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Informist, Wednesday, Oct. 23, 2024

By Gowri Lakshmi and Pratiksha

MUMBAI/NEW DELHI – The rupee ended at its record low against the dollar Wednesday as banks purchased the greenback on behalf of foreign portfolio investors and importers and the dollar index surged, dealers said. This was despite the Reserve Bank of India's persistent dollar sales to prevent a sharp fall in the Indian unit, they said.

"There were outflows in the market, mostly FIIs (foreign institutional investors), but there were constant offers from them (RBI) as well," a dealer at a private bank said. The rupee settled at its lifetime low of 84.0800 a dollar, which it hit earlier Tuesday, against its previous close of 84.0775.

The rupee moved in a tight range of just 2 paise during the day. Other Asian currencies fell between 0.1% and 0.7% against the dollar, with the Thai baht being the worst performer.

Even as the dollar index surged to a near-three-month high in early trade, the rupee started the day steady at 84.0725 a dollar as banks sold the greenback, probably on behalf of the Reserve Bank of India, in the offshore non-deliverable forwards market, dealers said. 

Shortly after opening, the central bank also stepped into the domestic spot market through its dollar sales intervention, dealers said. The RBI persistently sold the greenback at around 84.07 a dollar to prevent the Indian unit depreciating sharply and hitting a new record low. "They (RBI) are always there around the 84.07 level. They will maybe let it (the rupee) slowly go to 84.10 (a dollar)," a dealer at another private bank said. 

Foreign banks bought dollars on behalf of foreign portfolio investors looking to pull out funds from domestic equities, dealers said. So far in October, FPIs have withdrawn almost $8.3 billion on a net basis from India. This is the largest monthly outflow figure since March 2020, when the COVID-19 pandemic hit India.

Some dealers said the foreign fund outflows were also possibly on account of proceeds from last week's initial public offering of Hyundai Motor India Ltd. moving to the company's South Korean parent Hyundai Motor Co. "The money has started going to the Hyundai parent company. So we are seeing outflows for that as well," said a dealer at a broking firm. 

Despite the RBI's efforts to keep the currency afloat, some banks bought dollars on behalf of importers in anticipation of a further fall in the rupee in the days to come, dealers said. Meanwhile, the dollar index rose further during European trade, which also weighed on the Indian currency, they said. The dollar index gained due to growing expectations that the US Federal Reserve may not cut interest rates as fast or as aggressively as expected earlier. This is due to a slew of upbeat economic data from the US and recent comments from Fed officials.

Currently, traders have priced in an 89% probability of the Fed cutting rates by 25 basis points at its November policy meeting, with an 11% chance of the Fed maintaining status quo, as per the CME FedWatch tool. The market was fully pricing in a cut of at least 25 bps a month ago, with a 50.4% chance of a 50 bps cut. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.39, compared with 104.07 Tuesday and 103.96 on Monday. The index rose to a near-three-month high of 104.40 during the day.

FORWARDS

Even as US Treasury yields rose to a three-month high, the premium on the one-year dollar/rupee forward contract ended largely steady as banks bought dollars for forward delivery due to expectations that forward premium levels would rise going ahead, dealers said. 

US Treasury yields jumped as recent economic data in the US and comments by Fed policymakers cemented the view that the US central bank may not cut interest rates as aggressively or as fast as was expected earlier. Yields also gained ahead of the Nov. 5 presidential election, owing to growing anticipation of a victory for Republican candidate Donald Trump, which may lead to inflationary policies like tariffs.

Dealers said banks bought dollars for forward delivery on the view that levels may rise in the future, as RBI Governor Shaktikanta Das's comments Friday dashed hopes of a rate cut in December. Das said a rate cut at this stage would be premature and could be very risky.

With the Fed expected to cut interest rates again, and no rate cut in sight by the RBI, the interest rate differential between the US and India is likely to widen, driving dollar/rupee forward premiums higher. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Dealers said some banks also bought the greenback for forward delivery on behalf of a corporation, which aided the premiums. "There has been huge paying since yesterday (Tuesday). There are some client flows that are hitting," a dealer at a state-owned bank said.

Market participants will now focus on the minutes of the RBI's Monetary Policy Committee's October meeting for more cues on the central bank's rate-cut trajectory. At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 190.99 paise, against 190.19 paise Tuesday. On an annualised basis, the premium was at 2.26%, unchanged from the previous close.

