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Informist, Thursday, Nov. 7, 2024

By Gowri Lakshmi

MUMBAI – The rupee ended at a record closing low against the dollar on Thursday as banks continuously bought dollars on behalf of importers, anticipating a further fall in the local currency, dealers said. Some banks also purchased the greenback on behalf of foreign portfolio investors looking to withdraw funds from the domestic equities market, they said.

However, some public-sector banks sold the greenback, likely on behalf of the Reserve Bank of India, which limited the fall in the Indian currency, dealers said. Some exporters also sold the greenback to take advantage of the relatively higher dollar/rupee levels, which aided the rupee, they said. 

The rupee settled at 84.3725 a dollar after touching a lifetime low of 84.3775 just before the domestic spot market closed. The rupee moved in a range of 12 paise during the day.

Though the rupee opened steady at 84.2600 a dollar, importers rushed to purchase the greenback as soon as the market opened on expectations that the rupee might fall. Dealers said importers bought dollars with a sense of panic, as the dollar index strengthened sharply after Donald Trump won the US presidential election. 

Trump won 295 out of the 538 electoral seats, defeating Vice President Kamala Harris, who got 226 seats. With Trump in office, the rupee and other emerging market currencies are expected to weaken as his proposed policies, which are inflationary, may strengthen the dollar.

However, as the demand for dollars increased, banks stepped in to sell the greenback, likely on behalf of the Reserve Bank of India, to prevent the rupee from falling sharply. The central bank sold dollars around 84.35 a dollar, according to dealers. However, the dollar sales were not very aggressive.

"They are selling (dollars) but it's very mild," said a dealer at a state-owned bank. "They are letting it (rupee) fall gradually. It is good, there is some movement in the market now."

Banks also bought dollars on behalf of foreign portfolio investors, looking to pull out money from domestic equities, dealers said. FPIs, who net sold Indian equities worth $10.94 bln in October, have net sold another $749 million so far in November. On Thursday, benchmark equity indices, the BSE Sensex and the Nifty 50 ended 1.0% and 1.2% lower, respectively. 

Meanwhile, some banks sold the greenback on behalf of overseas investors, looking to invest in the initial public offering of domestic companies. Sagility India's public offer opened for subscription on Tuesday and closed on Thursday. The initial public offering of food delivery giant Swiggy opened for subscription on Wednesday and will close on Friday. "We may see some help for the rupee coming from the IPOs. Swiggy's IPO is undersubscribed now, but we expect most inflows to come in bulk during the last day of subscription," a dealer at a private bank said. 

The rupee found some support from a fall in the dollar index during European trade. The dollar index eased ahead of the US Federal Open Market Committee meeting outcome due later in the day. Market participants widely expect the US central bank to lower interest rates by 25 basis points. Currently, traders price in a 98.9% probability of the US Fed cutting its benchmark rates by a quarter percentage point on Thursday. However, with Trump being elected as the president, the chances of a rate cut in December now look bleak, as his policies of are considered inflationary.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.89, compared to 105.12 on Wednesday and 103.45 on Tuesday. 

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at a near three-week low as banks sold dollars for forward delivery on the expectation that the interest rate differential between the US and India may widen less than previously thought after Donald Trump won the US presidential election on Wednesday, dealers said. Trump's proposed policies are seen as inflationary and may potentially put the US central bank on a slower and shallower path for interest rate cuts, they said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

At 1530 IST, the CME FedWatch tool showed that Fed fund futures reflected a 70% probability of a 25-bps rate cut in December, down from 77% a day ago. 

Meanwhile, some banks bought dollars for forward delivery on behalf of importers in anticipation of a further fall in the Indian currency, which limited losses, dealers said. A fall in US 10-year Treasury yields ahead of the US rate decision also aided the premiums, dealers said. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 187.55 paise, against 191.79 paise on Wednesday. On an annualised basis, the premium was at 2.22% against the previous close of 2.26%.

OUTLOOK

On Friday, the rupee will take cues from movement in the dollar index after the US Fed policy outcome at 0030 IST, dealers said. Market participants also await the monetary policy decision of the Bank of England, also due later in the day. The central bank will likely cut its benchmark rate by a quarter basis point.

"There should not be much of a reaction from the FOMC, it's mostly priced in," said a dealer at a private bank. "Unless
(Fed Chair Jerome) Powell throws a surprise."

Dealers expect importers and foreign portfolio investors to continue purchasing the greenback, which may weigh on the rupee. However, they expect the central bank to continue intervening in the offshore non-deliverable forwards market and the domestic spot market through dollar sales to prevent the rupee from falling sharply. 

The rupee is expected to be in the range of 84.20-84.50, with strong support at 84.40 a dollar. 

