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Informist, Tuesday, Oct. 8, 2024

By Sourabh Kumar

MUMBAI – The rupee ended steady against the dollar Tuesday because of likely intervention by the Reserve Bank of India, dealers said. The RBI is said to have sold dollars to offset the downward pressure from rise in dollar purchases by oil marketing companies, dealers said.

"As of now, there are no triggers for the market, and the central bank is holding it today as well," a dealer with a private bank said. The India unit came under pressure after oil marketing companies bought dollars, anticipating a further rise in crude oil prices, dealers said.

The rupee settled at 83.9625 a dollar, after moving in a narrow range of four paise. On Monday, the rupee had settled at 83.9775 a dollar. After opening steady, the rupee rose slightly to the day's high of 83.9250 a dollar because of foreign fund inflows into companies and RBI's intervention, dealers said. 

The RBI's intervention was aimed at preventing the rupee from falling below the record low of 83.99 a dollar that it touched on Sept. 5, dealers said. On Monday, the RBI had asked some state-owned and private banks, through phone calls, to avoid placing large bets against the rupee in the spot market, dealers said. It was done to prevent the rupee from falling below the crucial level of 84 a dollar, dealers said. Consequently, volumes in the market were low Tuesday, they said.

The rupee came under pressure as crude oil prices rose on concerns over supply due to growing tensions in West Asia, dealers said. Last week, crude oil prices rose more than 8% after Iran fired multiple missiles towards Israel. This raised concerns of Israel launching attacks on Iran's oil infrastructure. As crude oil is a major commodity that India imports, a rise in its price raises the import bill, hurting the domestic currency.

At 1633 IST, the December Brent crude contract on the Intercontinental Exchange was $79.43 per barrel after rising to a high of $81.14 a barrel. On Monday, crude prices had closed at $80.93 a barrel, up from $78.05 a barrel on Friday.

"I think currently, it is the rise in crude prices that is driving the market on one end, and the central bank on the other end," a dealer with a private bank said. "I think, while crude prices have increased, it should not be a huge problem for us, at least now."

A strong dollar index also weighed on the rupee, dealers said. The dollar index rose after non-farm payrolls data showed a resilient US labour market, which weighed on expectations of a larger rate cut by the US Federal Reserve at its next meeting in November. As of today, the odds of a 25 basis point rate cut by the Fed are 86.7%, up from 63.2% a week ago, according to the CME FedWatch tool. It also shows that Fed fund futures traders are not seeing any chance of a 50 bps rate cut.

Market participants are now waiting for US CPI data, due Thursday, to assess the likely quantum of the rate cut, dealers said. The consumer price index for September is forecast to have risen 0.1% on a monthly basis, after rising 0.2% in the month before, according to a poll by Dow Jones. The core CPI is expected to have risen 0.2% in September, after rising 0.3% in August, the poll showed.

The decision of the RBI's Monetary Policy Committee meeting that will be announced on Wednesday is also in focus. According to an Informist poll, all but one of the respondents expect the rate-setting panel to stand pat on rates at 6.50%, with some expecting the committee to change its stance to "neutral" from "withdrawal of accommodation".

FORWARDS

The premium on the one-year dollar/rupee forward contract ended steady on Tuesday, as market participants refrained from placing large bets ahead of multiple sets of economic data, including CPI data from the US, dealers said.

Dealers said the one-year forward premium may move between 2.25% and 2.45% in the near term. However, if the yield on the benchmark 10-year US Treasury note continues to rise, the one-year dollar/rupee forward premium may fall further.

Dealers said though the chances of a larger rate cut by the Fed at its next meeting have decreased, expectations of an overall 100-bps rate cut this calendar year would keep the forward premium relatively higher. Lack of clarity around a rate cut in India may also keep forward premiums relatively higher, they said. 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 190.92 paise, against 191.55 paise on Monday. On an annualised basis, the premium was 2.27%, against Monday's close of 2.28%.

OUTLOOK

On Wednesday, the rupee will take cues from the dollar index and crude oil prices, dealers said. Market participants will keep a close watch on the Monetary Policy Committee's decision, they said.

Any further escalation in conflict in West Asia may drive oil prices higher, which could put pressure on the Indian currency, dealers said. Further, dealers expect the RBI to continue selling dollars to keep the Indian currency from falling beyond the psychologically crucial level of 84-per-dollar.

India Rupee - World FX: Yen up on fears of intervention by Bank of Japan

MUMBAI – The yen was up 0.3% against the dollar Tuesday after comments by Bank of Japan officials sparked fears of intervention among market participants. Atsushi Mimura, Japan's vice finance minister for international affairs, cautioned against speculative activities in the foreign exchange market, giving way to rumours that the government might step in to bolster the yen. Furthermore, Japan's recently appointed Finance Minister Katsunobu Kato said the government will keep an eye on how swift currency fluctuations might affect the economy and will intervene if needed.

