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Informist, Friday, Oct. 18, 2024

By Kabir Sharma

MUMBAI – The rupee ended at a record closing low against the dollar on Friday on the back of a surge in the dollar index and purchases of greenback by foreign banks for foreign fund outflows from domestic equities, dealers said. "The dollar was pressurising and some demand (for dollars) was there. Outflows are still happening from stocks and some oilers too were buying," a dealer at a state-owned bank said. 

After touching a record low of 84.0775 a dollar during the day, the rupee ended at 84.0725 a dollar. The rupee moved in a thin range of 3 paise during the day. 

The rupee got some support from dollar sales by state-owned banks on behalf of the Reserve Bank of India, which prevented the rupee from falling more, dealers said. If not for the RBI's dollar sales, the Indian unit could have tested 84.10 a dollar level which would have triggered a host of stop losses leading to sudden depreciation in the rupee, they said.

The rupee opened steady against the dollar as the impact of a strong dollar index was offset by dollar sales by state-owned banks on behalf of the RBI. The dollar index rose to an over two-month high on Thursday after data showed that US retail sales rose 0.4% in September. Analysts in a Reuters poll had forecast a rise of 0.3%. Further, US weekly jobless claims for the week ended Oct. 12 unexpectedly fell 19,000, against an estimated increase of 260,000. The strong economic data suggested that the US Federal Reserve may resort to modest rate cuts going forward.

Traders are currently pricing in a 93.0% probability of a 25-basis-point rate cut by the US Fed at its November policy meeting, while there is a 7.0% probability of status quo, according to the CME FedWatch tool. The strength in the dollar index was also on account of a fall in the euro after the European Central Bank on Thursday cut interest rates by 25 bps for the third time this year. At 1702 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.65, compared to 103.77 on Thursday and 103.52 on Wednesday. The dollar index rose to a fresh over-two-month high of 103.87 on Thursday. 

The rupee also came under pressure from dollar demand by foreign banks for foreign fund outflows from equities, dealers said. "The Indian unit ended flat against the dollar after testing new lows this Friday’s session pressured by equity outflows," a trader at a brokerage firm said. "RBI’s aggressive intervention capped further losses," he said. 

A rise in the offshore Chinese yuan and other Asian currencies supported the rupee, dealers said. The Chinese yuan was up 0.1% against the dollar after data released earlier on Friday showed that China's GDP rose 4.6% on year in Jul-Sept. This was higher than the estimate of 4.5% in a Bloomberg poll. 

Some banks bought the greenback on behalf of oil marketing companies, which were looking to stock up the greenback fearing further depreciation in the Indian unit, dealers said. 

FORWARDS

The premium on the one-year dollar/rupee forward contract fell slightly on Friday due to a rise in US Treasury yields, dealers said. The US yields rose after US retail sales for September and weekly unemployment data, released Thursday, indicated the world's largest economy remained resilient. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

The near-term dollar/rupee forward contracts, including the one-month and two-month tenures, fell due to a shortage of dollars in the system. Dealers said there was a dollar crunch in the system owing to continuous foreign fund outflows from domestic markets. So far this month, FPIs have net sold securities worth $7.9 billion from the domestic market, the highest in a month since March 2020. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 185.06 paise, against 186.05 paise on Thursday. On an annualised basis, the premium was at 2.20% against the previous close of 2.21%.

OUTLOOK

On Monday, the rupee will take cues from the movement in the dollar index and crude oil prices over the weekend. The dollar may see some movement due to US housing data and speeches from some US Federal Reserve officials later in the day. 

Dealers expect the Reserve Bank of India to intervene in both the non-deliverable forwards market and the domestic spot market through dollar sales to keep the Indian unit from falling sharply, they 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: Pound sterling up post strong UK retail sales data

MUMBAI – The pound sterling was up 0.2% against the greenback after data released earlier in the day showed that UK retail sales in September unexpectedly rose by 0.3%, against the forecast of a 0.3% fall in a Reuters poll. 

