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Informist, Monday, Nov. 4, 2024

By Gowri Lakshmi 

MUMBAI – The rupee ended at a record closing low against the dollar Monday as banks persistently bought the greenback on behalf of foreign portfolio investors looking to withdraw funds from domestic equities, dealers said. The benchmark indices, the Nifty 50 and BSE Sensex, ended 1.3% and 1.2% lower, respectively.

However, banks' active dollar sales, probably on behalf of the Reserve Bank of India, limited a further fall in the rupee, they said.

The rupee fell past its key technical support of 84.10 a dollar and touched a lifetime low of 84.1200 during the day. The local currency moved in a thin range of just 6 paise throughout the day, and settled at 84.1150 a dollar. However, other Asian currencies rose between 0.1-0.7% against the greenback, with the Thai baht being the best performer.

In October, foreign portfolio investors withdrew over $11 billion from the domestic equities market, keeping the rupee under downward pressure, dealers said.

The rupee opened steady against the dollar Monday, as the market remained cautious ahead of the US presidential election. Market participants are closely watching the US polls, an unprecedented close race between former president and Republican candidate Donald Trump and his rival, Vice-President and Democratic nominee Kamala Harris.

"There will be continued outflows from equities this week," a dealer at a private bank said. "We can see the market reacting to the US elections and FOMC (US Federal Open Market Committee). But the central bank will intervene through their dollar sales to stop the sudden shift."

According to opinion polls, Harris and Trump are locked in a neck-and-neck contest, with Harris seen having a 48.5% chance of victory and Trump a 47.6% chance of winning the race to the White House. The dollar index was also down ahead of the November FOMC meeting, scheduled to begin Wednesday.

The Fed is expected to lower its benchmark interest rate by 25 basis points at its policy outcome due Thursday. According to the CME FedWatch tool, traders have priced in a 98.1% probability of the Fed cutting its interest rate by a quarter of a percentage point. At 1613 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 103.73, compared with the previous close of 104.32 on Friday and 103.89 on Thursday.

The rupee came under downward pressure as importers purchased the greenback continuously in anticipation of a further fall in the Indian unit, dealers said. Though the RBI sold dollars actively, it did not intervene as aggressively as it had the previous week, which led to the rupee breaching the key support level of 84.10 per dollar, a dealer at a state-owned bank said.

Global crude oil prices rose over $2 per barrel Monday, which also put the rupee under pressure, triggering the currency to breach the vehemently protected level of 84.10 a dollar, dealers said. Wary of a further rise in crude oil prices, oil marketing companies, too, rushed to purchase the greenback. Oil prices rose following a decision by the Organization of the Petroleum Exporting Countries and its allies to delay the output hike in December, Reuters reported.

At 1530 IST, the January Brent Crude contract on the Intercontinental Exchange was $74.71 per barrel, compared to its close of $73.10 per barrel on Friday and $73.16 on Thursday. 

However, banks actively sold the greenback, likely on behalf of the RBI, which limited the fall for the domestic currency. Dealers said that upon breaching the 84.10 level, several stop-losses were triggered, which created some volatility in the market. Some banks also sold dollars on behalf of exporters who wanted to take advantage of the higher dollar/rupee levels, which aided the rupee, dealers said. Some exporters are in "wait and watch" mode, where they are expecting the rupee to fall as low as 84.20 a dollar, they said.

FORWARDS

The premium on the one-year dollar/rupee forward contract rose Monday, tracking a fall in US Treasury yields, dealers said. Market participants refrained from placing large bets as they await multiple events this week, they said. The yield on the 10-year benchmark US treasury note eased to 4.30% at 1420 IST from 4.40% at 0830 IST Monday.

As the US presidential election nears its peak, focus is shifting to the pivotal swing states that frequently influence the results. In the run-up to the voting, former president Donald Trump is projected to lead in forecasts across all seven swing states, based on the most recent AtlasIntel survey. The poll reveals that about 49% of participants intend to vote for Trump, providing Republicans with a 1.8% advantage over the Democratic contender, Vice-President Kamala Harris. Conducted during the initial two days of November, the survey covered nearly 2,500 likely voters in the US, with a significant portion identifying as female.

On Monday, the premium on the one-year exact-period dollar/rupee forward contract was 193.57 paise, against 191.89 paise Thursday. On an annualised basis, the premium was 2.30%, compared to Thursday's close of 2.28%.

OUTLOOK

On Tuesday, the rupee will take cues from the movement in the dollar index and crude oil prices. Market participants will remain cautious as the US elects its next president. "Now that the rupee has breached 84.10, it may fall to 84.15 and may even touch 84.20 a dollar," said a dealer at a private bank. "It is more likely that the Fed will cut rates by 25 bps, but there are chances of it keeping the rates steady too."

