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Informist, Wednesday, Nov. 6, 2024

By Gowri Lakshmi 

MUMBAI – The rupee ended at a lifetime low against the US dollar as Republican candidate Donald Trump was set to become the 47th president of the US, sparking risk aversion and fear of foreign fund outflows from emerging markets. The election results not only sent the dollar index surging to a four-month-high but also prompted aggressive dollar-buying by importers anticipating further weakness in the rupee, dealers said. 

However, the rupee found some support from dollar sales by some banks, likely on behalf of the Reserve Bank of India. Though the central bank intervened to check the rupee's fall, it did not do as aggressively as it has in recent months, dealers said. Some banks also sold dollars on behalf of exporters, which aided the rupee. 

After moving in a range of 12 paise during the day, the rupee settled at a record low of 84.2800, against 82.1075 a dollar on Tuesday. Other Asian currencies too fell against the dollar, which weighed on the rupee. The Indian currency was the worst performer amongst its Asian peers, plummeting 2% against the dollar. 

According to the latest poll by the Associated Press, Trump has secured 267 of the 270 electoral seats needed to win the race for the Oval Office. Trump's rival Kamala Harris has managed to win only 224 electoral votes so far. Investors anticipate that Trump's presidency would mean lower corporate taxes and stricter trade relations, leading to higher stock prices and bond yields, strengthening the dollar. 

Trump's presidency is seen as a negative for emerging markets because of risk aversion spurred by the protectionist trade policy advocated by him. Moreover, Trump has been proposing expansionary fiscal policies, driving up US interest rates, which in turn would reduce the relative attractiveness of emerging market assets. Sure enough, US Treasury yields shot up on Monday, prompting foreign fund outflows from the Indian debt market.

The rupee, which traded at around 84.16 a dollar in the non-deliverable forwards market, opened at the same level in the domestic spot market. Multiple dealers said the Reserve Bank of India stepped up its dollar sales when the rupee was at 84.20 a dollar level, preventing the domestic currency rupee from falling sharply. 

As soon as the domestic spot market opened, the rupee fell sharply as banks rushed to buy dollars on behalf of importers. Several stop losses were triggered due to short dollar bets at 84.20 per dollar level in early trade as the dollar index surged in response to initial trends showing a likely win for Trump. 

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 104.84, compared to the close of 103.45 on Tuesday and 103.88 on Monday. 

Dealers speculated that the central bank may have sold over $600 million-$700 million during the day to support the domestic currency. Some exporters, who wanted to take advantage of the higher dollar/rupee levels, sold the greenback, which supported the rupee. However, most exporters are in a "wait and watch" mode, hoping for a further fall in the rupee, dealers said. 

"I was expecting a 15-30 (84.15-84.30) range. But I also expected far more pressure from the sellers (RBI), which did not happen," a dealer at a state-owned bank said. 

Meanwhile, domestic equities ended higher on Wednesday, which supported the Indian currency. The Nifty 50 and the BSE Sensex closed 1.1% each higher. However, dealers expect foreign banks to continue purchasing dollars on behalf of foreign portfolio investors looking to withdraw funds from the Indian equities market, which will weigh on the rupee in the coming days.

"The RBI allowed a movement beyond 84.12, 84.20. The rupee is expected to remain weak under the current circumstances. The range for tomorrow (Thursday) is expected to be 84.10 to 84.40 with RBI slowly allowing it to fall," said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

Market participants will now wait for the policy outcome by the US Federal Reserve Open Market Committee on Thursday, where the central bank is expected to lower its interest rates by 25 basis points. Fed Fund Futures have priced in a 97.7% probability of the Fed cutting its benchmark rates by 25 bps. 

FORWARDS

The premium on the one-year dollar/rupee forward contract ended lower on Wednesday due to a jump in US Treasury yields after the results projected a win for Trump in the US elections, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

Banks bought dollars for forward delivery on behalf of importers in anticipation of a further fall in the Indian currency, which limited the fall, dealers said.

