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Informist, Wednesday, Oct. 16, 2024

By Kabir Sharma and Gowri Lakshmi

MUMBAI – The rupee rose against the dollar Wednesday to end slightly above the 84 per dollar mark as some banks sold the greenback for foreign portfolio investors wanting to invest in the initial public offering of Hyundai Motor India Ltd., dealers said. However, the rise was limited as banks bought dollars on behalf of importers, they said.

"The uptick (in rupee) is because of IPO flows, there are some today and more will come tomorrow," a dealer at a state-owned bank said. After moving in a narrow range of 9 paise throughout the day, the rupee rose above the 84 per dollar mark to settle at 83.99 against the dollar. This is the first instance the Indian currency has risen above the 84 per dollar mark after it fell to a record low on Friday.

Dealers said inflows were on account of Hyundai Motor India's IPO, which opened on Tuesday and ends Thursday. As at 1548 IST, more than 99% of the portion allocated for qualified institutional buyers was subscribed by foreign institutional investors. On the first day, the IPO saw an underwhelming response, as it was subscribed only 18%. The company received bids for 17.81 million shares against 99.77 million shares on offer.

The rupee had opened steady against the dollar at 84.0375 as a fall in crude oil prices offset the impact of a surge in the dollar index, dealers said. Oil prices fell 4% on Tuesday because of a weak demand growth outlook by the Organization of the Petroleum Exporting Countries and reassurance of undisrupted supply by the International Energy Agency. A drop in crude oil prices reduces India's import bill, as the country is one of the top importers of crude oil.

The fall in crude oil prices was capped Wednesday as importers, still wary about the situation in West Asia, bought the commodity. At 1530 IST, the December Brent crude contract was at $73.96 per barrel on the Intercontinental Exchange, compared to $74.25 per barrel on Tuesday and $79.04 per barrel on Monday.

As importers rushed to purchase the greenback in anticipation of further depreciation in the rupee, the Indian unit fell to the day's low of 84.0725, just a whisker away from its lifetime low of 84.0750, dealers said. As the rupee neared its record low, state-owned banks started selling the greenback on behalf of the Reserve Bank of India, which checked the further fall of the rupee, they said.

Some banks also sold dollars on behalf of exporters, who sought to take advantage of the relatively higher dollar/rupee levels, which also supported the rupee, dealers said. "Exporters began booking prices as soon as the rupee breached the 84 level on Friday. Some have partially booked in the price while most exporters are waiting for the rupee to break the next key level at 84.08 a dollar or the psychologically crucial level of 84.10 a dollar," a dealer at a state-owned bank said.

The dollar index surged to an over two-month-high of 103.40 on Wednesday, which put downward pressure on the rupee, dealers said. The dollar index rose due to a decline in the probability of a 50-basis-point rate cut by the US Federal Reserve at its upcoming meeting. The probability of a 25-bps rate cut in November is 94.1%, against 86.7% on Tuesday, while traders have priced in a 5.9% chance of the Fed maintaining the status quo, according to the CME FedWatch tool.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.25, compared with 103.23 at close on Tuesday, and 103.21 on Monday.

Market participants now wait for key economic data points from the US to get more cues on the interest rate trajectory of the US Fed. The US retail sales, industrial production and weekly jobless claims are due on Thursday.

FORWARDS

The premium on the one-year dollar/rupee forward contract closed higher Wednesday, after it touched a six-week low earlier in the day, tracking a fall in US Treasury yields. Premiums fell during the day as dealers do not anticipate the interest rate differential between the US and India to rise as much as previously thought. Forward dollar sales by banks also softened the impact of a fall in the benchmark 10-year US Treasury yield, dealers said.

Premiums on forwards of a currency pair are reflective of the interest rate differential between two countries. The 10-year US Treasury yield fell on Tuesday after data showed the manufacturing sector in New York unexpectedly contracted.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 186.47 paise, against 183.96 paise Tuesday. On an annualised basis, the premium was at 2.21%, against the previous close of 2.19%.

OUTLOOK

On Thursday, the rupee will take cues from movement in the dollar index and crude oil prices. Market participants also await the monetary policy outcome by the European Central Bank on Thursday. The central bank is expected to slash the key deposit rate by 25 bps to 3.25%, as per a poll by Reuters.