Dealers expect importers to continue purchasing the dollar, which is expected to keep the rupee under pressure. They also expect banks to purchase dollars on behalf of FPIs looking to withdraw funds from the domestic equities market, which may keep the rupee under downward pressure.

They also expect the central bank to intervene in both the domestic spot market and the non-deliverable forwards market through dollar sales to prevent any sharp fall in the rupee. The rupee is expected to remain in the range of 84.00-84.15, with strong support at 84.15 a dollar. 

India Rupee: Premiums rise as US yields fall; US election, FOMC meet awaited

MUMBAI – The premium on the one-year dollar/rupee forward contract rose on Monday, tracking a fall in US Treasury yields, dealers said. Market participants refrained from placing large bets, as they await multiple events this week, they said. The yield on the benchmark 10-year US treasury note eased to 4.30% at 1420 IST from 4.40% at 0830 IST on Monday.  

"There's not much volume as the polls keep changing, so we are just waiting to see what happens," a dealer at a state-owned bank said, referring to elections in the US. The US presidential election is scheduled for Tuesday.

As the presidential election nears its peak, focus is shifting to the pivotal swing states that frequently influence the election's results. In the run-up to the voting, former president Donald Trump is projected to lead in forecasts across all seven swing states, based on the most recent AtlasIntel survey. The poll reveals that about 49% of participants intend to cast their votes for Trump, providing Republicans with a 1.8% advantage over Democratic contender Kamala Harris. Conducted during the initial two days of November, the survey covered nearly 2,500 likely voters in the US, with a significant portion identifying as female.

Market participants also await the outcome of the Federal Open Market Committee meeting on Thursday. According to the CME FedWatch tool, traders price in a 98.1% probability of the Fed lowering its interest rate by 25 bps. At 1422 IST, the premium on the one-year exact-period dollar/rupee forward contract was 193.33 paise, against 191.89 paise on Thursday. On an annualised basis, the premium was 2.30%, compared to Thursday's close of 2.28%.  (Kabir Sharma)

India Rupee - World FX:Australian dollar up 0.5% ahead of policy outcome Tue

MUMBAI – The Australian dollar rose 0.5% against the US dollar ahead of the Reserve Bank of Australia's policy decision Tuesday. Economists expect the central bank to keep its official cash rate unchanged at 4.35% and hold it steady till February, according to a poll by Bloomberg. Tracking gains in the Australian currency, the New Zealand dollar was also up 0.4% against the US currency.

The euro was up 0.6% against the dollar as the dollar index eased ahead of the US presidential elections on Tuesday, with both candidates in close race to win the election. Republican candidate and former president Donald Trump is seen having 47.6% chance of a victory, while the probability of Democratic nominee and Vice President Kamala Harris winning the race to the White House is 48.5%. 

At 1318 IST, the dollar index, which measures the strength of the greenback against six major currencies, was 103.78, compared to 104.32 on Friday and 103.89 on Thursday. The Japanese yen was down 0.5% against the dollar.

The dollar index was also under pressure ahead of the US Federal Open Market Committee Meeting, which is scheduled to begin Wednesday. The US central bank is widely expected to lower its benchmark rates by 25 basis points on Thursday. According to the CME FedWatch tool, traders now have fully priced in a quarter basis point rate cut.

The pound sterling was up 0.5% against the dollar. The Bank of England is expected to cut its interest rates by 25 bps at its policy outcome on Thursday.  (Gowri Lakshmi)

India Rupee: Hits record low as FPIs, oil importers persistently buy dollars

MUMBAI – The rupee hit a record low of 84.1150 a dollar as banks continuously bought dollars on behalf of foreign portfolio investors, looking to pull out funds from domestic equities, dealers said. At 1247 IST, benchmark indices the Nifty 50 and BSE Sensex were down 1.8% and 1.6%, respectively.

Looming uncertainty over the US presidential elections and China's fiscal measures to support its economy has prompted foreign investors to withdraw funds from Indian markets. FPIs net withdrew almost $11 billion from Indian markets in October. 

"We expected this volatility. There will be higher volatility on account of (US) elections depending on how investors will position. Though most investors are in a wait and watch mode, the rupee can fall as low as 84.13 a dollar now," a dealer at a state-owned bank said. 

The rupee also came under pressure as importers purchased the greenback, wary of further fall in the rupee, dealers said. Oil importers also purchased the greenback, in anticipation of further rise in crude oil prices. Oil prices rose more than $1 on Monday following a decision by the Organization of the Petroleum Exporting Countries and its allies to delay the output hike in December.

On Sunday, OPEC+ said it would extend its output cut of 2.2 million barrels per day for another month in December. At 1215 IST, the January Brent Crude contract on the intercontinental exchange was $74.43 per barrel, compared to the close of $73.1 on Friday.