The Australian dollar and New Zealand dollar were up 0.2% against the dollar after data on Friday showed China GDP grew by 4.6% on year in the quarter ended September. This was higher than the estimate of 4.5% in a Bloomberg poll. Further, China's industrial output in September grew 5.4% on year, up from 4.5% in August. Both currencies track developments in China due to their close bilateral trade relations with the country. 

The dollar index hovered near the 11-week high it hit on Thursday, as recent economic data in the US further cemented expectations of modest rate cuts by the US Federal Reserve going ahead as the economy remains resilient. US retail sales rose 0.4% in September, compared to an unrevised 0.1% rise in August. Analysts in a Reuters poll had forecast a rise of 0.3%. Further, US weekly jobless claims for the week ended Oct. 12 unexpectedly fell 19,000, against an estimated increase of 260,000. Now, traders are pricing in a 92.2% probability of a 25-bps rate cut by the US Fed at its November policy meeting, while there is a 7.8% probability of status quo, according to the CME FedWatch tool.

At 1605 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.66, compared to 103.77 on Thursday and 103.52 on Wednesday. The dollar index rose to an 11-week high of 103.87 on Thursday. 

The Japanese yen was up 0.2% against the dollar as Japan's inflation grew slightly more than expected in September. Japan's core consumer price index rose 2.4% on year in September, compared to expectations of 2.3%. The September CPI data is one of the major economic data points the Bank of Japan will scrutinise at its next policy meeting on Oct. 30-31.

The euro rebounded after falling sharply against the dollar on Thursday after the European Central Bank slashed its benchmark interest rate by 25 bps to 3.25% on Thursday for the third time this year, in line with market expectations. "Have we broken the neck of inflation? Not yet. Are we in the process of breaking that neck? Yes," European Central Bank President Christine Lagarde said in a press conference after the monetary policy committee outcome. (Gowri Lakshmi)

India Rupee: Hits record low on FPI outflows; RBI's active dollar sales aid

MUMBAI – The rupee hit a lifetime low of 84.0775 a dollar Friday, as foreign banks persistently purchased the greenback, likely on behalf of foreign portfolio investors looking to withdraw funds from domestic equities, dealers said. However, state-owned banks sold dollars, likely on behalf of the Reserve Bank of India, which prevented the Indian unit from falling further, they said.

"The Chinese government is very stubborn in giving out economic stimulus packages. These are now attracting investors, where they are pulling money out of the Indian market," a dealer at a private bank said. Investors have been reallocating funds to China after the country's announcement of a slew of fiscal stimulus measures to support its economy. So far this month, FPIs have net withdrawn almost $8.4 billion from the domestic market, the highest in a month since March 2020, around the time the COVID-19 pandemic advanced. 

The central bank actively sold the greenback around the 84.07 a dollar level to prevent excessive volatility in the Indian unit, dealers said. They expect the RBI to continue intervening around the level throughout the day. 

A surge in the dollar index also weighed on the rupee, dealers said. The dollar index strengthened to an over two-month high on Thursday after robust US retail data cemented expectations that the US Federal Reserve may proceed with modest interest rate cuts going ahead. 

Currently, traders are pricing in a 90.2% probability of a 25-bps rate cut by the US Fed at its November policy meeting, while there is a 9.8% probability of status quo, according to the CME FedWatch tool. At 1341 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.65, compared to 103.77 on Thursday and 103.52 on Wednesday. The dollar index rose to a fresh over two-month high of 103.87 on Thursday. 

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

India Rupee: Technical Levels for rupee - Oct 18

MUMBAI – At 0900 IST, the rupee was at 84.0525 a dollar, from its previous close of 84.0675. At 1145 IST, the rupee was at 84.0675 per dollar. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee - Asia FX : Most up on rise in Asian equities, Chinese yuan

MUMBAI – Most Asian currencies traded higher against the dollar, tracking gains in domestic equities and offshore Chinese yuan. Most Asian share indices rose after Japan's September core inflation fell compared with the previous month and China's industrial production in September rose more than expected. 

