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Informist, Tuesday, Nov. 5, 2024

By Gowri Lakshmi

MUMBAI – The rupee ended largely steady against the dollar on Tuesday as banks persistently sold dollars, likely on behalf of the Reserve Bank of India, offsetting the impact of the dollar purchases by banks for foreign portfolio investors ahead of the US Presidential elections, dealers said. Dollar purchases by banks on behalf of importers, including oil marketing companies, also weighed on the currency, they said. 

"The FIIs (foreign institutional investors) were active but they (RBI) were pretty active as well. So there was no movement eventually," said a dealer at a private bank. The local unit moved in a range of just 2 paise during the day. 

The rupee also received support from a jump in domestic equities, with the BSE Sensex and the Nifty 50 ending 0.9% each higher. After hitting a lifetime low of 84.1225 during the day, the rupee settled at 84.1075, against 84.1150 a dollar on Monday. 

The rupee, which was trading at around 84.14 a dollar in the offshore non-deliverable forwards market, opened flat against the dollar as the RBI stepped in to sell dollars in the NDF market to prevent the Indian unit from falling sharply. Despite this, the rupee fell to a lifetime low of 84.1225 a dollar as soon as the domestic spot market opened as banks rushed to purchase the greenback, on behalf of importers who anticipated a further fall in the rupee.

"The market is currently at a heightened volatility due to sentiments surrounding the US elections and FOMC (Federal Open Market Committee)," a dealer at a private bank said. "Importers are really cautious, their sentiments are being triggered, putting the rupee on the edge," he added. 

The central bank marked its presence in the spot market, through its dollar sales intervention around the 84.12 a dollar level, which prevented the Indian unit from falling beyond during the day, dealers said. 

The rupee was weighed owing to the weak risk appetite among investors ahead of the US elections, where both candidates are in a neck-and-neck fight. The Republican candidate and former president Donald Trump and Democratic nominee and Vice President Kamala Harris are in a tight race, with recent polls showing both having an equal probability of winning, even in the swing states.

Foreign banks continued to purchase dollars on behalf of foreign portfolio investors, looking to withdraw funds from the Indian equities market, which pressured the Indian unit, dealers said. "The rupee will take some time to recover from the outflows. At least 10 days or at max (maximum) two weeks are needed, the central bank may hopefully not let the rupee fall further even after the election results," a dealer at a private bank said.

Most traders were cautious of placing large bets ahead of the big event -– the US election --, which led to lower-than-usual volumes in the currency market, dealers said. Market participants also await the outcome of the two-day policy meeting by the US Federal Open Market Committee on Thursday, where the central bank is expected to lower interest rates by a quarter percentage point. Fed Fund Futures now price in a 98.0% chance of the US Fed slashing its benchmark rates by 25 basis points.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.77, compared to its close of 103.88 on Monday and 104.32 on Friday. 

Further, an over 3% rise in Brent crude oil prices on Monday also weighed on the rupee as some oil marketing companies purchased the greenback, wary of further increases in crude prices, dealers said. Crude oil prices rose after the Organization of Petroleum Exporting Countries and its allies on Sunday announced a delay in its output hike in December. At 1530 IST, the January Brent Crude contract on the Intercontinental Exchange was $75.38 per barrel, compared to $75.08 on Monday and $73.10 on Friday.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended largely steady on Tuesday as market participants refrained from placing large bets ahead of the US elections and the US Federal Open Market Committee meeting outcome, dealers said. Volume in the market was lacklustre as well, they said. 

With the Fed set to lower rates once more this week and no clarity on the Reserve Bank of India's rate cut path, the interest rate differential between the US and India is likely to widen, which may lead to a further rise in premiums, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 193.96 paise, against 193.57 paise on Monday. On an annualised basis, the premium was 2.31%, compared to Monday's close of 2.30%.

OUTLOOK

On Wednesday, the rupee may open steady as market participants may remain cautious as the US votes to elect its next president, dealers said. The local unit will take cues from the movement in the dollar index and crude oil prices.

Dealers expect banks to continue purchasing dollars on behalf of FPIs looking to withdraw funds from the domestic market, which may keep the rupee under pressure, they said.

Some dealers expect the rupee to fall to 84.20 a dollar if Trump wins the election, while Harris emerging the winner may lead to the currency rising to 84.05-84.00 a dollar. 

"The exporters are in a wait-and-watch mode. They are very comfortable at this level. Post elections we can see it (rupee) around 84.16 or even to 84.25, then exporters will be active," a dealer at a foreign bank said.

Dealers expect foreign banks to sell dollars on behalf of overseas investors looking to invest in the initial public offerings of several companies this week, including the much-anticipated IPO of the food delivery giant Swiggy, which will open for subscription on Wednesday. 

