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Informist, Thursday, Oct. 10, 2024

By Pratiksha

NEW DELHI – The rupee ended steady against the dollar on Thursday as the Reserve Bank of India's firm grip on the currency ensured it was not weighed by a surge in the dollar index and oil marketing companies' dollar purchases, dealers said. "It is the same story, nothing has changed," said a dealer at a state-owned bank. "They (RBI) are holding the level, like every day."

The Indian unit settled at 83.9675 a dollar, at a spitting distance from its record low of 83.9900 a dollar, and broadly unchanged from its previous close of 83.9625 a dollar. The local unit traded in a thin band of just 4 paise throughout the day.

Most Asian currencies fell between 0.1% and 0.5% against the greenback due to a sharp rise in the dollar index. However, the Indian currency was the best performer among its peers after the offshore Chinese yuan and the Taiwan dollar, both of which gained 0.1% against the US unit. 

The rupee began the day largely steady against the greenback but came under pressure shortly afterwards as state-owned banks rushed to purchase the greenback on behalf of oil marketing companies, noting a slight rise in crude oil prices, dealers said. Oil importers purchased the greenback on fear that prices may rise further in the coming days owing to supply side risks amid the ongoing geopolitical tensions in West Asia.  

Crude prices gained slightly during the day due to a rise in fuel demand as Hurricane Milton loomed over the US, the world's largest oil producer and consumer, and risk of Iranian supply disruptions caused by the West Asian conflict. At 1530 IST, the December Brent crude contract on the Intercontinental Exchange was $77.70 per barrel, compared with $76.58 on Wednesday. "Oil bids (buying of dollars) came in the morning only," said a dealer at a private bank. "But there were inflows as well, so the levels were controlled."

Further, banks bought the greenback on behalf of foreign portfolio investors looking to pull out money from domestic equities, which also weighed on the Indian unit, dealers said. So far this month, FPIs have withdrawn almost $5.2 billion worth of funds from the domestic equities. 

However, the central bank likely stepped in to sell the greenback around the 83.96-83.97 a dollar level, which aided the Indian unit and prevented it from inching closer to the psychologically crucial level of 84-per-dollar, dealers said. The RBI has been steadfast in protecting the key level since August. 

"The spot level is stuck. It is just not moving. At this point, the rupee feels like a pegged currency, without an official memo on that," said a dealer at a foreign bank. Most dealers expressed their displeasure over the tight range of the Indian unit, citing lack of trading opportunities. So far this month, on average, the rupee has moved in only a 4 paisa intraday range. 

Further, some foreign banks sold the greenback for foreign fund inflows into corporates, which aided the Indian unit, dealers said. A portion of the foreign fund inflows were likely on account of Adani Enterprises Ltd's qualified institutional placement, which opened on Wednesday, they said.

The dollar index rose to a near two-month high during European trade as investors grew more confident that the US Federal Reserve may opt for a patient approach for further monetary policy easing, which also weighed on the Indian unit, according to dealers. The Fed's September meeting minutes on Wednesday showed that while a "substantial majority" of Fed officials backed a looser monetary policy with a large 50 bps rate cut, there was also a broader consensus that the initial step would not lock the Fed into any specific pace for future rate cuts. 

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 78.3%. The odds of no rate cut at all next month are 21.7%, according to the CME FedWatch tool. At 1530 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 102.87, compared to 102.88 on Wednesday and 102.47 on Tuesday. The dollar index surged to a near two-month high of 102.97 earlier in the day. 

FORWARDS

Premium on the one-year dollar/rupee forward contract ended at an over one-month low, as banks sold dollars for forward delivery on the view that the interest rate differential between the US and India may not widen as much as previously expected, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

"The spot market is dead, but there is movement in forwards," said a dealer at a state-owned bank. "With the US rate cuts being fleshed out, we are seeing forwards falling. I think once there is more clarity, there is more scope for fall."

Expectations about the interest rate differential between India and the US not widening as much as expected earlier have increased after recent economic data and comments from Fed officials led to investors pricing in a 50 bps rate cut in the US in November. Dallas Fed Bank President Lorie Logan said she supported last month's outsized rate cut but wants smaller reductions going ahead, given "still real" upside risks to inflation and "meaningful uncertainties" over the economic outlook.

Yield on the 10-year US Treasury note rose ahead of the release of the US inflation print, due Thursday, which weighed on the premiums, dealers said. The US consumer price index for September is forecast to have risen 0.1% on a monthly basis after rising 0.2% in August, according to a poll by Dow Jones. Core CPI is expected to have risen 0.2% in September after rising 0.3% in August, the poll showed.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 184.79 paise, against 188.92 paise on Wednesday. On an annualised basis, the premium was 2.20%, against Wednesday's close of 2.23%.

OUTLOOK

On Friday, the rupee will take cues from movements in the dollar index after the release of the US September inflation data, dealers said. "US CPI may mostly come in line with expectations or lower. The rupee should gain from it," a dealer at a state-owned bank said.

