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Informist, Monday, Oct. 28, 2024

By Sourabh Kumar

NEW DELHI – The rupee "practically did not move" the whole day and closed steady for the seventh consecutive trading day against the dollar, as some banks sold the greenback, likely on behalf of the Reserve Bank of India, to offset the downward pressure from a strengthening dollar index, dealers said. 

"It hasn't moved, I mean what to tell you, I have even stopped paying attention to it (dollar/rupee level)," a dealer with a private bank said. It was the seventh consecutive trading day that the rupee did not move beyond the 3-paise range.

The Indian currency ended the day at 84.0775 a dollar, against Friday's close of 84.0800 a dollar. In the morning, the rupee opened steady, with some demand for the greenback on the back of strength in the dollar index putting pressure on the rupee, dealers said. However, the Reserve Bank of India likely sold dollars in a move to prevent the rupee from falling beyond the protected level of 84.08 a dollar, dealers said. 

For the better part of the day, the rupee moved between 84.0700-84.0800. The rupee came under pressure as the dollar index hit a fresh near 3-month high early Monday ahead of the US presidential elections, scheduled on Nov.5. The Republican candidate Donald Trump is in a close contest with the Democratic Party's Kamala Harris to win the presidential race. According to a CNN poll, the odds of the former president winning were 47%, while Harris' chances were seen at 49%. Several other polls indicate a very close fight between the two candidates.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 104.27 at 1530 IST, against 104.32 on Friday, and 104.02 on Thursday. It had hit a near 3-month high of 104.57 earlier Monday.

The dollar index also found strength due to a rise in safe-haven asset demand, dealers said. While there was no further escalation after Israel struck Iran over the weekend, investors remained cautious of any escalation of the conflict, which could engulf other countries in the region, dealers said. Israel struck the oil-rich nation in response to the latter's missile attacks on Israel earlier this month.

Since the Israeli strike did not target Iran's oil or nuclear infrastructure, crude oil prices came down on Monday. It had earlier risen on anticipation that Israel may hit Iran's crude infrastructure. At 1530 IST, the December Brent crude contract on the Intercontinental Exchange was at $71.40 per barrel, compared to the close of $76.05 on Friday and $74.38 on Thursday.

The fall in crude oil prices provided support to the Indian rupee, dealers said. Since crude forms a major chunk of India's merchandise imports, a fall in its price reduces the import bill, thereby positively affecting the rupee. With a lack of dollar purchases in large quantities by oil marketing companies due to comfortable crude prices, and a truncated week due to the holiday for Diwali, dealers said the overall volume in the foreign exchange market was small on Monday. "Also, because the levels have not moved for quite a few days now, we also do not have volumes," a dealer with another private bank said.

Dealers said both importers and exporters refrained from placing large bets at this point, as the rupee has been stuck near 83.0700 a dollar for over a week now. Most dealers said the rupee can break away from the current tight range only when flows from overseas investors hit the market. Last week, foreign investors mainly withdrew funds from domestic equities, which put pressure on the Indian currency. In October so far, foreign investors have withdrawn nearly $9.45 billion from domestic equities. Today, however, both the NIFTY 50 and the BSE Sensex ended 0.7% and 0.8% higher, respectively.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended slightly down due to a rise in the yield on the benchmark 10-year US Treasury note, dealers said. The benchmark US Treasury yield closed 4 basis points higher at 4.25% on Friday.

Though the one-year dollar/rupee forward premium was a tad down Monday, dealers expect the premium to rise in coming weeks, as they see the interest rate differential between the US and India to remain higher, given the push-back in expectations of the start of the rate-cut cycle by the Reserve Bank of India.

At the upcoming policy meeting, the decision of which will be announced on Nov. 7, the Federal Open Market Committee is seen cutting rates by 25 bps. As per CME FedWatch tool, Fed funds futures traders see a 100% chance of a 25 bps rate cut next month.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 189.28 paise, against 190.42 paise on Friday. On an annualised basis, the premium was 2.25% against 2.26% on Friday.

OUTLOOK

On Tuesday, the rupee will take cues from the movement in the dollar index and crude oil prices. 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.

Market participants await the release of the US retail sales data, due Tuesday, ahead of next week's US Federal Open Market Committee meeting. 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: Yen slumps as no party secures majority in election

MUMBAI – The Japanese yen fell 0.6% against the dollar Monday after the ruling Liberal Democratic Party lost a majority in the parliamentary elections held on Sunday. The ruling party, along with its coalition party Komeito, secured 215 seats, falling short of the 233-seat majority. "Voters have handed us a harsh verdict, and we have to humbly accept this result," Prime Minister Shigeru Ishiba told Japanese media. It is currently not clear as to who will form the government in Japan.