They also expect the central bank to continue intervening 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 be in the range of 84.00-84.20, with strong support at 84.15 a dollar. 

India Rupee - World FX: Australian dlr up after central bank holds rates

MUMBAI – The Australian dollar was up 0.5% against the greenback after the Reserve Bank of Australia held its benchmark rates steady at 4.35% on Tuesday. "Inflation has fallen substantially since the peak in 2022," the bank said in a statement, while cautioning against high underlying inflation.

The New Zealand dollar was up 0.4% against the greenback, tracking gains in the Australian unit. However, the gains were limited as the Reserve Bank of New Zealand hinted at a bleak economic picture in a report published Tuesday. The central bank also forecast that the economy had contracted in the third quarter, with unemployment on the rise. 

"New Zealand banks are well positioned to continue supporting households and businesses, including effectively handling any potential loan defaults," Deputy Governor Christian Hawkesby said.

The pound sterling was up 0.2% against the dollar. Data on Monday showed that the UK's seasonally adjusted manufacturing managers' index dropped to 49.9 points in October from 51.5 in September, indicating contraction in economic activity. A reading above 50 indicates expansion.

The euro was up 0.1% against the greenback ahead of the US elections. Republican candidate and former president Donald Trump and Democratic nominee and Vice-President Kamala Harris are locked in a tight race for the White House. Latest polls suggest that both candidates have 49% chance of winning. 

At 1523 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.76, compared to 103.88 on Monday and 104.72 on Friday. Market participants also await the policy outcomes of the Bank of England and the US Federal Open Market Committee, scheduled on Thursday. Both central banks are expected to continue their easing cycle by lowering interest rates by 25 basis points. 

The Japanese yen was 0.2% down against the dollar. Makoto Sakurai, former Bank of Japan policymaker, on Tuesday said the central bank was likely to raise interest rates at its upcoming policy meetings, with January being the most likely timing to hike rates. "With domestic politics still in flux, acting in December might be tricky. January seems to be more likely as the BOJ would have more data including on whether consumption and wage growth will hold up," Sakurai said. (Gowri Lakshmi)

India Rupee: Premiums steady as market awaits US elections, FOMC meet

MUMBAI – The premium on the one-year dollar/rupee forward contract was steady Tuesday as market participants were cautious ahead of the US elections and the US Federal Open Market Committee meeting outcome, dealers said. With voting in the US set to commence at 1630 IST, the outcome remains uncertain. Republican contender Donald Trump and Democratic nominee Kamala Harris are locked in a tight race, with the most recent poll indicating a 49% chance of winning for each candidate.

"All are waiting for the elections, and then how the FOMC reacts, hard to see any movement before that," a dealer at a large brokerage said. The FOMC is widely expected to lower its interest rate by 25 basis points at the end of its two-day policy meeting that begins Wednesday. According to the CME FedWatch tool, traders have priced in a 98.0% probability of the Fed cutting its rate by a quarter percentage point. At 1311 IST, the dollar index, which measures the strength of the dollar, was at 103.81, against 103.88 on Monday and 104.32 on Friday.

With the Fed set to lower rates once more and the Reserve Bank of India expected to stand pat, the interest rate differential between the US and India is likely to increase, which may lead to a further rise in premiums, dealers said. 

At 1426 IST, the premium on the one-year exact-period dollar/rupee forward contract was 193.95 paise, against 193.57 paise Monday. On an annualised basis, the premium was 2.31%, compared to Monday's close of 2.30%. (Kabir Sharma)

India Rupee: In thin band as market cautious ahead of US polls, FOMC outcome

MUMBAI – The rupee was in a thin band as market participants are cautious ahead of the outcomes of the US presidential elections and the Federal Open Market Committee meeting. As voting begins at 1630 IST, there is still uncertainty over the likely winner. Republican candidate Donald Trump and Democratic nominee Kamala Harris are in a neck-and-neck competition, with the latest poll revealing a 49% probability of victory for both.

The US FOMC is widely expected to lower its interest rates by 25 basis points at the end of its two-day policy meeting that begins Wednesday. According to the CME FedWatch tool, traders have priced in a 98.0% probability of the Fed cutting its rates by a quarter percentage point. At 1311 IST, the dollar index, which measures the strength of the dollar, was at 103.81, against 103.88 on Monday and 104.32 on Friday.

The rupee was weighed down as banks bought the greenback, likely on behalf of foreign portfolio investors looking to withdraw funds from the domestic stock market. At 1311 IST, the BSE Sensex and Nifty 50 were down 0.41% and 0.37%, respectively.