The rupee will also take cues from a movement in crude oil prices, they 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.

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:Dollar index near 2-month high post FOMC meet minutes

MUMBAI – The dollar index surged to a near two-month high Thursday as the minutes of the US Federal Open Market Committee's September meeting suggested that the future pace of cuts by the Fed will not be determined by a large initial reduction. The Fed had cut rates by 50 basis points last month. While a "substantial majority" of Fed officials at the September meeting backed a looser monetary policy with a large 50-bps rate cut, there was also a broader consensus that the initial step would not lock the Fed into any specific pace for future rate cuts. 

Currently, traders have priced in an 82.7% probability of a 25-bps rate cut in November, while a small fraction of 17.3% sees the probability of the Fed maintaining the status quo. At 1458 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 102.93, compared with the close of 102.88 on Wednesday and 102.47 on Tuesday. The dollar index surged to a near two-month high of 102.94 on Wednesday. 

Market participants await the US consumer price index data for September for more cues on the quantum of future rate cuts by the US Federal Reserve. The CPI data is forecast to have risen 0.1% on a monthly basis in September, after rising 0.2% in August, according to a poll by Dow Jones. Core CPI is expected to have risen 0.2% in September, after rising 0.3% in August, the poll showed.

The New Zealand dollar was up 0.2% against the dollar, paring some losses from Wednesday. A rise in the offshore yuan supported the New Zealand currency. The Chinese yuan rose ahead of a briefing on fiscal policies by Finance Minister Lan Fo'an on Saturday. Any movement in the Chinese currency will impact the New Zealand dollar owing to their close bilateral-trade relationship. The New Zealand dollar was down against the dollar on Wednesday after the central bank slashed their benchmark official cash rate by 50 basis points. The Australian dollar was up 0.1% against the greenback.

The Japanese yen was up 0.3% against the dollar. Market participants now await the Bank of Japan's inflation forecasts, and are expected to keep interest rates unchanged at its next meeting scheduled on Oct.30-31. The Japanese central bank is expected to maintain its forecast for inflation around its 2% target through March 2027, a Reuters report said.

The pound sterling was 0.1% higher against the dollar as data showed the UK house price headline index rose to 11 in September from zero in August, a report by the Royal Institution of Chartered Surveyors showed. The index rose for the first time in almost two years amid rising expectations that the Bank of England will further ease their benchmark rates, reports said.

The Euro was steady against the dollar as stronger economic data from Germany offset the downward pressure from a rise in the dollar index. Germany, the largest economy in the European Union, recorded a surprising rise in exports in August while the market participants expected a decline. Official data released on Wednesday showed that exports rose by 1.3% in August, a stronger-than-expected figure of a 1.0% decline in a Reuters poll. Further, Germany's trade surplus was boosted citing a sharp fall in imports, which fell by 3.4% in August.  (Gowri Lakshmi)

India Rupee: Remains steady; RBI's likely dlr sales offset 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 continuous demand for dollars from oil marketing companies, dealers said. "The rupee will likely be steady and may only move 1–2 paise up or down," a dealer at a state-owned bank said. The rupee has moved in a range of barely 3 paise so far on Thursday. 

The central bank likely sold dollars to avert the Indian unit from hitting the psychologically-important level of 84-per-dollar, dealers said. They expect the RBI to continue preventing the key level for the rest of the day. 

The rupee came under pressure as state-owned banks rushed to purchase dollars, likely on behalf of oil marketing companies noting a slight rise in crude oil prices. Crude oil prices edged slightly higher on Thursday as geopolitical tensions in West Asia persisted. Oil importers were prompted to purchase dollars in fear of a further rise in crude prices, dealers said.

"Volumes are relatively less. Importers are actively purchasing, however they are not yet aggressive," a dealer at a state-owned bank said. At 1350 IST, the December Brent Crude contract on the Intercontinental Exchange was $76.72 per barrel, compared with $76.58 on Wednesday. 

Further, a rise in the dollar index also weighed on the Indian unit, dealers said. The dollar index surged to a near two-month high in European trade after the minutes of the US Federal Open Market Committee's September meeting, where it cut rates by 50 bps, suggested that the future pace of cuts by the Fed will not be determined by a large initial reduction. At 1350 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 102.89, compared with the close of 102.88 on Wednesday and 102.47 on Tuesday. 

Meanwhile, some foreign banks sold dollars, likely on behalf of overseas investors looking to invest in the ongoing initial public offering of Garuda Construction and Engineering Ltd., which opened for subscription on Tuesday and will close Thursday. Foreign fund inflows were also on account of Adani Enterprises Ltd's qualified institutional placement, which opened on Wednesday.

Market participants now await the US Consumer Price Index, due later today, for more cues on the likely quantum of interest rate cut by the US Fed in its November policy meeting.