However, the rupee was supported by an ease in the dollar index ahead of the US presidential elections. Both presidential candidates, former president and republican candidate Donald Trump and Vice President and democratic nominee Kamala Harris are in a neck and neck competition for the elections due Tuesday. 

At 1239 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 103.77, compared with the previous close of 104.32 on Friday and 103.89 on Thursday.

Some dealers speculated that the central bank intervened through dollar sales to prevent the rupee from falling sharply. However, the dollar sales were not aggressive in nature, they 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 now see strong technical support for the Indian currency at 84.15 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Nov 4

MUMBAI – At 0900 IST, the rupee was at 84.0700 a dollar, from its previous close of 84.0750. At 1112 IST, the rupee was at 84.0750 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 traders remain cautious ahead of US elections

MUMBAI – The rupee was steady against the dollar on Monday, as market participants exercised caution ahead of the US presidential elections on Tuesday, dealers said.

Uncertainty looms large over the outcome of the US presidential election, with both the candidates -- former president and the Republican Party's candidate Donald Trump, and Vice-President and the Democratic Party's nominee Kamala Harris -- in a close tie to win the election, several polls show. According to statistician Nate Silver, Harris is seen having a 48.5% chance of victory, while Trump is close at 47.6%. 

Meanwhile, a fall in the dollar index ahead of the US elections supported the Indian unit, dealers said. The dollar index also fell ahead of the November Federal Open Market Committee meeting, beginning on Wednesday, at which the US central bank is expected to go with a modest 25-basis-point rate cut. According to the CME FedWatch tool, traders are pricing in a 96.4% chance of the Fed slashing its rate by a quarter basis point. 

At 1005 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 103.65, compared with the previous close of 104.32 on Friday and 103.89 on Thursday.

A rise in Asian currencies, tracking weakness in the US unit, supported the local unit, dealers said. Asian currencies gained 0.3-0.7% against the greenback. However, banks bought dollars on behalf of importers, wary of a further fall in the rupee, which weighed on the local unit, they said. 

"There will be a dip (in dollar/rupee) for some time. But the dip probably will not sustain much as importers' (dollar) demand will be there," a dealer at a state-owned bank said. 

Dealers expect banks to continue to sell dollars, likely on behalf of the Reserve Bank of India, to prevent the rupee from falling sharply and to curb excessive volatility. "The rupee is heavily protected in this range. Until some substantial inflows come in, the central bank may have to intervene. But we don't expect many FII (foreign institutional investors) activities till Thursday, post the elections," a dealer at a state-owned bank said. 

For the rest of the day, the rupee is seen in the range of 84.00-84.10 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.10 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Most up as dlr index falls before US polls, FOMC meet

MUMBAI – Most Asian currencies traded higher against the dollar on Monday as the dollar index fell ahead of the US presidential elections on Tuesday and the outcome of the November Federal Open Market Committee meeting on Thursday. 

The dollar index eased in Asian trade amid the looming uncertainty over the outcome of the US presidential election, with both the candidates seen in a close tie. The chances of winning for Republican candidate and former president Donald Trump are 47.6%, while Democratic candidate and Vice-President Kamala Harris is seen having a 48.5% chance, according to statistician Nate Silver. 

The dollar index was also down ahead of the US FOMC outcome, with the central bank expected to proceed with a moderate 25-basis-point rate cut. According to the CME FedWatch tool, traders price in a 98.1% probability of the Fed lowering its interest rate by 25 bps. At 0930 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.74, compared to the close of 104.32 on Friday and 103.89 on Thursday. 

The Malaysian ringgit was up 0.4% against the dollar, tracking gains in domestic equities. At 0930 IST, Malaysia's Kuala Lumpur Composite was up 0.7%. 

The South Korean won was up 0.6% against the dollar. However, gains in the currency were limited as data released on Sunday showed a decline in the country's retail sales. The index for retail sales reached 100.7 in the quarter ended September, down 1.9% from a year ago. 

The Philippines peso was up 0.4% against the dollar. The Philippine Statistics authority is expected to release Jul-Sept GDP data on Thursday. The economy is likely to have slowed down in Jul-Sept due to weaker household spending and public spending, according to reports.

The Thai baht traded 0.7% higher against the greenback, the most among its Asian peers, even after the country's central bank announced on Monday that the selection of the next Bank of Thailand board chairman by an independent committee has been postponed to next week due to the need for more information.
 

Bucking the trend, the Indonesian rupiah was flat against the greenback. Data released on Friday showed that the country's October headline and core inflation was slightly higher than expected. The headline inflation was 1.71% in October, just above the 1.68% estimate in a Reuters poll. Traders now await the monetary policy meeting by Bank Indonesia, scheduled to be held on Nov. 19-20.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Nov 4

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 Rajeev Pai

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