India Rupee - World FX: Dollar index falls ahead of US FOMC meet outcome

MUMBAI – The dollar index weakened during European trade after surging to a 4-month-high on Wednesday following Donald Trump's victory in the US presidential election. The dollar index fell ahead of the US Federal Open Market Committee meeting outcome due later in the day. The central bank is widely expected to lower interest rate by 25 basis points. Currently, Fed Fund Futures price in a 98.9% probability of the US Fed cutting rates by 25 bps.

At 1535 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 104.80, compared with the previous close of 105.12 on Wednesday and 103.45 on Tuesday. The dollar index surged to a 4-month-high of 105.44 on Wednesday. Tracking weakness in the dollar, the euro traded 0.4% higher against the greenback.

The Japanese yen was up 0.5% against the greenback. On Thursday, Japan's top currency diplomat Atushi Mimura said that the country is equipped to act against the weakening of the yen. Mimura said to reporters on Thursday that authorities are "closely watching developments on the currency market, including those driven by speculators, with utmost urgency."

The pound sterling rose 0.5% against the dollar. Data on Thursday showed that UK house prices edged higher for the fourth consecutive month. House prices rose 0.2% in October, in line with market forecasts. Market participants now await the monetary policy outcome by the Bank of England later in the day, where the central bank is expected to lower its benchmark rates by a quarter percentage point.

The Canadian dollar and the Swiss franc were up 0.5% and 0.2% against the US currency, respectively. The Australian dollar and the New Zealand dollar traded 1% higher against the greenback, primarily because of a fall in the dollar index. Reserve Bank of New Zealand Deputy Governor Christian Hawkesby on Thursday, in an address to parliament, said that central banks globally must anticipate extra challenges posed by the newly-elected US President Donald Trump. 

"He (Trump) has talked about 10 to 20% tariffs across the board and higher tariffs still with China, lower business and personal taxes and less regulation, less red tape," Hawkesby said. "From a macroeconomic point of view, we think that that’s on the margin a higher inflation package than the alternative but one that’s very much manageable in the world of operationally independent central banks," he added. (Gowri Lakshmi)

India Rupee: Premium at over 2-week low as India-US rate gap may widen less

NEW DELHI – The premium on the one-year dollar/rupee forward contract fell to an over two-week low as banks sold dollars for forward delivery on the expectation that the interest rate differential between the US and India may widen less than previously thought after Republican Donald Trump won the US presidential election on Wednesday, dealers said. Trump's proposed policies are seen as inflationary and may potentially put the central bank on a slower and shallower path for interest rate cuts, they said. 

"Earlier, people were expecting a series of rate cuts (in the US) in this cycle. Now, that may not happen," said a dealer at a big state-owned bank. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Market participants are now keenly waiting for the outcome of the US Federal Open Market Committee's meeting, with the US central bank widely expected to cut interest rates by 25 bps. Traders will look for cues on whether the US central bank could skip a rate cut in December, with Trump winning the US presidential election.

At 1420 IST, the CME FedWatch tool showed that Fed fund futures reflected a 70% probability of a 25-bps rate cut at the Fed's December meeting, down from 77% a day ago, while there was a 28% probability of status quo.

Meanwhile, some 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 84.3650 a dollar on Thursday. Easing of US 10-year Treasury yields ahead of the US rate decision also aided the premiums, dealers said. 

At 1420 IST, the premium on the one-year exact-period dollar/rupee forward contract was 187.29 paise, against 191.79 paise on Wednesday. On an annualised basis, the premium was at 2.22% against the previous close of 2.26%. (Pratiksha)

India Rupee: At record low as importers buy dlrs; RBI's dlr sales limit fall

MUMBAI – The rupee hit a lifetime low of 84.3625 a dollar Thursday, as banks persistently purchased dollars on behalf of importers, who anticipate a further fall in the Indian unit, dealers said. However, some banks stepped in to sell the greenback, likely on behalf of the Reserve Bank of India and exporters, which limited the rupee's fall, they said.

"We can expect the rupee to now be in the 84.20-84.30 range in the near term. The RBI is actively intervening in the market. Some exporters are also seen selling (dollars), which will majorly help the rupee in keeping it (rupee) range bound within 5–10 paise," a dealer at a private bank said.

However, most dealers said the central bank's intervention in the market was not very aggressive in nature. They expect the RBI to allow a gradual depreciation in the Indian currency going ahead.

The rupee was also weighed down by a strong dollar index, which hovered around the four-month-high hit on Wednesday, after Republican candidate Donald Trump won the US elections. Investors expect a Trump regime to be negative for the rupee as policies proposed by him are seen as inflationary, which could drive US interest rates higher in the medium term, and in turn, boost the dollar and US Treasury yields.

At 1224 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 104.90, compared to the previous close of 105.12 on Wednesday and 103.45 on Tuesday.

Banks also purchased dollars on behalf of foreign portfolio investors, looking to withdraw funds from the domestic stock market. A Trump administration could potentially aggravate foreign fund outflows from India as China may likely introduce more economic stimulus plans to counter the high tariffs the Trump administration has promised to impose. This may attract investors to reallocate their funds to China from Indian markets. At 1229 IST, the BSE Sensex and Nifty 50 were down 0.9% and 1.1%, respectively.

