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Informist, Monday, Oct. 21, 2024

By Gowri Lakshmi

MUMBAI – The rupee ended flat against the dollar on Monday as banks sold the greenback, likely on behalf of the Reserve Bank of India, offsetting the dollar purchases for foreign investors looking to withdraw funds from the domestic equities market and importers, dealers said. Some exporters sold dollars to take advantage of the relatively higher dollar/rupee levels, which limited the fall in the Indian currency, they said.

"Yes the central bank was there, which did not allow it to break 08 levels (84.08 a dollar), no matter how much buying came in," a dealer at a state-owned bank said. The local currency settled at 84.0725 against the dollar, unchanged from its previous close on Friday. The rupee moved in a tight range of under 3 paise throughout the day.

A fall in the offshore Chinese yuan also weighed on the rupee, dealers said. The offshore Chinese yuan fell 0.2% against the dollar Monday after the People's Bank of China decided to slash two key benchmark interest rates to boost their consumer spending and revive the sluggish economy. 

The rupee opened steady at 84.0550 against the dollar on Monday slightly higher than the level at which it was trading in the offshore non-deliverable forwards market before the domestic spot market opened. As soon as the market opened, the rupee came under pressure as banks purchased the greenback on behalf of importers. Importers were in the market, demanding dollars, as they anticipated a further fall in the rupee, dealers said.

The rupee also came under pressure due to a strength in the dollar index as investors now firmly believe that the US Federal Reserve will likely proceed with a moderate interest rate cut at its upcoming policy meeting. Earlier on Monday, US Federal Reserve President Raphael Bostic said, "if the economy continues to evolve as it does — if inflation continues to fall, labour markets remain robust, and we still see positive production — we will be able to continue on the path back to neutral."

Currently, traders are pricing in a 90.1% probability of a 25-basis-point rate cut by the US Fed in November, while they see a 9.9% chance of the Fed maintaining the status quo, according to CME FedWatch tool. 

The dollar index also received a boost due to safe-haven demand for the currency as geopolitical tensions in West Asia escalated. On Monday, Israel launched new wave of air strikes against Hezbollah-affiliated financial institution Al-Qard-Al-Hassan Association in Lebanon, reports said. At 1530 IST, the dollar index, which measures the strength of the greenback against six major currencies, was 103.67, compared to the close of 103.46 on Friday and 103.77 on Thursday. 

Further, foreign banks bought the greenback, likely on behalf of foreign portfolio investors looking to withdraw funds from domestic equities, which also weighed on the Indian unit, dealers said. "The Hyundai-IPO related outflow has begun, which put the rupee under pressure. The Chinese stimulus package is also prompting investors to re-allocate their funds from India to China," a dealer at a private bank said. 

Today, both the NIFTY-50 and the BSE Sensex closed 0.3% and 0.1% lower, respectively, which weighed on the rupee. So far in October, FPIs have net withdrawn almost $9.43 billion worth of funds from Indian markets.

However, the central bank likely persistently sold the greenback at around 84.07 a dollar, which prevented the Indian unit from depreciating, dealers said. 

FORWARDS

Premium on the one-year dollar/rupee forward contract rose on Monday after the Reserve Bank of India Governor Shaktikanta Das on Friday indicated that an early rate cut was not viable for the economy, dealers said. 

Das said that a rate cut at this stage would be premature, and termed it very risky. With this, market expectations of an early rate cut in India fell. Before Monday's upward movement, the dollar/rupee forward premium had been falling since the RBI changed its monetary policy stance to 'neutral' from 'withdrawal of accommodation'. After the change in the stance, market participants expected an early rate cut by the central bank, probably in December. 

As the dollar/rupee forward premium rose Monday, it touched an over-a-week high of 2.25% on an annualised basis, a level which prompted many banks to sell dollars for forward delivery, dealers said. This capped the rise in the forward premiums, they said.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 188.84 paise, against 185.31 paise on Friday. On an annualised basis, the premium was at 2.25% against the previous close of 2.20%.

OUTLOOK

On Tuesday, the rupee will take cues from the movement in the dollar index and crude oil prices. Foreign fund outflows from the domestic equities market are likely to continue, which is likely to push the rupee further down, dealers said.

"We expect more outflows during the week, which will bring the rupee down in the coming days," a dealer at a private bank said. Traders keenly await the US producer price index due on Thursday. "Market participants are now waiting for the next data point to get more insights about the health of the US economy," a dealer at a private bank said. 

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 84.08. 

