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Informist, Wednesday, Oct. 30, 2024

By Sourabh Kumar

NEW DELHI – Once again, the rupee ended steady against the dollar because of the Reserve Bank of India's active intervention through dollar sales, which offset the pressure from dollar purchases by importers, dealers said. They said the rupee was also under pressure as some foreign banks purchased the greenback on behalf of foreign portfolio investors, who exited domestic equities.

"It (rupee) went down slightly today, but the fall was capped," a dealer with a private bank said. "We don't expect much change in the range till next week."

However, dealers said the rupee would be under constant pressure from foreign fund outflows, should domestic equities continue to fall. After moving in a 2 paise range, the Indian currency settled at 84.0775 a dollar, against Tuesday's close of 84.0750 a dollar. 

The rupee opened steady Wednesday, but quickly came under pressure as demand for greenback from importers increased, dealers said. Importers were demanding the greenback to meet their month-end payment obligations. Some importers also anticipated a fall in the Indian unit, which prompted their dollar purchases, dealers said.

Domestic equities were down Wednesday, which weighed on the rupee, dealers said. The Nifty 50 and the BSE Sensex closed down 0.5% each. Dealers said overseas investors pulled out their money from domestic equities, which prompted further dollar purchases by some foreign banks. It ended up weighing on the Indian currency.

For a better part of the day, the dollar index remained firm, before easing in early European trade. This also put pressure on the rupee, dealers said. The index, which measures the strength of the greenback against a basket of six major currencies, was at 104.13 against 104.28 Tuesday and 104.30 Monday.

Though it eased from a three-month high touched on Tuesday, the greenback remained firm ahead of the US presidential elections scheduled on Nov. 5. Both the presidential candidates, Donald J. Trump and Kamala Harris, are in a close race, according to several polls, with The New York Times reporting 48% chance of a win for both. 

Due to pressure on the rupee, it touched a lifetime low of 84.0850 a dollar, which likely prompted the Reserve Bank of India to sell dollars to prevent a further fall, dealers said. Due to the RBI's likely intervention, the rupee was again contained in an extremely narrow range, closing steady for the ninth straight trading day.

A fall in crude oil prices aided the Indian currency, dealers said. Since crude is a major item that India imports, a fall in its price reduces the import bill of the country, thereby positively affecting the domestic currency. Oil prices fell following an easing in geopolitical tensions in West Asia.

Israeli Prime Minister Benjamin Netanyahu said he will hold a meeting to carve a diplomatic solution to the war in Lebanon, as per reports. At 1530 IST, the December Brent crude contract on the Intercontinental Exchange was $71.54 per barrel compared to its previous close of $71.12 on Tuesday, and $71.42 a barrel on Monday.

Market participants said that with the rupee touching a record low on Wednesday, most exporters remained on the sidelines, as they were hopeful of a further fall in the Indian currency, dealers said.

FORWARDS

Premium on the one-year dollar/rupee forward contract ended steady Wednesday as market participants remained largely on the sidelines, dealers said.

However, some banks purchased dollars for forward delivery, anticipating a rise in the dollar/rupee forward premium going ahead as the interest rate differential between the US and India is expected to remain high. They said the overall volume in the dollar/rupee forward market was low due to a truncated week. Indian financial markets are closed on Friday for Diwali.

With the US Federal Reserve seen continuing to lower interest rates and the Reserve Bank of India pushing back on rate cut expectations at its December meeting, the US-India interest rate differential is likely to increase and drive up forward premiums, dealers said.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 190.43 paise, against 189.50 paise Tuesday. On an annualised basis, the premium was 2.25%, similar to Tuesday's close.

OUTLOOK

On Thursday, the rupee will take cues from the movement of the dollar index and crude oil prices. Importers are expected to continue their dollar purchases, which is likely to keep the rupee under pressure. They also expect the RBI to intervene in the spot market through dollar sales to keep the Indian unit steady.

Data released Wednesday showed that the Indian government's fiscal deficit in the first six months of 2024-25 (Apr-Mar) was INR 4.745 trillion, down 32.4% on year. This is expected to support the rupee.

A strong dollar index is likely to keep the pressure on the Indian unit, calling for more aggressive dollar selling by the RBI, dealers said. Market participants are waiting for US Jul-Sept preliminary flash GDP estimates, due later in the day, and the personal consumption expenditure data, due Thursday.

India Rupee - World FX: Euro up ahead of eurozone Jul-Sept flash GDP data

MUMBAI – The euro was up 0.1% against the US dollar ahead of the closely watched eurozone Jul-Sept, due later Wednesday. Market participants are also awaiting Germany's inflation figures due later on Wednesday. The Jul-Sept preliminary flash GDP for the eurozone is estimated to have grown 0.8% on year and 0.2% on month. 