Market participants are now waiting for the policy outcome of the US Federal Open Market Committee meeting, due at 0030 IST. The US central bank is widely expected to lower interest rates by 25 basis points. Currently, the Fed Fund Futures have priced in a 96.8% probability of the Fed cutting rates by 25 bps.

For the rest of the day, the rupee is seen in a range of 84.15-84.40 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.40 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Nov 7

MUMBAI – At 0900 IST, the rupee was at 84.2600 a dollar, from its previous close of 84.2800. At 1140 IST, the rupee was at 84.3400 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 dn as dlr index strong post Trump win in US poll

MUMBAI – Most Asian currencies traded lower against the dollar Thursday as the dollar index hovered near the four-month-high hit on Wednesday after Republican candidate Donald Trump emerged victorious in the US presidential election. The former president defeated his rival, Democrat and Vice-President Kamala Harris, by winning 295 of the 538 electoral seats, while Harris could secure only 226 seats.

A Trump presidency is a negative for the emerging market units, as his coming to power would mean lower corporate taxes, stricter trade relations, leading to higher stock prices and bond yields, strengthening the dollar. 

At 1020 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.99, compared to the previous close of 105.12 on Wednesday and 103.45 on Tuesday. The dollar index rose to a four-month high of 105.44 on Wednesday, the highest level since Jul.3. 

The Malaysian ringgit traded 0.2% lower against the dollar. On Wednesday, the central bank of Malaysia decided to hold its benchmark interest rates unchanged at 3.00%, in line with market expectations, owing to a positive economic outlook and steady inflation. 

The Thai baht was down 0.1% against the dollar, as the country's headline consumer price index rose 0.83% in October, less than expectations, and compared to a rise of 0.6% in September, the commerce ministry said. The inflation was well below the central bank's target range of 1-3% and below the forecast of 0.94% in a Reuters poll.

The Taiwan dollar traded 0.2% lower against the greenback after data on Wednesday showed the consumer price index rose 1.69% in October, compared with an estimate of 1.8% from economists surveyed by Bloomberg. The CPI reading came below the central bank's target of 2%. 

The Philippines peso was down 0.1% against the dollar as data on Thursday showed that the Philippines' GDP grew 5.2% on year in the quarter ended September, below the 5.7% forecast in a Reuters poll.

Bucking the trend, the South Korean won and the Indonesian rupiah were up 0.3% against the dollar. Market participants now await the monetary policy decisions of the US Federal Reserve and Bank of England later in the day. Both the central banks are widely expected to lower interest rates by 25 basis points. (Gowri Lakshmi)

India Rupee: Hits record low as dollar index strong, importers buy greenback

MUMBAI – The rupee hit a record low of 84.3050 a dollar on Thursday as the dollar index strengthened after the Republican candidate Donald Trump won the race to the White House. The dollar index surged to a four-month high on Wednesday as Trump defeated Democrat Kamala Harris by securing 295 of the 538 electoral seats, while Harris managed to secure only 226 seats. Further, banks bought dollars on behalf of importers, which also weighed on the Indian currency, dealers said. 

"There is continuous buying (of dollars) pressure especially from importers. They are panic buying now. There are outflows also seen from the equities market," a dealer at a state-owned bank said. Dealers also said that some exporters sold the greenback, to take advantage of the relatively higher dollar/rupee levels, which aided the rupee. Exporters may sell dollars actively, if the rupee falls further. Dealers also expect banks to sell the greenback, likely on behalf of the Reserve Bank of India, to prevent the rupee from falling sharply and to curb any sudden volatility in the market.

Market participants keenly await the US Federal Open Market Committee meeting outcome, due later in the day. Currently, traders price in a 97.5% probability that the central bank will lower its interest rates by 25 basis points at its November policy meeting. "The FOMC result is not going to impact the market much, it is already factored in at 25 bps. But if the Fed surprises the market with a different decision, like a status quo, then we can expect some volatility as it is a buy (dollars)on dips (in dollar/rupee) market," a dealer at a state-owned bank said. 

At 1005 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 105.04, compared to its previous close of 105.12 on Wednesday and 103.45 on Tuesday. 

Dealers expect banks to sell the greenback, likely on behalf of overseas investors looking to invest in the initial public offering of domestic companies. Food delivery giant Swiggy opened for subscription on Wednesday and will close on Friday. Sagility India Ltd.'s public offer opened for subscription on Tuesday and will close on Thursday. "Usually inflows come on the last day. Sagility India's is a significant IPO, we can expect it to aid the rupee in some way if not largely," a dealer at a state-owned bank said. 

For the rest of the day, the rupee is seen in the range of 84.15-84.35 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.35 a dollar.(Gowri Lakshmi)

India Rupee: Expected range for rupee - Nov 7

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