Market participants are awaiting the outcome of the US Federal Open Market Committee meeting, due Thursday. With the Fed set to lower rates once more this week and the Reserve Bank of India expected to stand pat on rates, the interest rate differential between the US and India is likely to widen, which may lead to a rise in premiums, dealers said.

RBI Governor Shaktikanta Das on Wednesday again pushed back expectations of an interest rate cut next month, saying it would be wrong to assume that a change in stance by the Monetary Policy Committee would be followed by a reduction in the repo rate at the immediate next meeting. On Oct. 9, the MPC left the repo rate unchanged at 6.50% but voted to change its stance to neutral from the withdrawal of accommodation. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 191.79 paise, against 193.96 paise on Tuesday. On an annualised basis, the premium was at 2.26% against the previous close of 2.31%.

OUTLOOK

On Thursday, the rupee is seen opening steady as market participants may await monetary policy outcomes from the US Federal Reserve and the Bank of England. Both the central banks are widely expected to lower their respective benchmark rates by 25 bps. Traders will closely track the dollar index, although sentiment for the Indian currency is expected to remain weak following Trump's election victory.

Dealers expect importers to purchase the greenback, wary of a further fall in the rupee owing to the strengthening of the dollar index. They also expect the Reserve Bank of India to continue its intervention through dollar sales to prevent a sharp fall in the domestic currency and curb any volatility. The rupee is expected to be in the range of 84.10-84.40, with strong support at 84.35 a dollar. 

India Rupee - World FX: Euro, yen slump as Trump set to become US president

MUMBAI – The euro plunged 1.7% against the greenback after early results showed that Republican candidate Donald Trump was set to become the 47th president of the US. Results showed Trump has secured 267 of the 270 electoral seats needed to win the race for the Oval Office. Trump's rival Kamala Harris has managed to win only 224 electoral votes so far, The Associated Press said. 

Investors anticipate that Trump's victory would mean lower corporate taxes and stricter trade relations, leading to higher stock prices and bond yields, strengthening the dollar. 

At 1550 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 104.97, compared to 103.45 on Tuesday and 103.88 on Monday. The dollar index rose to a high of 105.31 on Wednesday, the highest level since Jul. 4. 

The euro also fell after the purchasing manager's index showed stagnant growth in the region's economy. The composite PMI stood at 50.0 in October while the services PMI rose to 51.6 in October. 

The Japanese yen also fell 1.7% against the dollar as the PMI data showed that Japanese services activity shrank and business confidence slipped in October. The composite PMI dropped to 49.6 in October from 52.0 a month ago. A reading below 50 shows a contraction in economic activity. However, the Bank of Japan's minutes of the September meeting showed that policymakers agreed that the Japanese economy was making progress in meeting conditions for further interest rate hikes.

The pound sterling was down 1.2% against the dollar ahead of the monetary policy outcome of the Bank of England due Thursday. The central bank is widely expected to lower its policy rates by 25 basis points. Market participants will also closely watch Governor Andrew Bailey's address to get cues on how the latest budget proposals would influence the monetary policy decisions in December.  

The New Zealand dollar was down 0.7% against the greenback as data Wednesday showed New Zealand's unemployment rate rose to a near four-year high in the September quarter, cementing expectations of another outsized cut in interest rates this month. Tracking a fall in the New Zealand currency, the Australian dollar fell 0.9% due to their interrelated economies.

Market participants now keenly await the policy outcome of the US Federal Open Market Committee meeting on Thursday, where the central bank is expected to lower its rates by 25 bps. Fed Fund Futures currently price in a 97.5% probability of the Fed slashing its interest rates by a quarter percentage point on Thursday. (Gowri Lakshmi)

India Rupee: Forward premiums fall on rise in US yields on likely Trump win

NEW DELHI – The premium on the one-year dollar/rupee forward contract fell on Wednesday due to a jump in US Treasury yields after the latest results projected a win for Republican candidate Donald Trump in the US presidential election, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

The Associated Press projects that Trump is leading the race for the White House with 267 electoral seats, while his opponent, Vice President and Democrat Kamala Harris, managed to secure 224 seats. A total of 270 electoral seats are required to declare the winner. Investors anticipate that Trump coming to power would mean lower corporate taxes, stricter trade relations, leading to higher stock prices and bond yields, strengthening the dollar. 