The euro was up 0.1% against the dollar as the greenback eased from a seven-week high touched earlier in the day. European Central Bank Governing Council member Bostjan Vasle Tuesday said that "an interest-rate cut in October is an option." Euro was also supported by economic data from Germany, which showed that industrial production rose by 2.9% on a monthly basis in August against a contraction of 2.4% in July and higher than the market expectation of 0.8%.

The dollar strengthened as investors weighed the future of US interest rates following last week's strong jobs report, which dampened hopes of significant rate cuts. The dollar was also backed by rising tensions in West Asia. In recent events, Hezbollah launched rockets from Lebanon targeting Israel's coastal city of Haifa and a military installation close to central Tel Aviv, while Israel conducted airstrikes on several structures located in the southern suburbs of Beirut.

The Australian dollar was down 0.4% against the US dollar. In the minutes of the policy meeting held in September, the Reserve Bank of Australia indicated that board members deliberated on the possibilities of reducing or raising interest rates. "All scenarios for lowering, maintaining, or raising rates are plausible due to the significant uncertainty surrounding the economic forecast," the minutes said. In an address at the Walkley Foundation, Deputy Governor Andrew Hauser said that policy actions will be taken once inflation ceases to be elevated and persistent. (Kabir Sharma)

India Rupee: In thin band; RBI's likely dollar sales offset oil cos' dlr buys

NEW DELHI – The rupee remained in a thin band against the dollar Tuesday as state-owned banks' persistent dollar sales, likely for the Reserve Bank of India, countered the impact of dollar purchases on behalf of oil marketing companies and weakness in the offshore Chinese yuan, dealers said. The Indian unit has moved in a range of only 4 paise so far on Tuesday. 

The central bank intervened through dollar sales to prevent the Indian unit from hitting the psychologically-crucial level of 84 per dollar, dealers said. "RBI is there since morning. Seems aggressive (in dollar sales)," said a dealer at a private bank. Dealers now expect the RBI to keep up with its intervention for the rest of the day, and subsequently, a narrow trading range for the local currency. 

"See, they (RBI) have enough reserves to do these actions," said a dealer at a state-owned bank. "So, it is not surprising they (RBI) are so big on protecting these levels." India's foreign exchange reserves rose to an all-time high of $704.89 billion as of Sept. 27.

Meanwhile, some state-owned banks bought the greenback on behalf of oil marketing companies, on fear of crude oil prices rising further amid the mounting geopolitical tensions in West Asia, dealers said. Crude oil prices jumped over 3% on Monday, rising above $80 per barrel for the first time since August, on fears West Asia could be on the verge of a region-wide war and disruption to supply. At 1354 IST, the December Brent crude contract on the Intercontinental Exchange was $80.11 per barrel, compared to $80.93 a barrel on Monday. It was at $78.05 a barrel on Friday. 

Additionally, the offshore Chinese yuan fell over 0.6% against the dollar as trade resumed after a one-week break, which also weighed on the domestic currency, dealers said. The decline in yuan was mainly due to catch-up trade after the Golden Week holiday in mainland China. 

A sharp rise in domestic equities aided the domestic currency, according to dealers. At 1345 IST, the Sensex was up 0.7% and the Nifty 50 was up 0.8%. 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. (Pratiksha) 

India Rupee: Premium steady as traders avoid large bets ahead of US CPI Thu

MUMBAI – The premium on the one-year dollar/rupee forward contract was steady today, as market participants refrained from placing large bets ahead of multiple sets of economic data, including US CPI data from the US, dealers said. US inflation data for September is due to be released on Thursday, with the release of the producer price index scheduled for Friday.

"After falling post NFP (non-farm payrolls data), premiums are now consolidating," a dealer with a private bank said. "Traders are now waiting for CPI to see the movement in US yields."

On an annualised basis, the one-year forward premium fell to over a three-week low of 2.27% on Monday, after the yield on the benchmark US Treasury note rose 13 basis points on Friday. The US Treasury yield rose after data released on Friday showed non-farm payrolls in the US increased significantly more in September than what was forecast.

Dealers said the one-year forward premium may move between 2.25% and 2.45% in the near term. However, if the benchmark US yield continues to rise, the one-year dollar/rupee forward premium may fall further. "There are stop-losses, which I think will get triggered if premiums (one-year dollar/rupee forward premium) touch 2.25%," the dealer with the private bank said.

After data indicated underlying strength in the US labour market, the odds of a large rate cut by the US Federal Reserve in November declined. According to the CME FedWatch tool, chances of a 25-bps rate cut by the Fed in November rose to 87.4% as of today. This was up from 63.2% a week ago. The odds of 50-bps completely vanished after the release of US jobs data.