Dealers expect the RBI to continue selling dollars to keep the Indian unit from falling sharply. They also expect the rupee to be supported by continued dollar sales by foreign banks on behalf of overseas investors looking to invest in the ongoing IPO of Hyundai Motor India. "The rupee can rise as high as 83.96 a dollar upon inflows," a dealer at a private bank said.

During the day, the rupee is seen in a range of 84.00-84.15 a dollar, with strong technical support pegged at 84.10.

India Rupee - World FX: Sterling down as UK inflation lower than expected

MUMBAI – The pound sterling fell 0.5% against the dollar on Wednesday after data showed that UK inflation slowed by 1.7% on year in September, below a Reuters poll estimate of 1.9%. The inflation number in September was the lowest since April 2021. Headline CPI remained flat on month while services inflation slowed to 4.9% on year.

The New Zealand dollar was down 0.2% against the US dollar for the third consecutive day. However, the fall was limited as the country's consumer price index rose to 2.2% on the year in September, within the Reserve Bank of New Zealand's target 3%.

The Australian dollar was 0.2% lower against the greenback after the dollar index surged to an over two-month-high of 103.40 on Wednesday. The dollar index rose due to decline in the probability of a 50-basis-point rate cut by the US Federal Reserve at its upcoming meeting. The probability of a 25-bps rate cut in November is 94.1%, against 86.7% on Tuesday, while traders have priced in a 5.9% chance of the Fed maintaining status quo.

At 1512 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.26, compared with 103.23 at close on Tuesday, and 103.21 on Monday. Market participants will track US retail sales, industrial production, and weekly jobless claims, all lined up Thursday, for cues on Fed's interest rate decision going forward.

The euro was down 0.1% against the greenback ahead of the monetary policy outcome of the European Central Bank on Thursday. A Reuters poll sees the central bank slashing the benchmark interest rate by 25 bps to 3.40% from 3.65%. Market participants are also waiting for the Eurozone inflation data that will be detailed later in the day. The inflation is seen above the central bank's target of 2% at 2.6%.

The Japanese yen was down 0.1% against the dollar. On Wednesday, Bank of Japan policymaker Seiji Adachi said the bank must raise interest rates "at a very moderate pace", hinting that appreciation of the yen amid slowing global demand are weighing on the country's inflation and wage growth. "Given high uncertainty surrounding global developments, there is significant uncertainty over next year's wage developments in Japan. We must carefully monitor the situation," Adachi said. (Gowri Lakshmi)

India Rupee: Steady; RBI's likely dollar sales offset importers' dollar buys

MUMBAI – The rupee moved in a thin band as banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset the impact of dollar purchases by importers, dealers said. Importers purchased the greenback, wary of further depreciation in the rupee. "There is heavy buying pressure (of dollars) from importers. They are expecting the rupee to fall as low as 84.10 a dollar," a dealer at a state-owned bank said. 

"We see high resistance at 84.0800-84.0825 a dollar. The next key level is seen at 84.08, but the psychologically crucial level will be 84.10 a dollar, which the exporters are waiting to breach," he added. 

The rupee hovered around its lifetime low of 84.0750, while the dollar index surged to over a 2-month-high on Wednesday. The rupee was weighed down by the rise in the dollar index due to the probability of a 50-basis-point rate cut by the US Federal Reserve at its upcoming meeting. Currently, the probability of a 25-bps rate cut in November is 94.1%, against 86.7% on Tuesday, while traders price in a 5.9% chance of the Fed maintaining the status quo. 

At 1256 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 103.37, compared with 103.23 at the close on Tuesday, and 103.21 on Monday. The dollar index hit an over 2-month high of 103.40 on Wednesday. Market participants will track US retail sales data, industrial production figures, and weekly jobless claims data, all lined up for Thursday. 

For the rest of the day, the rupee is seen in the range of 84.00-84.15 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.10 a dollar. (Gowri Lakshmi)

 India Rupee: Asia FX - Down; policy outcomes of several central bks awaited

MUMBAI – Most Asian currencies were down against the greenback, tracking the broadly strong dollar index. Market participants remain cautious during the Asian trade ahead of monetary policy announcements by the central banks of Indonesia, the Philippines, and Thailand. 

