar on Monday after trading near 83.97 a dollar in the offshore non-deliverable forwards market a few minutes before, as the central bank likely sold dollars in the offshore NDF market, dealers said. 

The dollar index rose to a near-eight-week high on Friday after the US non-farm payrolls data came stronger than expected, boosting investors' confidence in the resilience of the US economy and reduced expectations of another large rate cut by the US Federal Reserve next month. The US non-farm payrolls data showed the US economy added 254,000 new jobs in September, significantly more than the expected addition of 140,000 jobs in a Reuters poll. 

Fed fund futures now see no chance of a 50-bps rate cut by the Fed in November, whereas the probability of a 25-bps cut is now seen at 87.3%, up from nearly 68% on Thursday. The odds of no rate cut at all next month are 12.7%, according to the CME FedWatch tool. At 1530 IST, the dollar index, which measures the strength of the greenback against six major currencies, was 102.57, compared to 102.49 on Friday and 101.94 on Thursday.

In order to prevent the Indian unit from coming under pressure from a strong dollar index, state-owned banks rushed to sell dollars on behalf of the Reserve Bank of India, shortly after the market opened. The central bank was active in the market for the majority of the day, they said. 

Further, dealers said the RBI asked some state-owned and private banks to avoid placing large bets against the rupee in the domestic spot market, which also prevented the Indian unit from hitting a record low. The central bank informally communicated the directions to banks through phone calls Monday, dealers said. "We were asked to disclose out trade counterparties. They (RBI) don't want positions building up (against the rupee)," said a dealer at a state-owned bank. 

Further, the rupee was weighed by foreign banks' dollar purchases on behalf of foreign portfolio investors, looking to pull out money from domestic equities amid escalating geopolitical tensions in West Asia, dealers said. Recent media reports said Israel bombed Hezbollah targets in Lebanon and the Gaza Strip on Sunday ahead of the one-year anniversary of Hamas' Oct. 7 attacks on Israel that triggered war. On Monday, both the domestic benchmark indices, Nifty 50 and BSE Sensex, ended 0.8% and 0.9% lower, respectively. 

"The Indian rupee was again down at 83.9775 with FPIs buying dollars to cover their sale of equities and take money back or to put them into Chinese stocks which are still relatively cheaper to Indian stocks," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. "Indian rupee was well protected by RBI who has now $705 billion of reserves and has the capability to sell more dollars to ensure stability in rupee, as FPIs and oil companies keep buying dollars for the outflows." 

FORWARDS

Premium on the one-year dollar/rupee forward contract ended at a near-four-week low on Monday as US Treasury yields soared after a stronger-than-expected non-farm payrolls report on Friday dashed hope of aggressive rate cuts by the US Federal Reserve this year, dealers said. 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 25-bps rate cut in November, instead of 50 bps as expected earlier, the difference between Indian and US yields may not widen as much as expected earlier, putting pressure on the forward premiums, dealers said. Meanwhile, some banks rushed to buy dollars for forward delivery on behalf of importers, to make the most of the relatively lower levels, which limited the fall in premiums, dealers said. The one-year dollar/rupee forward premium rose over 25 bps last month.

Traders now await the outcome of the RBI's Monetary Policy Committee, due on Wednesday. According to an Informist poll, all but one of the respondents expect the rate-setting panel to stay pat on rates at 6.50%, with some expecting the Monetary Policy Committee to change its stance to "neutral" from "withdrawal of accommodation".

Most market participants now see the one-year dollar/rupee forward premium falling to 2.20-2.15% in the near term if US Treasury yields continue to rise. At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 191.63 paise, against 200.63 paise on Friday. On an annualised basis, the premium was 2.28%, against Friday's close of 2.39%. 

OUTLOOK

On Tuesday, the rupee will take cues from movement in the dollar index and crude oil prices. Traders will keep a close watch on the ongoing geopolitical tensions in West Asia, dealers said. 