The Chinese yuan was up 0.1% against the dollar after data released earlier on Friday showed that the GDP rose 4.6% on year in Jul-Sept. This was higher than the estimate of 4.5% in a Bloomberg poll. Further, China's industrial output in September grew 5.4% on year, up from 4.5% in August. Following the data, the Shanghai Composite Index was up 0.67% as of 0930 IST. The Thai baht and the Malaysian ringgit were up 0.2% and 0.1%, respectively, against the greenback.  

However, gains in Asian currencies were capped as the dollar index strengthened to over a two-month high on Thursday post upbeat US economic data. US retail sales rose 0.4% in September, compared to an unrevised 0.1% rise in August. Analysts in a Reuters poll had forecast a rise of 0.3%. Further, US weekly jobless claims for the week ended Oct. 12 unexpectedly fell 19,000, against an estimated increase of 260,000, which cemented expectations that the US Federal Reserve may proceed with modest interest rate cuts going ahead. 

Currently, traders are pricing in a 93.0% probability of a 25-bps rate cut by the US Fed at its November policy meeting, while there is a 7.0% probability of status quo, according to the CME FedWatch tool. At 0923 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.67, compared to 103.77 on Thursday and 103.52 on Wednesday. The dollar index rose to a fresh over two-month high of 103.87 on Thursday. 

The Indonesian rupiah was up 0.2% against the dollar ahead of the inauguration of the country's new President Prabowo Subianto on Sunday. The Philippine peso was up 0.2% against the US unit. (Gowri Lakshmi)

India Rupee: Touches record low; RBI's likely dollar sales lend support

MUMBAI – The rupee touched its record low of 84.0750 against the dollar on Friday, earlier hit on Tuesday, due to a surge in the dollar index, dealers said. However, state-owned banks sold the greenback, likely on behalf of the Reserve Bank of India, which limited losses for the Indian unit, they said.

"The rupee is weighed as there are continuous bets and buying pressure (of dollars) due to the strengthening in the dollar index. The rupee may rise as high as 84.05 or fall as low as 84.08 (a dollar)," a dealer at a state-owned bank said.

The dollar index rose to an over two-month high on Thursday after data showed that US retail sales rose 0.4% in September, compared to an unrevised 0.1% rise in August. Analysts in a Reuters poll had forecast a rise of 0.3%. Further, US weekly jobless claims for the week ended Oct. 12 unexpectedly fell 19,000, against an estimated increase of 260,000. Following this, traders now expect only modest rate cuts by the US Federal Reserve going ahead as the economy remains resilient.

Currently, traders are pricing in a 93.0% probability of a 25-basis-point rate cut by the US Fed at its November policy meeting, while there is a 7.0% probability of status quo, according to the CME FedWatch tool. The dollar index was also strengthened by a fall in the euro after the European Central Bank on Thursday cut interest rates by 25 bps for the third time this year. At 1010 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.70, compared to 103.77 on Thursday and 103.52 on Wednesday. The dollar index rose to a fresh over-two-month high of 103.87 on Thursday. 

Dealers expect the central bank to continue intervening through dollar sales to prevent any sharp fall in the rupee throughout the day, keeping the Indian unit in a tight range. "Neither importers nor exporters are seen now since volume is down due to lack of movement in market," a dealer at a state-owned bank said.

A rise in the offshore Chinese yuan and other Asian currencies supported the rupee, dealers said. The Chinese yuan rose 0.1% against the dollar owing to upbeat economic data. 

For the rest of the day, the rupee is seen in the range of 84.00-84.10 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 18

MUMBAI – Following are the expected support and resistance levels for the rupee on Friday, 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 Saji George Titus

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