Dealers said while the chances of a larger rate cut by the Fed at its next meeting decreased, expectations of an overall 100-bps rate cut this calendar year would keep the forward premium relatively higher. Lack of clarity around a rate cut in India may also help keep forward premiums relatively higher, they said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

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

At 1334 IST, the premium on the one-year exact-period dollar/rupee forward contract was 191.17 paise, against 191.55 paise on Monday. On an annualised basis, the premium was 2.28%, similar to Monday's close.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Oct 8

NEW DELHI – At 0900 IST, the rupee was at 83.9550 a dollar, from its previous close of 83.9775. At 1114 IST, the rupee was at 83.9425 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: Most down as risk appetite weak, dollar index strong

NEW DELHI – Most Asian currencies fell against the greenback on Tuesday due to dampened risk appetite among investors amid escalating geopolitical tensions in West Asia and a strong dollar index. Investors' risk appetite took a beating amid heightened fears of widespread conflict in West Asia.

Reports said Hezbollah on Monday fired rockets at Israel's third-largest city Haifa, and Israel looked prepared to increase its offensive into Lebanon, one year after the devastating Hamas attack on Israel that fuelled a war in Gaza. Most Asian shares fell on Tuesday, with Hong Kong's Hang Seng Index being the biggest loser with a fall of 6.1%. 

Further, the dollar index remained strong as investors continued to assess the outlook for the US Federal Reserve's easing cycle after the stronger-than-expected non-farm payrolls data on Friday diminished hopes of large rate cuts. Safe-haven bets amid escalating tensions in West Asia also boosted the US unit. 

Following Friday's strong jobs data, traders have completely pulled back from bets on a 50-basis-point rate cut by the Fed in November. Fed fund futures now see no chance of a 50-bps rate cut by the Fed next month, whereas the probability of a 25-bps cut is now seen at 78.3%. The odds of no rate cut at all next month are 21.7%, according to the CME FedWatch tool. At 1030 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 102.40, compared to 102.49 on both Monday and Friday. The index rose to a high of 102.69 on Friday, its highest level since Aug. 16. 

The offshore Chinese yuan was down 0.6% against the dollar, the worst hit amongst its peers, as trade resumed after a week-long break. This was despite economic officials saying at a keenly-awaited press conference in Beijing on Tuesday that China was "fully confident" of achieving full-year economic targets and planned to issue 200 billion yuan in advance budget spending and investment projects from next year, reports said. 

The South Korean won was down 0.3% against the dollar, while both the Philippine peso and Malaysian ringgit were down 0.1% against the greenback. The Bank of Korea is expected to embark on an easing cycle when it meets on Friday.  A Bloomberg poll expects the central bank to cut its benchmark interest rate by 25 bps to 3.25%. 

The Thai baht was down 0.2% against the dollar. Bucking the trend, the Indonesian rupiah was up 0.2% against the US unit. Bank Indonesia intervened in the foreign exchange market on Monday to ensure confidence in the currency, reports said. (Pratiksha)

India Rupee: Slightly up as PSU bks aggressively sell dollars likely for RBI

NEW DELHI – The rupee rose slightly against the dollar on Tuesday as state-owned banks aggressively sold dollars, likely on behalf of the Reserve Bank of India at open, dealers said. "They were first in the offshore and then in the spot, which took the rupee to 83.92 (a dollar). The action was aggressive," said a dealer at a private bank.

The central bank also likely intervened in the offshore non-deliverable forwards market right before the opening of the domestic spot market, which prevented the Indian unit from testing the psychologically-crucial level of 84 per dollar, dealers said. The rupee was trading at 83.98-83.99 a dollar in the offshore NDF market right before the opening of the domestic spot market at 0900 IST, where it opened at 83.9550 a dollar. Following this, the Indian unit rose to a high of 83.9250 a dollar. 

The RBI likely intervened to prevent the Indian unit from hitting a record low and touching the key level of 84 per dollar, just like it has been doing in the past, dealers said. The rupee hit a lifetime low of 83.9900 a dollar on Sept. 5. "84 (a dollar) is not happening with this kind of intervention (by the RBI)," said a dealer at a state-owned bank. Dealers expect the RBI to keep its grip on the currency intact throughout the day. 

The central banks' intervention ensured that the Indian currency was not weighed down by soaring crude oil prices and a strong dollar index. Crude oil prices surged over 3% on Monday, rising above $80 per barrel for the first time since August, amid heightened fears of widespread conflict in West Asia and disruptions to supply. At 0945 IST, the December Brent crude contract on the Intercontinental Exchange was $80.11 per barrel, compared to $80.93 a barrel on Monday. It was at $78.05 a barrel on Friday. 

The dollar index strengthened as investors continued to assess the outlook for US interest rates after the stronger-than-expected non-farm payrolls data on Friday diminished hopes of large rate cuts by the US Federal Reserve. At 0945 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 102.41, compared to 102.49 on both Monday and Friday.

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. (Pratiksha) 

India Rupee: Expected range for rupee - Oct 8

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 Ashish Shirke

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