"I don't think 84 will break now," said a dealer at a brokerage firm. "The kind of support they (RBI) are giving around these levels, it is unlikely they will let go now." Dealers expect the RBI to continue selling dollars to keep the Indian unit from falling beyond 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: Dlr index up as data indicate strength in US economy

India Rupee - World FX: Dlr index up as data indicate strength in US economy

MUMBAI – The dollar index strengthened after data from the US showed an underlying strength in its economy, significantly reducing the chances of a large rate cut by the Fed in November. Data released on Friday showed that non-farm payrolls rose 254,000 in September, way more than the forecast of 140,000 jobs in a Reuters poll.

Following the release of jobs data, the dollar index rose to 102.69 on Friday, the highest since Aug. 16. At 1301 IST today, the index, which measures the strength of the greenback against a basket of six major currencies, was 102.55. It was 102.49 on Friday, and 101.94 on Thursday. As of today, fed funds futures traders see no chance of a 50 basis point rate cut by the Federal Open Market Committee at its meeting in November. Chances of a 25 bps rate cut were seen at 94.4%.

As the dollar index surged, most of the other major currencies came under pressure. The pound sterling was worst hit, falling 0.4% against the greenback. The Australian and the Canadian dollar were both down 0.1% each against the US currency. 

The euro fell 0.1% against the US dollar. The euro also came under pressure after retail sales in the eurozone rose slower than the market consensus. Retail sales rose 0.8% on year in August, lower than the market consensus of a 1.0% rise. Further, the eurozone Sentix Investor Confidence index improved to (-)13.8 in October from (-)15.4 in September. The index measures the six-month economic outlook for the eurozone.

The Japanese yen recovered slightly, having risen by 0.2%, after the far east nation's top currency diplomat, Masato Kanda, today warned against speculative trading. His comments came after the yen fell sharply on Friday against the US dollar. He also said the government would monitor the rapid movement of the currency, and would take necessary action, if required.  (Sourabh Kumar)

India Rupee: In thin band as RBI's likely dollar sales avert 84/$1

MUMBAI – The rupee remained in a thin band as state-owned banks sold the greenback, possibly on behalf of the Reserve Bank of India, preventing the rupee from inching toward the psychologically crucial level of 84-per-dollar. "The rupee will be in a tight range of 83.95-83.98 today," a dealer at a state-owned bank said. "It will be stable around this level for quite some time," said another dealer at a state-owned bank. The rupee has moved under 4 paise so far today.

The central bank persistently sold the greenback to prevent a sharp fall as the rupee hovered around its lifetime time low of 83.9900, which it hit on Sept. 5. Apart from selling dollars, the RBI also asked some state-owned and private banks Monday to avoid placing large bets against the rupee in the domestic spot market to keep the Indian unit from falling below 84 a dollar, dealers said.

The rupee came under pressure as the US non-farm payrolls data released Friday showed a stronger-than-expected figure, strengthening the dollar index. The dollar index rose sharply Friday after the non-farm payrolls data showed the US economy added 254,000 new jobs in September, significantly more than the expected addition of 140,000 jobs in a Reuters poll. The index rose to a high of 102.69 Friday, its highest level since Aug. 16. At 1417 IST, the dollar index, which measures the strength of the greenback against six major currencies, was 102.44, compared to 102.49 Friday and 101.94 Thursday.

Following the data, investors' confidence in the resilience of the US economy was boosted, which reduced expectations of a large-sized interest rate cut by the US Federal Reserve in November. Fed fund futures now see no chance of a 50-basis-point rate cut by the Fed in November, whereas the probability of a 25-bps cut is now seen at 95.1%, up from roughly 68% Thursday, according to the CME FedWatch tool.

The Indian rupee also came under pressure Monday as foreign banks purchased dollars on behalf of investors who were exiting the domestic equities market as geopolitical tensions in West Asia escalated, dealers said. At 1420 IST, both the domestic benchmark indices, Nifty 50 and BSE Sensex, were down 1%.

