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Informist, Tuesday, Oct. 22, 2024

By Gowri Lakshmi 

MUMBAI – The rupee ended at a record closing low of 84.0775 a dollar on Tuesday as banks purchased the greenback, likely on behalf of foreign portfolio investors withdrawing funds from the domestic equities market, dealers said. A surge in the dollar index, which rose to a fresh near-three-month high on Monday, also weighed on the local unit, they said. 

"Despite a huge dollar demand, the RBI (Reserve Bank of India) ensured that the rupee does not cross 84.08 for today as FPIs continued their onslaught on Indian indices," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. "The rupee was in a 2 paise range for the day with RBI protecting it at 84.08 and FPIs buying all day near to 84.07."

After falling to the lifetime low of 84.0800 during the day, a key level the central bank has been protecting, the local currency settled at 84.0775 against the dollar on Tuesday, compared with 84.0725 on Monday.

The rupee was weighed down by a slump in domestic equities. A fall in other Asian currencies also weighed on the rupee. Asian currencies fell between 0.3-0.5% against the dollar, with the Philippines peso down by 0.5% being the worst performer.

A few dealers estimated the day's foreign fund outflows to the tune of around $600 million. This kept the rupee under pressure the whole day, dealers said. The Chinese economic stimulus package is prompting investors to re-allocate funds to China, which is weighing on both the currency market and the domestic equity market, dealers said. 

So far in October, FPIs have net sold securities worth $8.6 billion in the domestic market, the highest in a month since March 2020, around the time the COVID-19 pandemic advanced. On Tuesday, both benchmark indices, the BSE Sensex and the Nifty 50 ended 1.2% and 1.3% lower, respectively.

The rupee opened steady on Tuesday as banks sold greenback on behalf of the RBI, which offset the impact of the rise in the dollar index, dealers said. The dollar index surged to a near three-month high of 104.02 on Monday after multiple US Federal Reserve officials said that the Fed will likely go for a gradual rate cut at its upcoming meetings. This further pushed back expectations of a large-sized rate cut in November.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 103.90, compared to the close of 103.96 on Monday and 103.46 on Friday.

Dallas Fed President Lorie Logan favoured a gradual pace for lowering rates. Minneapolis Fed President Neel Kashkari also supported a gradual rate cut, calling for "modest" interest rate cuts in the upcoming policy meetings.

Currently, traders are pricing in an 87.5% probability of the US Fed cutting its interest rates by 25 basis points, while 12.5% sees the Fed maintaining the status quo, according to the CME FedWatch tool. There is no expectation of a 50-bps rate cut.

The rupee also came under downward pressure as importers rushed to purchase the greenback, fearing a further fall in the domestic unit, dealers said. "The rupee seemed like a no-man's land at the start, with no buying or selling happening. But soon importers were buying as the rupee was expected to react to global and regional cues," a dealer at a state-owned bank said. 

As the rupee touched the record low of 84.0800, some banks sold the greenback to take advantage of the relatively higher dollar/rupee levels, which aided the rupee, dealers said. Dealers also said that the Reserve Bank of India persistently sold the greenback in the domestic spot market to prevent the rupee from falling sharply and to curb excessive volatility in the market.  

FORWARDS

Despite a jump in the US Treasury yields, the premium on the one-year dollar/rupee forward contract ended higher on Tuesday as banks purchased the greenback for forward delivery, noting lower levels, dealers said. 

The one-year dollar/rupee forward premium fell to a low of 2.23% earlier in the day. Dealers said banks bought dollars for forward delivery on the view that the forward premiums may rise going ahead after RBI Governor Shaktikanta Das' comments on Friday dashed hopes of a rate cut in December. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

US treasury yields rose after multiple Fed policymakers on Monday supported the idea of further rate cuts but differed on the speed and depth of any adjustments. At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 190.19 paise, against 188.41 paise on Monday. On an annualised basis, the premium was at 2.26% against the close of 2.24% on Monday. 

OUTLOOK

On Wednesday, the rupee is expected to take cues from movement in the dollar index and crude oil prices. "We are waiting for the US PMI data on Thursday. On Friday we can expect some volatility in the rupee market," 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 84.10. 

India Rupee - World FX: Dollar strengthens after Fed officials' comments Mon

MUMBAI – The dollar index strengthened after speeches by multiple US Federal Reserve officials Monday indicated their support for a gradual rate-cut trajectory. The dollar index rose to 104.02 Monday, and was near that level in early European trade Tuesday as well. The index, which measures the strength of the greenback against a basket of six major currencies, was at 103.99 at 1541 IST, after closing at 103.96 Monday and 103.46 Friday.