The Japanese yen was up 0.2% against the greenback. On Tuesday, Japanese Finance Minister Katsunobu Kato said the authorities would cautiously watch foreign exchange movements, including those driven by speculators, Reuters reported. With no party getting a clear majority in the Japanese elections held on Sunday, many expect the ruling coalition party to seek the support of relatively smaller opposition parties. 

Meanwhile, the Bank of Japan's 2-day monetary policy meeting started on Wednesday. The central bank is expected to hold rates steady while keeping the door open for interest rate hikes in future. 

The Australian dollar was up 0.2% against the greenback. However, gains in the currency were capped as data released on Wednesday showed that the country's consumer price index rose 0.2% in Jul-Sept, down from 1.0% in the previous quarter.

The Swiss franc was up 0.1% against the US dollar. The Swiss currency was up despite the comments by Swiss National Bank Chairman Martin Schlegel on Tuesday that the central bank could further cut interest rates to maintain price stability. "In the coming quarters, further interest rate reductions could be needed to maintain price stability in the mid-term," Schlegel said. The pound sterling was down 0.1% against the greenback.

The dollar index eased after data showed that job openings in the US fell. The Job Openings and Labor Turnover Survey on Tuesday showed that US job openings fell to 7.44 million in September from a downwardly revised 7.86 million in August. The data came weaker than the market estimate of 8.00 million job openings, dropping to the lowest levels since early 2021, reports said. 

However, losses in the dollar index were limited as the US consumer confidence index for October edged higher to 108.7 compared to 99.2 in September. At 1459 IST, the dollar index, which measures the strength of the greenback against six major currencies, was at 104.10, compared to the previous close of 104.28 on Tuesday and 104.30 on Monday. 

Traders now await the US Jul-Sept preliminary flash GDP estimates, due later on Wednesday, and the personal consumption expenditure data, due Thursday, to get more cues on the possible rate trajectory in the US. Market participants also eye the US presidential election on Nov. 5 where Donald J. Trump and Kamala Harris are in a close fight.  (Gowri Lakshmi) 

India Rupee: Premium steady as mkt avoids large bets; FOMC meet next wk eyed

NEW DELHI – The premium on the one-year dollar/rupee forward contract was steady Wednesday as market participants remained largely on the sidelines, not placing large bets, dealers said. However, some banks purchased dollars for forward delivery, anticipating a rise in the dollar/rupee forward premium going ahead as the interest rate differential between the US and India is expected to remain higher.

"There is a very little movement today," a dealer with a state-owned bank said. "It is at the same level as last week, and people are waiting for FOMC (Federal Open Market Committee)." The overall volumes in the forward market were low on Wednesday due to a truncated week, with financial markets closed on Friday for Diwali, dealers said.

While market participants await next week's US Fed policy outcome, a few data points were lined up this week, including the US Jul-Sept advance GDP estimates, due later in the day, and the personal consumption expenditure data, due Thursday, which could lend some cues to the possible rate trajectory in the US.

At next week's FOMC meeting on Nov. 6-7, the expectations were of a 25 basis-point rate cut. As of today, Fed funds futures see a 98.9% chance of a 25 bps cut, with the rest of odds for the status quo, as per CME FedWatch tool.

With the Fed seen continuing to lower interest rates and the Reserve Bank of India pushing back on rate cut expectations at its December meeting, the US-India interest rate differential is likely to increase and drive up forward premiums, dealers said.

Further, a surplus liquidity in the banking system weighed on forward premiums on Wednesday, dealers said. On Tuesday, surplus liquidity in the banking system widened to INR 1.01 trillion, against INR 849.83 billion on Monday.

Further, market participants were also wary of placing large bets ahead of the US Presidential elections, due Nov. 5. Both the presidential candidates, Donald J. Trump and Kamala Harris, were in a close race, according to several polls, with The New York Times reporting a 48% chance of a win for both.

At 1329 IST, the premium on the one-year exact-period dollar/rupee forward contract was 190.43 paise, against 189.50 paise on Tuesday. On an annualised basis, the premium was 2.25%, similar to Tuesday's close.  (Sourabh Kumar)

India Rupee: Touches record low; RBI's likely dlr sales prevent further fall

MUMBAI – The rupee touched a record low of 84.0850 a dollar on account of persistent dollar purchases from importers, dealers said. They said some banks' dollar sales, likely on behalf of the Reserve Bank of India, prevented the rupee from falling further.

"Though the rupee is range-bound, within the 3 paise movement, there is buying pressure from importers and due to outflows from equities," a dealer at a private bank said. 

The rupee came under pressure as importers continuously purchased the greenback to meet their month-end payment obligations, dealers said. They said some importers also bought dollars, anticipating a further fall in the Indian currency. The Indian unit also came under pressure after a few foreign banks purchased the greenback on behalf of overseas investors, who were looking to withdraw funds from the domestic equity market. 