Dealers are also sceptical about further foreign fund inflows supporting the rupee as the initial public offering of food delivery giant Swiggy will open for subscription from Wednesday. "It will be hard for the rupee to get help from inflows now. Even the Swiggy IPO is too insignificant to outweigh the Trump trade and sell offs in Indian stock market," a dealer at a private bank said.

"The market sentiment is that of panic now. They have been selling since October and have sold off over $10 billion. This will continue for at least the next 10 days, putting the rupee at the weaker end," a dealer at a private bank said.

Importers bought dollars anticipating its further rise. However, banks sold dollars persistently, likely on behalf of the Reserve Bank of India, which limited a sharp fall in the rupee and prevented any sudden volatility in the market.

For the rest of the day, the rupee is seen in a range of 84.00-84.15 against the dollar, with a strong technical support seen at 84.15, dealers said. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Nov 5

NEW DELHI – At 0900 IST, the rupee was at 84.1150 a dollar, unchanged from its previous close. At 1127 IST, the rupee was at 84.1200 per dollar. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee - Asia FX: Mixed ahead of US elections; South Korean won dn 0.2%

MUMBAI – Asian currencies moved on a mixed note as traders braced themselves for the much-awaited US presidential elections. The presidential candidates, former president and Republican Donald Trump and Vice President and Democrat Kamala Harris, were in a neck-and-neck competition to win the race. 

In the past few weeks, markets saw an increased likelihood of Trump winning. However, in light of the Iowa poll, Harris' odds of winning the election have improved from the previous week. Trump emerging victorious is seen as a negative for Asian currencies. A Trump win is expected to push up US Treasury yields, boost the dollar, and weaken the Chinese yuan. At 1020 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.89, compared to 103.88 on Monday and 104.32 on Friday. 

The South Korean won was down 0.2% against the dollar after data released on Tuesday showed October headline inflation in the country slowed further to the weakest level in almost four years, strengthening the case for more interest rate cuts. 

The Thai baht was up 0.2% against the greenback, tracking gains in domestic equities. Bank of Thailand Governor Sethaput Suthiwartnarueput said in a speech on Monday that the independence of the central bank is being challenged. "Central bank independence in many countries, including Thailand, is being challenged despite having done a reasonable job over the past decades," Suthiwartnarueput said. 

The Philippines peso was down 0.1% against the dollar after inflation in the country rose in line with expectations in October, giving the central bank room to sustain its easing cycle. Consumer prices rose 2.3% on year in October, in line with the forecast in a Bloomberg poll. The data also came within the central bank's estimate of 2-2.8% for the month.

The Malaysian ringgit was up 0.1% against the dollar, while the Chinese yuan was down 0.1% against the greenback even after data released on Tuesday showed that China's services activity expanded at the fastest pace in three months in October, suggesting an improvement in the economy after Beijing's stimulus plans. The Caixin purchasing managers' index rose to 52.0 in October from 50.3 in the previous month. A reading above 50 shows an expansion in economic activities. (Gowri Lakshmi)

India Rupee:Hits record low; RBI's likely dollar sales in spot, NDF mkts aid

MUMBAI – The rupee hit a record low of 84.1225 against the dollar Tuesday as banks purchased the greenback on behalf of foreign portfolio investors and importers, dealers said. However, banks sold dollars, likely on behalf of the Reserve Bank of India, in both the offshore non-deliverable forwards market and the domestic spot market, which prevented the local unit from falling sharply, dealers said.

The central bank likely sold dollars around the 84.12 a dollar level, which supported the Indian unit, they said. Traders see strong technical support for the Indian currency at 84.15 a dollar.

Dollar purchases for foreign portfolio outflows weighed on the rupee. Banks purchased the greenback, likely on behalf of foreign portfolio investors, looking to withdraw funds from the domestic equity markets, owing to uncertainty over the US presidential election and as investors re-allocate their funds to China. Data on Tuesday revealed China's economy has expanded at its fastest pace in the three months to October, suggesting Beijing's stimulus plans are boosting the sluggish economy.

Further, banks bought the greenback on behalf of importers, including oil marketing companies, who were wary of a further fall in the rupee after the US election outcome, dealers said.

Republican candidate Donald Trump and Democratic nominee Kamala Harris are in a tight race, with the latest exit polls showing both parties have a 49% probability of winning the election. "The bull pressure has cooled off after the poll results which showed Trump and Harris are in a neck-to-neck competition," a dealer at a private bank said. "People who went long have booked profits now before elections, those who did not are confident of a Trump win," he added.

Dealers expect the central bank to continue its intervention through dollar sales to prevent the rupee from falling sharply and to curb extreme volatility. For the rest of the day, the rupee is seen in the range of 84.00-84.15 against the dollar, dealers said. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Nov 5

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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