The euro was up 0.2% against the dollar ahead of the Eurozone Jul-Sept flash gross domestic product figures and the inflation data due Wednesday and Thursday, respectively.

The dollar index rose to a fresh near 3-month high early Monday ahead of the US presidential elections scheduled on Nov. 5. The dollar strengthened as Republican candidate Donald Trump was found to be in a close tie with the Democratic Party's Kamala Harris to win the presidential race. According to polls by CNN, the former president is now seen at a 47% odds of winning, while Harris is seen at 49%. Several other polls indicate a very close fight between the two candidates.

The dollar index also got a boost from upbeat US economic data released in the past few weeks which supported the view that the US Federal Reserve may not lower its rates as aggressively or as fast as it was expected earlier. Currently, traders price in a 100% chance of the Fed slashing its benchmark rates by 25 basis points at its November policy meeting.

At 1447 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 104.25, compared to 104.32 on Friday and 104.02 on Thursday. The dollar index rose to a near 3-month high of 104.57 Monday. The pound sterling traded flat against the US dollar Monday.

Both the Australian dollar and New Zealand dollar were down 0.1% against the greenback after crude oil prices dipped near $4 per barrel on Monday as geopolitical tensions eased in West Asia. The Israeli attack on Iran over the weekend did not affect the Iranian oil infrastructure and nuclear facilities as anticipated.  (Gowri Lakshmi)

India Rupee: In thin band; bks' dlr sales, likely for RBI, offset strong dlr

MUMBAI – The Indian rupee remained in a very narrow range as state-owned banks sold dollars, likely on behalf of the Reserve Bank of India, which offset the rise in the dollar index, dealers said.

The dollar index rose to a fresh near 3-month high Monday ahead of the US presidential elections, scheduled on Nov.5. The dollar strengthened after Republican candidate Donald Trump was found to be in a close tie with Democratic Party's Kamala Harris to win the presidential race. According to polls by CNN, the former president is now seen at a 47% odds of winning, while Harris is seen at 49%. Several other polls indicate a very close fight between the two candidates.

The dollar index also got a boost from upbeat US economic data released in the past few weeks which supported the view that the US Federal Reserve may not lower its rates as aggressively or as fast as it was expected earlier. Currently, traders price in a 100% chance of the Fed slashing its benchmark rates by 25 basis points at its November policy meeting.

At 1251 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 104.45, compared to 104.32 on Friday and 104.02 on Thursday. The dollar index surged to a near 3-month high of 104.57 Monday. Market participants now await key US economic data lined up this week to get more cues on the interest rate trajectory of the Fed. The US Job Openings and Labor Turnover Survey is due Tuesday.

The domestic unit also came under downward pressure, tracking a fall in most other Asian currencies. The Chinese yuan fell 0.1% against the greenback Monday following a dip in the country's industrial profits, data on Sunday showed. 

However, a rise in domestic equities aided the rupee, dealers said. At 1254 IST, both the benchmark index, the Nifty 50 and BSE Sensex were up 0.96% and 1.10%, respectively. Dealers expect the central bank to continue its intervention in the domestic spot market through dollar sales to prevent the rupee from falling sharply.

The overall volumes in the foreign exchange market were low on Monday due to an extended weekend, dealers said. Both importers and exporters were not present in the market with large volumes, "as they also waited for the rupee to break away from the current range of around 2 paise," a dealer with a private 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: Premium tad down on rise in US yield; US retail sales data eyed
 

NEW DELHI – The premium on the one-year dollar/rupee forward contract inched down slightly due to a rise in the yield in the benchmark 10-year US Treasury note, dealers said. The benchmark US Treasury yield traded near 4.28% in early European trade, after closing up 4 basis points at 4.25% on Friday.

"Today's movement (in premiums) is primarily because of a rise in UST (US Treasury yields)," a dealer with a brokerage firm said. "However, we generally have an upside bias to forwards." Dealers further said the overall volumes in the dollar/rupee forward market were low today due to a long-weekend this week.

While today the one-year dollar/rupee forward premium was a tad down, dealers expected the premium to rise in coming weeks, as they see the interest rate differential between the US and India to remain higher, given the push-back in expectations of the start of the rate-cut cycle by the Reserve Bank of India. Further, the continuation of rate cuts by the US Federal Reserve is likely to keep the interest rate differential higher, thus driving the one-year dollar/rupee forward premium up, dealers said.

At the upcoming policy meeting, the decision of which will come out on Nov. 7, the Federal Open Market Committee is seen cutting rates by 25 bps. As per CME FedWatch tool, Fed funds futures traders see a 100% chance of a 25 bps rate cut next month.