"It's all about the US elections today, so forwards are tracking that," said a dealer at a private bank. "There may be more downside in the coming days once US yields go higher."

Meanwhile, banks bought dollars for forward delivery on behalf of importers in anticipation of a further fall in the Indian currency, which limited losses for premiums, dealers said. The rupee fell to a record low of 84.2550 a dollar on Wednesday. 

Market participants are also waiting for the US Federal Open Market Committee meeting outcome, due Thursday. Fed Fund Futures price in a 98.9% chance of the US Fed cutting rates by 25 basis points this week. With the Fed set to lower rates once more this week and the Reserve Bank of India expected to stand pat on rates, the interest rate differential between the US and India is likely to widen, which may lead to a rise in premiums, dealers said.

RBI Governor Shaktikanta Das on Wednesday again pushed back against expectations of an interest rate cut next month, saying it would be wrong to assume that a change in stance by the Monetary Policy Committee would be followed by a reduction in the repo rate at the immediate next meeting. On Oct. 9, the MPC left the repo rate unchanged at 6.50% for the 10th meeting in a row, but unanimously voted to change its stance to neutral from withdrawal of accommodation. 

At 1350 IST, the premium on the one-year exact-period dollar/rupee forward contract was 191.79 paise, against 193.96 paise on Tuesday. On an annualised basis, the premium was at 2.26% against the previous close of 2.31%. (Pratiksha) 

India Rupee:At record low as dlr surges on likely Trump win; stop losses hit

MUMBAI – The rupee fell to a lifetime low of 84.2525 a dollar, as the dollar index surged to a four-month-high on Wednesday after the latest results projected a likely presidential win for Republican candidate Donald Trump, dealers said.

The latest poll by the Associated Press projected Trump leading the race for the White House with 267 electoral seats, and Vice-President and Democrat Kamala Harris only managing to secure 214. A total of 270 electoral seats are required to win the US presidential election. Investors anticipate that Trump coming to power would mean lower corporate taxes, stricter trade relations, leading to higher stock prices and bond yields, strengthening the dollar. 

The rupee was also weighed down by a sharp fall in other Asian currencies, which fell 0.5-1.0%. Further, banks' persistent dollar purchases on behalf of importers, on expectation of a further fall in the rupee, also weighed on the currency, they said. This, and a strengthening dollar index, led to stop-losses being triggered on short dollar bets around the 84.20-a-dollar level, dealers said.

However, state-owned banks sold dollars continuously, likely on behalf of the central bank, which limited losses for the Indian unit, they said. "The central bank has been selling continuously since morning. Whatever amount of dollars they're supplying, they are immediately absorbed. Stop losses have also been triggered," a dealer at a foreign bank said. "We can see the weakness in the rupee being spilt over even tomorrow (Thursday)," he added. Some dealers said the central bank may have sold around $600 million-$700 million in the domestic spot market.

At 1330 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 105.10, compared with the previous close of 103.45 on Tuesday and 103.88 on Monday. The dollar index rose to a four-month high of 105.31 on Wednesday, the highest level since Jul. 4. 

Some banks also sold dollars on behalf of exporters, which aided the rupee. However, dealers said most exporters are still in the wait-and-watch mode, expecting the rupee to fall below 84.30 a dollar.