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 10

MUMBAI – At 0900 IST, the rupee was at 83.9425 a dollar, from its previous close of 83.9625. At 1120 IST, the rupee was at 83.9525 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 dlr index hits 2-mo high; US CPI eyed

MUMBAI – Most Asian currencies were down against the dollar as the dollar index rose to a near-two-month high on Wednesday after the release of the US Federal Open Market Committee's meeting minutes and comments from several Federal Reserve officials. However, a rise in Asian equities, tracking Wall Street, limited losses for the emerging market currencies.  

The dollar index surged as the minutes of the US Fed's September meeting showed that while a "substantial majority" of Fed officials backed a looser monetary policy with a large 50 bps rate cut, there was also a broader consensus that the initial step would not lock the Fed into any specific pace for future rate cuts. 

Further, Dallas Fed Bank President Lorie Logan said she supported last month's outsized rate cut but wants smaller reductions going ahead, given "still real" upside risks to inflation and "meaningful uncertainties" over the economic outlook. Currently, traders have priced in an 82.7% probability of a 25-basis-point rate cut in November, while a small fraction of 17.3% sees the probability of the Fed maintaining the status quo. 

At 1015 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 102.89, compared to 102.88 on Wednesday and 102.47 on Tuesday. The dollar index surged to a near two-month high of 102.94 on Wednesday. 

The Malaysian ringgit was down 0.3% against the dollar. The South Korean won was down 0.2% ahead of the Bank of Korea's policy outcome on Friday. As many as 20 out of 22 economists in a Bloomberg poll expect a 25 bps rate cut by the Bank of Korea, bringing the benchmark interest rate to 3.25%.   

The Indonesian rupiah and the Phillipine peso were also down 0.2% against the greenback. Bucking the trend, the offshore Chinese yuan was up 0.2% against the dollar tracking gains in domestic equities. As on 0930 IST, China's benchmark Shanghai Composite was up 2.95%. China's Finance Minister will likely brief on fiscal adjustments and policy measures on Saturday. Finance Minister Lan Fo'an will discuss the initiatives to enhance "counter-cyclical adjustments" in fiscal policy, reports said.

The Taiwan dollar was up 0.1% against the greenback despite data released on Wednesday showing that Taiwan's inflation dropped below the central bank's 2% target in September, to reach 1.82%, its lowest level in eight months. 

The Thai baht was flat against the dollar even after comments from deputy Finance Minister Paopoom Rojanasakul, increased the pressure on the Bank of Thailand to cut interest rates to boost the economy and weaken the currency. "It's highly possible they will cut this year either this meeting or next meeting," Rojanasakul said in an interview on Wednesday. "A 25 basis point cut would be a good start, but whether that is enough or not, we will need to keep monitoring and adjusting," he added.

Market participants now await the US Consumer Price Index, due later today, for more cues on the likely quantum of interest rate cut by the US Fed in its November policy meeting. (Gowri Lakshmi)

India Rupee: Steady on caution before US CPI data; surge in dlr index weighs

MUMBAI – The rupee was steady against the dollar on Thursday as market participants were cautious ahead of the release of the US inflation data due later in the day, dealers said.

Traders await the US consumer price index data for September for more cues on the quantum of future rate cuts by the US Federal Reserve. The CPI data is forecast to have risen 0.1% on a monthly basis in September, after rising 0.2% in August, according to a poll by Dow Jones. Core CPI is expected to have risen 0.2% in September, after rising 0.3% in August, the poll showed.

Meanwhile, the dollar index surged to a near two-month high on Wednesday as the minutes of the US Federal Open Market Committee's September meeting where it cuts rates by 50 bps, suggested that the future pace of cuts by the Fed will not be determined by a large initial reduction. While a "substantial majority" of Fed officials at the September meeting backed a looser monetary policy with a large 50 bps rate cut, there was also a broader consensus that the initial step would not lock the Fed into any specific pace for future rate cuts. 

Currently, traders have priced in an 82.7% probability of a 25-basis-point rate cut in November, while a small fraction of 17.3% sees the probability of the Fed maintaining the status quo. "The rise in dollar index is surely weighing on the rupee, but RBI is always there, they will be active," a dealer at a state-owned bank said.

At 0950 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 102.89, compared with the close of 102.88 on Wednesday and 102.47 on Tuesday. The dollar index surged to a near two-month high of 102.94 on Wednesday. 

However, dealers expect the Reserve Bank of India to intervene in the domestic spot market through dollar sales to prevent the rupee from inching toward the psychologically-crucial level of 84-per-dollar, as it has done in the past.

A rise in crude oil prices during early Asian trade also weighed on the Indian unit, according to dealers. At 0950 IST, the December Brent Crude contract on the Intercontinental Exchange was $77.13 per barrel, compared to $76.58 on Wednesday. 

Dealers expect some foreign banks to sell dollars on behalf of overseas investors looking to invest in the ongoing initial public offering of domestic companies, which may aid the Indian currency, dealers said. Garuda Construction and Engineering Ltd.'s public offer opened for subscription on Tuesday and will close Thursday.

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 10

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 Akul Nishant Akhoury

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