The yield on the benchmark 10-year Treasury note was up, as recent data, and most recently, the Michigan Consumer Sentiment survey released Friday showed underlying strength in the US economy. The Michigan Consumer Sentiment index rose to 70.5 for its final October result, better than both the preliminary results and the September reading. Economists surveyed by The Wall Street Journal and Dow Jones had forecast a reading of 69.0 for the month.

Dealers said market participants await the release of the US retail sales data, due Tuesday, after which they will keenly wait for next week's FOMC decision.

At 1249 IST, the premium on the one-year exact-period dollar/rupee forward contract was 189.28 paise, against 190.42 paise on Friday. On an annualised basis, the premium was at 2.25%, down from Friday's close of 2.26%.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Oct 28

MUMBAI – At 0900 IST, the rupee was at 84.0700 a dollar, from its previous close of 84.0800. At 1119 IST, the rupee was at 84.0725 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 strong before US election

MUMBAI – Most Asian currencies were down against the dollar as the dollar index was near its three-month high hit on Wednesday, ahead of the US presidential election on Nov. 5. The dollar index was firm due to safe-haven demand as the latest surveys suggest a very tight race between Republican candidate Donald Trump and Democratic candidate Kamala Harris. A poll by the Emerson College Polling on Saturday suggested both Harris and Trump have 49% chance of winning the election.

The dollar index also strengthened as recent economic data supported the view that the US economy is in a good shape and that the US Federal Reserve may not lower its interest rates as aggressively or as fast as earlier expected. Traders have currently priced in a 94.7% probability of the Fed slashing rates by 25 basis points, while they see a 5.3% chance of the central bank maintaining a status quo, according to the CME FedWatch tool. 

At 1025 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was 104.52, compared with 104.32 on Friday and 104.02 on Thursday.

The Malaysian ringgit and Indonesian rupiah were down 0.3% and 0.6%, respectively, against the US currency. The Indonesian currency was under pressure as the domestic stock market was down more than 1% on Monday. The Taiwan dollar fell 0.1% against the greenback.

The Chinese yuan was down 0.2% against the greenback as data released on Sunday showed the country's industrial profits declined in September, recording the steepest monthly fall of the year. According to official data, profits dipped 27.1% on year in September, following a 17.8% fall in August.

Thailand's baht was down 0.3% against the dollar after Bank of Thailand Deputy Governor Piti Disyatat on Sunday said in an interview that the country's current inflation target of 1-3% "has served well" and there was no need to change it. However, the Thailand government has been calling for a higher price target to boost economic activity. Officials from the finance ministry and the central bank are scheduled to meet this week.

Bucking the trend, the South Korean won was up 0.6% against the US dollar following comments by Bank of Korea Governor Rhee Chang-yong that the rapid depreciation of the Korean won against the dollar will be a key factor in determining the pace of interest cuts at the upcoming policy meeting. "The Korean won is losing against the US dollar at a pace far faster and a level far lower than we would like," Chang-yong said on Friday.  (Gowri Lakshmi)

India Rupee: Steady as RBI's likely dollar sales offset strong dollar index

MUMBAI – The rupee was steady against the dollar as some banks sold dollars, likely on behalf of the Reserve Bank of India, which offset the impact of a strong dollar index, dealers said. "Overall volumes are also very low in the market for the past few days, due to little movement in the rupee," a dealer with a private bank said.

"The rupee will largely be range bound within the 2-paise limit. There is continuous supply (of dollars) at 84.0850-84.0875 a dollar," a dealer at a state-owned bank said.

The rupee was weighed by strength in the dollar index ahead of the US presidential elections, scheduled for Nov.5. The dollar index strengthened due to safe-haven demand for the asset as the latest rounds of surveys suggested a very tight race between the republican candidate, Donald Trump, and the Democratic candidate Kamala Harris. A poll by the Emerson College Polling on Saturday suggested Harris and Trump having 49% chances of winning each.

The dollar index also got a boost as the recent upbeat economic data from the US supported the view that the US economy was in a good shape and the Federal Reserve may not proceed to slash interest rates as aggressively or as fast as expected earlier. 

Currently, the odds of the Fed lowering rates by 25 basis points at its November meeting were 94.8%, while the odds of a status quo were 5.2%, according to the CME FedWatch tool. At 1014 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 104.52, compared with its close of 104.32 on Friday and 104.02 on Thursday.

The rupee may also come under downward pressure from foreign fund outflows from the domestic equities market, dealers said. Dealers expect overseas investors to continue withdrawing funds from Indian stock markets and re-allocate the funds, likely in Chinese markets. So far in October, foreign investors have pulled out over $9 billion from domestic equities.

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 a strong technical support for the Indian currency at 84.10 a dollar. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Oct 28

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