Three of the four Fed officials who spoke indicated a slower pace of rate cuts, citing strength in the US economy and an uncertain outlook. "While I support dialling back the restrictiveness of policy, my preference would be to avoid outsized moves, especially given uncertainty over the eventual destination of policy and my desire to avoid contributing to financial market volatility," Kansas City Fed President Jeffrey Schmid said Monday. Dallas Fed President Lorie Logan, who spoke at a separate event Monday, echoed Schmid.

The pound sterling was steady against the dollar ahead of Bank of England Governor Andrew Bailey's speech at Bloomberg Global Regulatory Forum in New York Tuesday. Earlier this month, in an interview with The Guardian, Bailey had said there was a need to cut interest rates aggressively if price pressures continue to ease.

The euro was up 0.1% against the greenback as European Central Bank governing council member Gediminas Simkus said Monday that the ECB could cut rates further, should inflation continue to slow.

The Australian dollar was up 0.3% against the US currency, ahead of the release of the Purchasing Managers' Index, as market participants assessed the rate trajectory in Australia. The Australian central bank's deputy governor, Andrew Hauser, Monday expressed surprise at the country's strong employment growth.

Both the Canadian dollar and the Japanese yen were steady against the US dollar. Market participants now await the release of the US state employment and unemployment data, due later Tuesday, to assess the Fed's rate trajectory.  (Sourabh Kumar)

India Rupee: Steady after hitting record low; RBI sells dollars to limit fall

MUMBAI – After hitting a record low of 84.08 a dollar earlier in the day, the rupee was steady against the dollar, as banks sold the greenback, likely on behalf of the Reserve Bank of India to limit a sharp fall in the Indian unit, dealers said. 

"There were about INR 200 million worth of outflows from the market related to Hyundai's IPO yesterday, and there are such outflows today as well," a dealer with a private bank said. "And then, the dollar index has also gone up, so we are seeing pressure (on the rupee) from two sides. But as has been the last couple of days, the central bank was present in the market to control the rupee's fall."

Some banks' dollar purchases for their clients who wanted to withdraw from the domestic equities market, weighed on the Indian currency, dealers said. At 1316 IST, both the Nifty 50 and the BSE Sensex were down 0.6% each. Further, banks also bought dollars on behalf of importers, who demanded the greenback in anticipation of a further fall in the domestic currency, dealers said.

The rupee has been under pressure since the morning as the dollar index surged to near a three-month high of 104.02 on Monday, and stayed near that level on Tuesday. The index, which measures the strength of the greenback against a basket of six major currencies, was 103.87 at 1313 IST, after closing at 103.96 on Monday, and 103.46 on Friday.

The US currency surged after multiple Federal Reserve officials indicated their support for a shallow rate cut at upcoming policy meetings of the Federal Open Market Committee. The next meeting of the committee will take place on Nov 6-7. As of today, Fed fund futures traders see an 87% chance of a 25 basis point rate cut at the Federal Open Market Committee's next meeting in November, the CME FedWatch Tool showed. The rest of the expectations are around keeping the rates steady, with no expectations of a 50 bps cut.

Market participants keenly await the retail sales data from the US, due Tuesday after Indian market hours. US state employment and unemployment data are also eyed.

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.  (Sourabh Kumar)

India Rupee: Premium steady as banks' fwd dlr buys offset rise in US yields

MUMBAI – The premium on the one-year dollar/rupee forward contract was steady Tuesday as banks purchased the greenback for forward delivery, which offset the downward pressure from a surge in the benchmark 10-year US Treasury yield, dealers said. "Despite UST's (US Treasury yield) rise, the (one-year dollar/rupee) forward are at a similar level, because there is paying interest on every dip in the market," a dealer with a state-owned bank said.

Dealers said views among market participants about the movement in the dollar/rupee forward premium have changed since the Reserve Bank of India Governor Shaktikanta Das indicated on Friday that an early rate cut in India may not be possible. Since Friday, the one-year dollar/rupee forward premium has risen about 5 basis points. 

After the RBI governor's comments, market participants saw the one-year dollar/rupee forward premium rising, against their prior expectation of a fall, dealers said. Before his comments, the interest rate differential between the US and India was seen falling due to market expectations of an early rate cut by the RBI, probably in December, after having changed its monetary policy stance to 'neutral' from 'withdrawal of accomodation' this month. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

"After comments by the governor, we are seeing the (one-year dollar/rupee) forward rising again to around 2.40 levels," another dealer with the state-owned bank said. In the last week of September, the one-year dollar/rupee forward premium rose to a near 18-month high of 2.42%, on an annualised basis, before starting to fall.