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 7

MUMBAI – At 0900 IST, the rupee was at 83.9450 a dollar, from its previous close of 83.9725. At 1114 IST, the rupee was at 83.9650 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 dn as dollar index surges on strong US economic data

MUMBAI – Most Asian currencies were down against the dollar on Monday as the dollar index rose to a near-eight-week high on Friday after the US non-farm payrolls data came in stronger than expected. The robust economic data pointed to resilience in the world's largest economy and reduced expectations of another large rate cut by the US Federal Reserve next month.

The non-farm payrolls data showed that the US economy added 254,000 jobs in September, compared to the forecast of 140,000 in a Reuters poll. Following the economic data, Fed fund futures now see no chance of a 50-basis-point rate cut by the Fed in November, whereas the probability of a 25-bps cut is now seen at 95.1%, up from roughly 68% on Thursday, according to the CME FedWatch tool.

Further, an escalation of geopolitical tensions in West Asia led to investors' moving to the safe-haven US unit, strengthening the dollar. At 1012 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 102.47, compared to 102.49 on Friday and 101.94 on Thursday. The index rose to a high of 102.69 on Friday, its highest level since Aug. 16.

Tracking the sharp rise in the dollar index, both the Malaysian ringgit and the Indonesian rupiah fell 1.3% each, against the dollar, the most amongst their peers. The Philippines peso was down 0.7% against the dollar after data released on Friday showed that the Consumer Price Index rose 1.9% in September on year, the slowest rate in more than four years, from 3.3% in August. The Bangko Sentral ng Pilipinas on Friday, said that the September inflation print affirms its outlook that inflation will continue its downward trend in the succeeding quarter, raising expectations amongst investors that the central bank may have more room to cut rates this year.

The Chinese yuan was down 0.1% against the dollar ahead of a key media address by the country's top officials on Tuesday to discuss a package of policies aimed at boosting economic growth, reports said. 

Bucking the trend, the South Korean won was up 0.1% against the greenback. The Bank of Korea is expected to deliver a 25 bps rate cut, bringing the lending rates to 3.25% at its monthly rate setting meeting, scheduled on Friday.  (Gowri Lakshmi)

 India Rupee: Steady; RBI's likely dollar sales offset surge in dollar index

MUMBAI – The rupee was steady against the dollar on Monday as the impact of a surge in the dollar index was offset by state-owned banks' dollar sales, likely on behalf of the Reserve Bank of India, dealers said. "The rupee is seen lower before the market opens (in the offshore), but after the market opens it is difficult for the rupee to break the range," a dealer at a state-owned bank said. 

The RBI likely sold dollars, both in the offshore non-deliverable forwards market and the domestic spot market, to prevent the rupee from testing the psychologically-crucial level of 84 per dollar, dealers said. The rupee traded around 83.97 a dollar in the offshore NDF market 10 minutes before the domestic spot market opened at 83.9450 a dollar at 0900 IST. Dealers expect the RBI to continue its dollar sales interventions throughout the day to keep the 84-per-dollar mark from breaking. "The tight range (for rupee) will continue, they (RBI) are not letting it break," a dealer at a private bank said. 

The dollar index rose to a near eight-week high on Friday, after stronger-than-expected non-farm payrolls data reduced investors' expectations of another large interest rate cut in November by the US Federal Reserve. The data released on Friday showed that the US economy added another 254,000 jobs in September, compared to the forecast of 140,000 in a Reuters poll. Further, the unemployment rate in the US declined slightly to 4.1% in September, compared to 4.2% in August. 

Following the economic data, Fed fund futures now see no chance of a 50-basis-point rate cut by the Fed in November, whereas the probability of a 25-bps cut is now seen at 95.1%, up from roughly 68% on Thursday, according to the CME FedWatch tool. At 0955 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 102.46, compared to its previous close of 102.49 on Friday and 101.94 on Thursday. The index rose to a high of 102.69 on Friday, its highest level since Aug. 16.

Most Asian currencies were down against the greenback, which is expected to further weigh on 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: Expected range for rupee - Oct 7

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 Deepshikha Bhardwaj

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