The dollar index strengthened as the probability of a 50-basis-point rate cut at the US Federal Reserve's upcoming policy meeting waned. Currently, the probability of a 25-bps rate cut in November is 95.4%, against 86.7% on Tuesday, while traders price in a 4.6% chance of the Fed maintaining the status quo. At 0939 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.22, compared to the close of 103.23 on Tuesday and 103.21 on Monday. Tracking the dollar index, the Malaysian ringgit was down 0.3% against the dollar.

The South Korean won was down 0.3% against the dollar. Data released earlier on Wednesday showed that the country's unemployment benefits claims fell for the second consecutive month. The number of new applicants claiming unemployment benefits was 81,000 in September, down by 1% on year. Market participants now await the monetary policy committee outcome of the Bank of Korea on Friday. 

The Indonesian rupiah was down 0.3% against the greenback ahead of Bank Indonesia's policy outcome due later in the day. Bank Indonesia is expected to leave its interest rates unchanged at 6%, despite inflation falling to the lowest level in three years. Over 75% of economists in a Reuters poll forecast the central bank to maintain the status quo on its benchmark interest rate.

The Chinese yuan was down 0.1% against the dollar. On Thursday, China's Housing Ministry is expected to brief on new measures aimed to boost the struggling property sector.

The Philippines peso was down 0.1% against the dollar as Bangko Sentral ng Pilipinas is scheduled to announce their monetary policy decision on Wednesday. The Philippine central bank is expected to slash their benchmark rate by 25 bps to 6.00%. The Thai baht remained subdued ahead of the country's monetary policy decision later in the day, where its central bank is expected to keep interest rates unchanged. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Oct 16

MUMBAI – At 0900 IST, the rupee was at 84.0375 a dollar, from its previous close of 84.0375. At 1113 IST, the rupee was at 84.0550 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee: Steady as slump in crude prices offsets strength in dlr index

MUMBAI – The rupee was largely steady against the dollar Wednesday as a drop of 4% in crude oil prices on Tuesday offset the impact of a strong dollar index, dealers said. Oil prices fell due to a weak outlook on demand growth by the Organization of the Petroleum Exporting Countries, and reassurance of undisrupted supply by the International Energy Agency. A fall in crude oil prices supports India's import bill, as the country is one of the top importers of crude.

At 1000 IST, the December Brent crude contract on the Intercontinental Exchange was at $74.45 per barrel, compared to $74.25 per barrel on Tuesday and $79.04 per barrel on Monday. Traders now await US crude and fuel inventory data later in the day. Analysts in a Reuters poll said they estimate addition of 1.8 million barrels.

"The rupee is stable and is expected to touch the low of 84.0750 today as well, but that will be heavily protected," a dealer at a private bank said. On Tuesday, US Federal Bank of San Francisco President Mary Daly said the central bank was likely to cut rates further as long as economic data meet expectations. Market participants will track US retail sales data, industrial production figures, and weekly jobless claims data, all lined up for Thursday. 

Currently, the probability of a 25-basis-point rate cut by the US Federal Reserve in November is 95.4%, against 86.7% on Tuesday, while traders price in a 4.6% chance of the Fed maintaining status quo. At 0939 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.21, compared to the close of 103.23 on Tuesday and 103.21 on Monday.

The Indian rupee may also be weighed down by weakness in other Asian currencies, with the offshore Chinese yuan falling 0.1% against the dollar, extending its losses from Tuesday. The Chinese yuan began depreciating due to lack of clarity about an economic stimulus package from the government. 

Dealers expect foreign banks to sell the greenback on behalf of overseas investors looking to invest in the ongoing initial public offering of Hyundai Motor India Ltd., which may limit the fall of the rupee. "Inflows into equities are expected, but that will be mostly absorbed by buying (of dollars)," a dealer at a private bank said. Dealers expect importers to purchase the greenback in anticipation of further depreciation in the rupee. 

For the rest of the day, the rupee is seen in the range of 84.00-84.15 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.10 a dollar. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Oct 16

MUMBAI – Following are the expected support and resistance levels for the rupee on Wednesday, 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 Ashish Shirke

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