India Rupee - World FX: Euro down after German PPI falls more than estimates

MUMBAI – The euro was down 0.1% against the greenback as Germany's producer price index in September fell 0.5% on month, more than the market forecast of a 0.2% fall. On a yearly basis, the producer price index fell 1.4%, more than 1.0% fall that the market estimated. Further, European Central Bank policymaker Gediminas Simkus on Monday said the ECB may cut its key interest rate to the "natural" level, between 2%-3%, reports said.

The dollar index strengthened following remarks by US Federal Reserve President Raphael Bostic. "I'm not in a rush to get to neutral," Bostic said on Friday. "If the economy continues to evolve as it does — if inflation continues to fall, labour markets remain robust, and we still see positive production — we will be able to continue on the path back to neutral," he added. 

Following his comments, investors cemented their views that the US Fed will likely proceed with a moderate interest rate cut at its upcoming policy meeting. Currently, traders are pricing in a 93.7% probability of a 25-basis-point rate cut by the US Fed in November, while they see a 6.3% chance of the Fed maintaining the status quo, according to CME FedWatch tool. 

The dollar also got a boost from the safe-haven demand as geopolitical tensions in West Asia escalated. On Monday, Israel launched new waves of air strikes against Hezbollah-affiliated financial institution Al-Qard-Al-Hassan Association in Lebanon, reports said. The Japanese yen and the pound sterling were down 0.2% and 0.3%, respectively.

At 1523 IST, the dollar index, which measures the strength of the greenback against six major currencies, was 103.60, compared to the close of 103.46 on Friday and 103.77 on Thursday.

The Australian dollar and New Zealand dollar were down 0.3% against the greenback after the People's Bank of China decided to slash two of their benchmark interest rates earlier in the day to boost consumer spending and revive the sluggish economy. Both the commodity-linked currencies of Australia and New Zealand are directly influenced by any change in the economic and monetary policies of China due to their close bi-lateral trade relations. The latest measure by China's central bank showed the dire situation its economy was in.  (Gowri Lakshmi) 

India Rupee: Premium up as Das' speech weighs on early India rate cut bets

MUMBAI – Premium on the one-year dollar/rupee forward contract was up today after the Reserve Bank of India Governor Shaktikanta Das on Friday indicated that an early rate cut was not viable for the economy, dealers said. Das said that a rate cut at this stage would be premature, and termed it very risky. With this, market expectations of an early rate cut in India fell.

"I think it was definitely after the governor's statement that we see forward (premium) seeing some upside movement," a dealer with a state-owned bank said. The RBI governor's speech provided an upward push to the dollar/rupee forward premium, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Before Monday's upward movement, the dollar/rupee forward premium had been falling since the RBI changed its monetary policy stance to 'neutral' from 'withdrawal of accommodation'. After the change in the stance, market participants expected an early rate cut by the central bank, probably in December. 

The one-year dollar/rupee forward premium also rose because of a slight ease in the benchmark 10-year US Treasury yield, which fell by one basis point on Friday. Dealers now wait for the release of more economic data from the US to assess the health of its economy. 

As the dollar/rupee forward premium rose Monday, it touched an over-a-week high of 2.24% on an annualised basis, a level which prompted many banks to sell dollars for forward delivery, dealers said. This capped the rise in the forward premiums, they said. Further, dealers had mixed opinions about the movement in the one-year dollar/rupee forward contract, with some anticipating it to rise further, while others expecting that it would fall back.  

At 1402 IST, the premium on the one-year exact-period dollar/rupee forward contract was 187.84 paise, against 185.31 paise on Friday. On an annualised basis, the premium was at 2.23% against the close of 2.20% Friday.  (Sourabh Kumar)

India Rupee: In thin band as RBI's dollar sales offset importers' purchases

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 in anticipation of a further fall in the Indian unit, they said.

"The rupee is weighed purely because of dollar demand. There is West Asian tension escalating, so safe haven demand for the dollar is on the rise. Market participants are also waiting for the US producer price index on Thursday," a dealer at a private bank said.

The rupee hovered around its lifetime low of 84.0775 as the dollar index strengthened after US Federal Reserve President Raphael Bostic said he was "not in a rush to get to neutral". This cemented the view that the US Fed might proceed with only a moderate rate cut in its upcoming meeting. At 1256 IST, the dollar index, which measures the strength of the greenback against six major currencies, was 103.60, compared to the close of 103.46 on Friday and 103.77 on Thursday.