The benchmark 10-year US Treasury yield surged 11 bps to close at 4.19% on Monday, which pulled the forward premiums down, dealers said. US treasury yields rose after some Federal Reserve officials on Monday indicated their support for shallow rate cuts. As of today, Fed fund futures traders see an 87% chance of a 25 basis point rate cut at the Federal Open Market Committee's next meeting in November, the CME FedWatch Tool showed. The rest of the expectations are around keeping the rates steady, with no expectations of a 50 bps cut.

For more cues regarding rate cuts, market participants would keenly eye the retail sales data from the US, due later Tuesday. Further, US state employment and unemployment data are also eyed.

At 1237 IST, the premium on the one-year exact-period dollar/rupee forward contract was 189.44 paise, against 188.40 paise on Monday. On an annualised basis, the premium was at 2.25% against the close of 2.24% on Monday.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Oct 22

MUMBAI – At 0900 IST, the rupee was at 84.0725 a dollar, unchanged from its previous close. At 1159 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: Steady as dlr sales likely by RBI offset surge in dollar index

MUMBAI – The rupee was steady against the dollar on Tuesday as state-owned banks sold dollars, likely on behalf of the Reserve Bank of India, which offset the impact of a surge in the dollar index, dealers said. The dollar index rose to fresh near three-month highs Monday after multiple Federal Reserve officials said the central bank will likely proceed with only a moderate interest rate cut at its upcoming policy meeting. 

"There is a continuous supply of dollars in the market. Even in the offshore non-deliverable forwards market, there is supply to bring the rupee to the same level to stabilise the opening at the domestic spot market," a dealer at a state-owned bank said. "So the supplies (of dollars) at 84.07 level is capping the movement caused from dollar index and Asian currencies," he added. 

The dollar index rose to a near three-month high of 104.16 on Monday. US Federal Reserve Dallas President Lorie Logan said on Monday that she expects the US central bank to cut rates this year, but at a gradual pace if the economy meets the forecasts. Currently, traders are pricing in an 89.0% probability of the Fed cutting interest rates by 25 basis points, while odds for a status quo are 11.0%, according to the CME FedWatch tool.

At 1005 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 103.95, compared to the close of 103.96 on Monday and 103.46 on Friday.

The rupee also came under pressure from the fall in the Chinese yuan. The Chinese yuan fell 0.1% against the dollar on Tuesday as market sentiment remained subdued after the People's Bank of China slashed two of its benchmark interest rates on Monday to boost their sluggish economy. 

Dealers also expected foreign fund outflows from the domestic equity market, which is likely to exert pressure on the rupee, they said. Outflows from the initial public offering of Hyundai Motor Co, which got listed on exchanges earlier in the day, may also weigh on the rupee, dealers said. "The Hyundai IPO(initial public offering)-related outflows began on Monday. We can expect the outflow to continue for the next 2–3 days," a dealer at a state-owned bank said. However, dealers also expect the central bank to intervene through its 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 84.08 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Most down as dollar index surges to near 3-month high

MUMBAI – Most Asian currencies traded lower against the dollar on Tuesday as the dollar index surged to near a three-month-high on Monday, and stayed around that level early Tuesday. The dollar index surged after multiple US Federal Reserve officials hinted that the Fed may only proceed with a moderate interest rate cut at its upcoming policy meeting. 

On Monday, Federal Reserve President of Dallas Lorie Logan said she expects the US central bank to cut rates this year, but at a gradual pace if the economy meets the forecasts. Currently, traders are pricing in an 89.0% probability of the US Fed cutting its interest rates by 25 basis points, while 11.0% is for status quo, according to the CME FedWatch tool. There is no expectation of a 50-bps rate cut.

At 0913 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.97, compared to the close of 103.96 on Monday and 103.46 on Friday.

The Malaysian ringgit was down 0.4% against the greenback. Advance estimates showed Monday that the Malaysian economy likely grew 5.3% on year in Jul-Sept. The growth was slower than in the previous quarter. Last week, the government raised its forecast for economic growth to 4.8-5% from 4-5%, reports said. Final GDP figures are due on Nov. 15. 

The Philippines peso was down 0.4% against the dollar. The losses were limited as the Philippines reported the largest dollar surplus in almost four years, indicating a recovery in its balance of payments. According to reports from Bangko Sentral ng Pilipinas, the balance of payments in September was $3.5 billion, against a deficit of $414 million recorded a year ago. Further, the Indonesian rupiah was down 0.4%.

The Chinese yuan was down 0.1% against the dollar, continuing its losses from Monday as market sentiment remained subdued after the People's Bank of China lowered interest rates on Monday. This also weighed on other Asian currencies.

The Thai baht and South Korean won were each down 0.1% against the greenback, tracking losses in their benchmark domestic indices. The Thai SET and the Kospi were down 0.2% and 1.02%, respectively.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Oct 22

MUMBAI – Following are the expected support and resistance levels for the rupee on Tuesday, 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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