OUTLOOK

On Thursday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said. However, the movement in the currency may remain contained as the RBI may continue to prevent excessive volatility through its interventions, they said. 

Market participants now await remarks from a Fed policymaker later in the day, along with the release of the Fed's Beige Book, a summary of current US economic conditions, for cues on the future path of US policy rates.

Dealers expect foreign banks to continue buying dollars on behalf of FPIs, which may weigh on the rupee. 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: Premiums steady as banks' fwd dlr buys offset jump in US yields

NEW DELHI – Even as the US Treasury yield rose to a three-month high, the premium on the one-year dollar/rupee forward contract was largely steady as banks bought dollars for forward delivery due to expectations that forward premium levels would rise going ahead, dealers said. 

US Treasury yields jumped as recent economic data in the US and comments by Federal Reserve policymakers cemented the view that the US central bank may not cut interest rates as aggressively or as fast as was expected earlier. Yields also gained ahead of the Nov. 5 US presidential elections, due to growing expectation of a likely victory for Republican presidential candidate Donald Trump, which may lead to inflationary policies like tariffs.

Currently, traders have priced in an 89% probability of the Fed cutting rates by 25 basis points at its November policy meeting, with an 11% chance of the Fed maintaining status quo, as per the CME FedWatch Tool. The market was fully pricing in a cut of at least 25 bps a month ago, with a 50.4% chance of a 50-bps cut.

Dealers said banks bought dollars for forward delivery on the view that levels may rise going ahead, as Reserve Bank of India Governor Shaktikanta Das' comments on Friday dashed hopes of a rate cut in December. Das said on Friday that a rate cut at this stage would be very premature and could be very risky. "Post governor's (RBI Governor Shaktikanta Das) comments, rate cuts are being priced out, which is why we are seeing a lot of paying," said a dealer at a foreign bank. 

With the US Fed expected to cut interest rates more going ahead, and no rate cut in sight by the RBI, the interest rate differential between the US and India is likely to widen, driving dollar/rupee forward premiums higher. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Market participants now await the minutes of the RBI's Monetary Policy Committee's October meeting, due later in the day, for more cues on the RBI's rate cut cycle. At 1355 IST, the premium on the one-year exact-period dollar/rupee forward contract was 191.20 paise, against 190.19 paise on Tuesday. On an annualised basis, the premium was at 2.26%, unchanged from the previous close.  (Pratiksha)

India Rupee: Remains steady; RBI's persistent dlr sales prevent record low

MUMBAI – The rupee remained steady against the dollar as state-owned banks sold the greenback, likely on behalf of the Reserve Bank of India, which neutralised the impact of banks' dollar purchases for importers and foreign fund outflows, dealers said. The Indian unit has moved in a range of only 2 paise so far Wednesday. 

The central bank persistently sold the greenback around 84.07 a dollar to prevent the Indian unit from hitting a record low and depreciating sharply. The Indian currency hit a lifetime low of 84.0800 a dollar on Tuesday. 

Despite the RBI's strong defence of the currency, banks bought dollars on behalf of importers in anticipation of a further fall in the rupee in the coming days, dealers said. "The rupee will likely fall this week, after the US PMI on Thursday. The rupee may be pressured more with the outflows expected, even falling to 84.15 a dollar," a dealer at a private bank said. 

Further, banks bought dollars on behalf of foreign portfolio investors, looking to pull out funds from domestic equities, dealers said. Some dealers said the foreign fund outflows were also likely on account of proceeds from last week's initial public offering of Hyundai Motor India Ltd, moving to the company's South Korean parent company Hyundai Motor Co.

The rupee was also weighed sown by a strong dollar index, dealers said. The index surged to a near three-month high of 104.19 on Wednesday due to growing expectations that the US Federal Reserve may not cut interest rates as fast or as aggressively as expected earlier.

Currently, traders have priced in an 88.9% probability of the Fed lowering its rates by 25 basis points at its November policy meeting, with an 11.1% chance of the Fed maintaining status quo, as per the CME FedWatch Tool. The market was fully pricing in a cut of at least 25 bps a month ago, with a 50.4% chance of a 50-bps cut. At 1305 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.35, compared with the close of 104.07 on Tuesday and 103.96 on Monday.