At 1132 IST, both the domestic benchmark indices, the Nifty 50 and the Sensex were down 0.15% and 0.18%, respectively. So far in October, foreign institutional investors have withdrawn over $10 billion from domestic equities. 

A strong dollar index also weighed on the rupee. The index rose to a fresh 3-month-high on Tuesday, before easing slightly. The dollar index rose following an upbeat US consumer confidence this month. However, the Job Openings and Labor Turnover Survey figures showed that US job openings fell from August, which weighed on the dollar index.

At 1137 IST, the dollar index, which measures the strength of the greenback against six major currencies, was at 104.29, compared to the previous close of 104.28 on Tuesday and 104.30 on Monday.

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 84.08 a dollar. (Gowri Lakshmi)

India Rupee - Asia FX: Most dn on firm dollar index; mkt awaits US econ data

MUMBAI – Most Asian currencies traded down against the dollar on the back of a firm dollar index. The dollar surged to a fresh 3-month-high on Tuesday after data showed a rise in US consumer confidence.

Data on Tuesday showed that the US consumer confidence print for October edged higher to 108.7 compared with 99.2 in September, strengthening the dollar. However, the index eased after the Job Openings and Labor Turnover survey showed that US job openings fell to 7.44 million from a downwardly revised 7.86 million in August. The data came weaker than the market's estimate of 8.00 million job openings, dropping to the lowest levels since early 2021, reports said.

After the release of both data, Fed funds futures traders see a 100% chance of the Fed lowering its interest rate by 25 basis points, according to the CME FedWatch tool. Traders now await the US Jul-Sept preliminary flash GDP estimates, due later in the day, and the personal consumption expenditure data, due Thursday, to get more cues on the possible rate trajectory by the Fed.  

The US is also near its next presidential election, scheduled on Nov. 5. Both the presidential candidates, Donald J. Trump and Kamala Harris, were in a close tie according to several polls, with The New York Times reporting a 48% chance of win for both. 

At 1028 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 104.28, compared with the previous close of 104.28 on Tuesday and 104.30 on Monday. The dollar rose to a 3-month high of 104.63 on Tuesday, the highest rise since Jul. 29.

The Malaysian ringgit was down 0.4% against the greenback. The Philippines peso was down 0.1% against the dollar, tracking losses in the domestic stock market. The domestic equity benchmark PSEi Index was down 0.5% in early trade. The Indonesian rupiah, on the other hand, was up 0.2% against the greenback. 

The Thai baht was down 0.3% against the dollar after the release of minutes from the Bank of Thailand's monetary policy meeting on Oct. 16. The minutes showed concerns over uneven growth of the economy after the central bank lowered its interest rate by 25 basis points. Further, Thailand's government on Tuesday agreed with the central bank to maintain the inflation target price at 1-3% for 2025.

The South Korean won was steady against the greenback, after the Bank of Korea board member Chang Yong-sung, who voted against a rate cut, said the rate cut should be delayed to prevent further spikes in property prices.  (Gowri Lakshmi)

India Rupee: Steady; importers' dollar buys offset foreign banks' sales for FPIs

MUMBAI – The rupee was steady against the dollar on Wednesday as importers' dollar purchases offset the dollar sales by some foreign banks on behalf of foreign portfolio investors, dealers said.

Dealers said the rupee found some support as foreign banks sold dollars on behalf of FPIs, who were keen on investing in the initial public offering of Swiggy. The company's IPO will open for subscription on Nov. 6, and close on Nov. 8.

"Some flows are seen in the morning, probably for Swiggy IPO, but at the same time, good demand is also there in the market," a dealer with a brokerage firm said.

Importers purchased the greenback to meet their month-end payment obligations, and as they were wary of a further fall in the rupee, dealers said. Dealers expected state-owned banks to sell the greenback, likely on behalf of the Reserve Bank of India, should the Indian currency fall below 84.0800 a dollar.

The dollar index surged to a three-month high of 104.64 on Tuesday after data showed the US consumer confidence print for October edged higher to 108.7 from 99.2 in September. However, the index eased, but was firm, after the Job Openings and Labor Turnover survey showed US job openings fell to 7.44 million from a downwardly revised 7.86 million in August. A firm dollar index weighed on the rupee, dealers said.

At 0946 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.32, compared to the previous close of 104.28 on Tuesday and 104.30 on Monday. 

The dollar index also got a boost as the US is nearing presidential elections, scheduled for Nov. 5. Both the presidential candidates are in a close race, according to several polls, with The New York Times reporting a 48% chance of a win for both Donald J. Trump and Kamala Harris. 

Traders now await the US Jul-Sept preliminary flash GDP estimates, due later in the day, and personal consumption expenditure data on Thursday, to get more cues on the possible rate cut trajectory by the Fed. Currently, Fed funds futures traders see a 100% chance of the Fed lowering its interest rate by 25 basis points, according to the CME FedWatch tool.

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 84.08 a dollar. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Oct 30

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 Ashish Shirke

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