For the rest of the day, the rupee is seen in the range of 84.10-84.30 against the dollar, dealers said. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Nov 6

MUMBAI – At 0900 IST, the rupee was at 84.1600 a dollar, from its previous close of 84.1075. At 1124 IST, the rupee was at 84.1925 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: Fall as dlr surges; US poll trends show Trump in lead

MUMBAI – Asian currencies fell against the dollar Wednesday as the dollar index surged to a four-month-high after trends in the US presidential election showed Republican candidate and former President Donald Trump leading the race to the White House. Associated Press repored that Trump is leading with 230 electoral votes while his opponent, Vice President and Democratic nominee Kamala Harris has secured 210 electoral seats. 

A Trump administration is a negative for emerging markets due to his high-tariff policy, stricter trade relations and a strengthening of the dollar. At 1023 IST, the dollar index which measures the strength of the dollar against six major currencies, was at 104.73, compared to its previous close of 103.45 on Tuesday and 103.88 on Monday. The dollar index surged to 105.19, its highest level since Jul. 9. Both the Thai baht and South Korean won were down 1.2% against the dollar. 

The Malaysian ringgit was down 1.3% against the dollar, the biggest fall amongst its Asian peers. However, Malaysia's central bank said that it is closely monitoring the US election and is prepared to manage the market volatility from it to curb sudden shocks, Reuters reported. "Malaysia's highly diversified economic and trade structure, along with its strong fundamentals and positive growth prospects, will provide ample buffers to navigate external uncertainties," the bank said, as per reports.

The Chinese yuan was down 0.7% against the dollar. The People's Bank of China on Tuesday said that the central bank planned to maintain supportive monetary policy. Governor Pan Gongsheng said that the central bank is hoping to "increase the intensity of counter-cyclical monetary policy", reports said. 

The Indonesian rupiah also traded 0.7% lower against the greenback. Bank Indonesia notified market participants that the bank was ready to act in order to stabilise the currency movement from excessive volatility as trends showeed Trump was leading the presidential race. The Philippines peso and Taiwan dollar were down 0.7% and 0.6% against the dollar, respectively. (Gowri Lakshmi).

India Rupee: At record low as dlr surges; US poll trends show Trump in lead

MUMBAI – The rupee hit a record low of 84.1900 against the dollar Wednesday as the dollar index surged to a four-month-high after early US election trends showed that Republican candidate and former president Donald Trump has taken the lead in several states, dealers said. 

The latest presidential results from Associated Press show that Trump is leading the race to the Oval Office with 214 electoral votes, while the democratic nominee and Vice President Kamala Harris is seen to have secured 179 electoral votes.

"The market is only anticipating and reacting to the election results. Even though the FOMC (Federal Open Market Committee) is an important event too, the market knows what the Fed will do, for the week, so the US election results will be in the spotlight," a dealer at a state-owned bank said.

At 0938 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 105.12, compared to its previous close of 103.45 on Tuesday and 103.88 on Monday. The dollar index surged to 105.19, its highest level since Jul. 9. 

However, banks sold the greenback, likely on behalf of the Reserve Bank of India, in the non-deliverable forwards market, which prevented the rupee from falling sharply, they said. "The market will be highly volatile today (Wednesday). It (rupee) traded around 84.23 a dollar in NDF. Nats (public-sector banks) sold at that level to bring it down to 84.16 before the market opened in the spot (market)," a dealer at a state-owned bank said. Most dealers expect the rupee to fall as low as 84.25 a dollar during the day. Dealers speculated that the RBI may be selling dollars in the domestic spot market as well to support the currency.

Traders are also closely watching the US FOMC meeting outcome due Thursday, where the central bank is expected to lower its interest rates by 25 basis points. According to the CME FedWatch tool, traders currently price in a 97.6% probability of the US Fed slashing its benchmark rates by a quarter percentage point.

A fall in other Asian currencies also weighed on the Indian unit, dealers said. They also expect banks to continue their purchase of dollars on behalf of foreign portfolio investors, who are looking to withdraw funds from the Indian equities market. This will likely weigh on the domestic unit significantly, they said. For the rest of the day, the rupee is seen in the range of 84.05-84.25 against the dollar, dealers said. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Nov 6

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 Saji George Titus

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