Dealers expect the central bank to continue intervening through dollar sales to prevent the rupee from falling sharply and curbing sharp volatility. For the rest of the day, the rupee is seen in a 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: Technical Levels for rupee - Oct 23

MUMBAI – At 0900 IST, the rupee was at 84.0725 a dollar, from its previous close of 84.0775. At 1117 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 - Asia FX : Most down as dollar index surges to near 3-mo high

MUMBAI – Most Asian currencies traded lower against the dollar as the dollar index surged to a near 3-month high of 104.19 on Wednesday. The dollar index surged as the recent upbeat US economic data and comments by US Federal Reserve policymakers cemented the view that the US central bank may not cut interest rates as aggressively or as fast as it was expected before.

Currently, traders have priced in an 89% probability of the Fed lowering its rates by 25 basis points at its November policy meeting, while 11% chance of the Fed maintaining status quo, as per CME FedWatch Tool. The market was fully pricing in a cut of at least 25 bps a month ago, with a 50.4% chance of a 50 bps cut.

The dollar index also got a boost ahead of the Nov. 5 US presidential elections on growing expectation of a likely victory for the Republican presidential candidate Donald Trump, which may lead to inflationary policies like tariffs. 

At 0959 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.15, compared with the close of 104.07 on Tuesday and 103.96 on Monday. Both the Malaysian ringgit and Indonesian rupiah were down 0.3% against the greenback. 

The Thai baht was down 0.4% against the dollar even after Bank of Thailand governor Sethaput Suthiwartnarueput on Tuesday hinted that the policymakers may not rush for another interest rate cut. "Given that we just recalibrated, I think the bar for taking further rate moves has to be reasonably high," Suthiwartnarueput said in an interview with Bloomberg.
 

The offshore Chinese yuan was down 0.1% against the dollar. The People's Bank of China on Tuesday launched the first operation of a new swap facility to spur liquidity in the stock market. The losses in the currency were capped by tracking gains in domestic equities. The Shanghai Composite Index was up 0.79% as on 1030 IST.

The South Korean won was down 0.1% against the greenback. A survey by the Bank of Korea on Wednesday showed that consumer sentiment rebounded in October as a cooling in inflation and hopes of a rate cut may boost domestic demand, as per reports. The composite consumer sentiment index was at 101.7 this month, up from the previous month's 100, according to the central bank's poll. A reading above 100 means optimists outnumber pessimists.

The Philippines peso was down 0.1%, tracking losses in domestic equities. The benchmark index PSEi was down 0.8% at 1030 IST.  (Gowri Lakshmi)

India Rupee: Steady; RBI's likely dlr sales in NDF mkt offset dlr index rise

MUMBAI – The rupee was steady against the dollar on Wednesday as banks sold the greenback, likely on behalf of the Reserve Bank of India, in the offshore non-deliverable forwards market, which offset the impact of a surge in the dollar index, dealers said.

The central bank likely sold dollars in the offshore NDF market to prevent the Indian unit from hitting a record low at the open, dealers said. The rupee hit a lifetime low of 84.0800 on Tuesday. Dealers speculated that the RBI may be selling dollars in the domestic spot market as well. 

The dollar index rose to a near three-month high of 104.19 on Wednesday on expectations that the US Federal Reserve may not cut rates as fast or as aggressively at its upcoming policy meeting as previously thought. Currently, traders have priced in an 88.9% probability of the Fed lowering its rates by 25 basis points at its November policy meeting, while an 11.1% chance of the Fed maintaining status quo, as per the CME FedWatch Tool. At 0939 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.12, compared to the close of 104.07 on Tuesday and 103.96 on Monday.

The rupee was also weighed down by a fall in Asian currencies tracking a surge in the dollar index, dealers said. "Market was active as soon as it opened. Importers are buying (dollars) for general payment and some exporters are seen selling (dollars). The dollar index has also risen sharply, the rupee will be under pressure for quite some time," a dealer at a state-owned bank said.

Dealers said most exporters are waiting for the rupee to break the 84.10 a dollar level before letting go of their dollar holdings, while some importers are purchasing the greenback, wary of a further fall in the rupee, dealers said. 

Dealers expect banks to sell dollars, likely on behalf of overseas investors looking to invest in the ongoing initial public offering of domestic companies. The IPO of Waaree Energies Ltd., and Deepak Builders and Engineers India Ltd., opened on Monday and will close Wednesday. "The rupee movement is flow dependent, we expect inflows and outflows today," a dealer at a state-owned bank 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 84.10 a dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Oct 23

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 Rajeev Pai

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