Currently, traders are pricing in a 92.3% probability of a 25-basis-point rate cut by the US Fed in November, while they see a 7.7% chance of the Fed maintaining status quo, according to CME FedWatch tool. 

The dollar also got a boost from safe-haven demand as geopolitical tensions in West Asia escalated. On Monday, Israel launched new waves of air strikes against Hezbollah-affiliated financial institution Al-Qard-Al-Hassan Association in Lebanon, reports said. 

Further, some expected outflows from Hyundai Motor Co.'s initial public offering may weigh on the rupee, dealers said. "We can expect the Hyundai IPO outflow anytime from today (Monday)," a dealer at a private bank said. However, dealers expect the RBI to continue its intervention through dollar sales to prevent the rupee from falling sharply to break the next key level of 84.08, which the central bank has been steadfastly protecting.

Some dollar sales by exporters also limited the fall in the rupee. However, exporters are not seen selling aggressively as they expect the rupee to fall further before placing large bets, dealers said.

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 84.08 a dollar. (Gowri Lakshmi)

India Rupee - Asia FX: Mixed after China cuts key rates to support growth

MUMBAI – Asian currencies traded on a mixed note against the dollar after the People's Bank of China slashed its two benchmark interest rates to boost consumer spending and thereby revive the sluggish economy. However, investors remain concerned about whether the current policy support would be big enough to revive growth.

China cut benchmark lending rates at the monthly fixing on Monday, after cutting other policy rates last month as part of a package of stimulus measures to revive the economy. The one-year loan prime rate was lowered by 25 basis points to 3.10% from 3.35%, while the five-year loan prime rate was cut by the same margin to 3.6% from 3.85% previously. The Chinese yuan was down 0.1% against the dollar post the policy decision. 

Further, a strong dollar index weighed on the Asian units. The dollar index strengthened following comments from US Fed Reserve President Raphael Bostic on Friday, who said that the Fed is in no rush to cut its upcoming interest rates aggressively. Currently, traders price in a 92.6% probability of a 25 bps rate cut by the US Fed in November, while they see a 7.4% chance of the Fed maintaining the status quo. At 1145 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.53, compared with 103.46 on Friday and 103.77 on Thursday.

The Thai baht was down 0.6% against the dollar, while the Taiwan dollar was up 0.3% against the dollar, tracking gains in domestic equities. The Philippines peso was down 0.1% against the US unit. 

The South Korean won was down 0.4% against the dollar as data released earlier showed that the country's exports growth has slowed so far this month, led by a sharp decline in demand for oil products and mobile phones, reports said.

The Indonesian rupiah was down 0.1% against the dollar. On Sunday, Indonesia's former military general Prabowo Subianto was sworn in as the new president of the country. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Oct 21

MUMBAI – At 0900 IST, the rupee was at 84.0550 a dollar, from its previous close of 84.0725. At 1139 IST, the rupee was at 84.0700 per dollar. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee: Steady as some exporters' dlr sales offset importers' dlr buys

MUMBAI – The rupee was steady against the dollar Monday as some foreign banks sold the greenback, likely on behalf of exporters, which offset the impact of importers' dollar purchases, dealers said. "There is buying pressure from importers, heavily, but exporters are also selling, but not at an aggressive level, they are waiting at 84.10," a dealer at a state-owned bank said. 

The rupee is expected to be weighed as dealers expect equity-related outflows to China after the People's Bank of China lowered its two key benchmark interest rates earlier on Monday. "The Chinese yuan is steady, we may see a weigh on equity side outflows rather than a weigh on the currency," a dealer at a private bank said. 

The rupee also came under downward pressure from a strong dollar index. The dollar index was firm as views about a moderate rate cut at the US Federal Reserve's upcoming policy meeting were cemented following remarks from US Federal Reserve President Raphael Bostic, who said he is in no rush to ease policy rates. 

Currently, traders price in a 92.6% probability of a 25 basis point rate cut by the US Fed in November, while they see a 7.4% chance of the Fed maintaining status quo. At 1012 IST, the dollar index, which measures the strength of the greenback against six major currencies, was 103.47, compared to the close of 103.46 on Friday and 103.77 on Thursday. The dollar also gained strength due to safe-haven demand as geopolitical tension in West Asia escalated. 

Outflows from Hyundai Motor Co.'s initial public offering later in the day may weigh on the rupee, dealers said. However, dealers speculate that the Reserve Bank of India may be intervening in the spot market through their dollar sales to prevent the rupee from falling sharply. 

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 21

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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