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Informist, Friday, Nov. 8, 2024

By Gowri Lakshmi

MUMBAI – The rupee ended at a record closing low for the second consecutive day against the dollar on Friday as banks persistently purchased dollars, on behalf of foreign investors, dealers said. However, the sale of dollars by some public-sector banks, on behalf of the Reserve Bank of India, limited the fall in the local unit, they said. 

"FPIs and oil companies are constant buyers of the currency pair and therefore, we are not seeing rupee gain from here except if the RBI sells (dollars) in a big way and brings it down," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

The rupee was also weighed by strong dollar demand from importers, anticipating a further fall in the rupee, they said. Some foreign banks sold the greenback, likely on behalf of exporters, which supported the domestic currency.

The rupee settled at a record closing low of 84.3750 a dollar, after falling to a lifetime low of 84.3800 during the day. A fall in the offshore Chinese yuan also weighed on the rupee. The yuan fell 0.3% against the greenback. 

The rupee opened slightly higher at 84.3350 a dollar as the dollar index fell after the US Federal Open Market Committee lowered the federal funds target range by 25 basis points to 4.50-4.75%. The committee took note of the job market that has "generally eased" while inflation continues to move towards the US central bank's 2% target.

Fed fund futures are now pricing 74.7% odds of the Fed cutting the rate by another 25 bps in December, according to the CME Group's Fed Watch Tool. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.50, compared to 104.36 on Thursday and 105.12 on Wednesday. The index had risen to an over four-month high of 105.44 on Wednesday.

However, the gains in the Indian currency were short-lived as importers stepped in to buy dollars. Banks purchased the greenback on behalf of importers, anticipating a further fall in the rupee, which pushed the rupee to its lifetime low within an hour after the domestic spot market opened.

Oil marketing companies also purchased dollars, wary of a further increase in crude oil prices after Donald Trump was declared the President-elect. Trump's policies are expected to increase US Treasury yields, push up inflation and boost dollar strength. A strengthening of the dollar may weigh on commodity prices, making crude expensive. At 1530 IST, the January Brent Crude contract on the Intercontinental exchange was $74.61 per barrel, compared to the close of $75.63 per barrel on Thursday and $74.92 per barrel on Wednesday.

The rupee also came under pressure as banks continued to purchase the greenback on behalf of foreign portfolio investors, looking to withdraw funds from the domestic equities market, dealers said. FPIs, who net sold Indian equities worth $10.94 billion in October, have net sold another $1.86 billion so far in November. 

A fall in the offshore Chinese yuan also weighed on the rupee, dealers said. The Chinese currency fell against the dollar after the conclusion of the five-day Standing Committee meeting of the National People's Congress. Market participants are now assessing the major financial policies announced by the National People's Congress, with investors analysing the efficiency of China's economic stimulus plans. China unveiled a $10 trillion yuan debt package to stabilise the sluggish economy and the potential tariff-pressures from the US.

However, state-owned banks persistently sold the greenback, likely on behalf of the RBI, around 84.38 a dollar, which prevented the local unit from falling further, dealers said. The central bank kept a tight leash on the currency throughout the day, and made sure that it traded in a range of just 5 paise through the day. "The rupee will continue to fall in the coming days, though we can see good support at 84.40. Given the nature of the (dollar/rupee) pair, RBI will have to let it (rupee) fall, but only at a gradual pace, like they have done before every key level," a dealer at a private bank said. 

Some banks also sold dollars on behalf of exporters, who wanted to take advantage of the higher dollar/rupee levels, further aiding the Indian unit, dealers said.

Some foreign banks sold the greenback on behalf of overseas investors looking to invest in the initial public offering of Swiggy Ltd., which supported the rupee, dealers said. The IPO of food delivery giant Swiggy opened for subscription on Wednesday and closed on Friday.

FORWARDS 

The premium on the one-year dollar/rupee forward contract ended at an over three-week low as banks persistently sold the greenback for forward delivery owing to a shortage of dollars in the system, dealers said. Premium on dollar/rupee forward contracts fell across most tenures.

There was a dollar crunch in the system owing to continuous foreign fund outflows from domestic markets, they said. Foreign portfolio investors, who net withdrew $11.12 billion from Indian markets in October, have pulled out another $1.81 billion so far in November.

"There seems to be a cash dollar shortage in the markets as RBI is not now supplying sufficient dollars, which FPIs are buying. The premiums have therefore fallen to 2.19% from around 2.30%," Bhansali said. Amid the strong FPI outflows, the RBI has been actively selling dollars in the domestic spot market to support the rupee.

Further, some banks sold dollars for forward delivery on behalf of exporters, noting a fall in the Indian unit, dealers said. The rupee fell to a record low of 84.3800 on Friday.

However, a fall in US Treasury yields limited losses in the forwards premiums, dealers said. US Treasury yields fell sharply after the Federal Open Market Committee cut the Fed funds target range by 25 basis points to 4.50-4.75% on Thursday, in line with expectations. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

Market participants have been wary that US President-elect Donald 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. However, US Federal Reserve Chair Jerome Powell said Trump's win in the US presidential election would have no "near-term" impact on the FOMC's rate decisions.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 184.95 paise, against 187.55 paise on Thursday. On an annualised basis, the premium was at 2.19% against the previous close of 2.22%. The premium fell to 2.16% earlier in the day, the lowest level since Sept. 4.

OUTLOOK

On Monday, the rupee will take cues from the movement in the dollar index and crude oil prices, dealers said. Dealers expect the RBI to continue intervening in both the non-deliverable forwards market and the domestic spot market through dollar sales to keep the Indian unit from falling sharply, they said.

Dealers also expect importers to continue purchasing the dollar in anticipation of a further fall in the rupee. During the day, the rupee is seen in a range of 84.20-84.50 a dollar, with strong technical support pegged at 84.40.

 India Rupee - World FX: Dollar index weakens after FOMC cuts rates by 25 bps

India Rupee - World FX: Dollar index weakens after FOMC cuts rates by 25 bps

NEW DELHI – The dollar index remained broadly weak after the US Federal Open Market Committee lowered the federal funds target range by 25 basis points to 4.50-4.75%. The committee took note of a job market that has "generally eased" while inflation continues to move towards the US central bank's 2% target.

Further, US Federal Reserve Chair Jerome Powell said Donald Trump's win in the US presidential election would have no "near-term" impact on the FOMC's rate decisions. Fed fund futures are now pricing 74.7% odds of the Fed cutting rates by another 25 bps in December, according to the CME Group's Fed Watch Tool.

At 1515 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.40, compared to 104.36 on Thursday and 105.12 on Wednesday. The index had risen to an over four-month high of 105.44 on Wednesday.

The pound sterling was down 0.2% against the greenback, following a sharp rise on Thursday after the Bank of England cut interest rates by 25 bps but said it expected inflation and growth in the UK to pick up more quickly than it had previously anticipated.

The euro was also down 0.2% against the US unit even after data released on Thursday showed Eurozone retail sales grew unexpectedly quickly in September. The Eurozone's annual retail sales rose by 2.9% in September, well above expectations of 1.3% in a Reuters poll, and a revised 2.4% in August.

The euro was weighed down by a political crisis in Germany, where the coalition led by Chancellor Olaf Scholz collapsed late on Wednesday. Germany's Economy Minister Robert Habeck will announce his intention to run as chancellor on behalf of the Greens party on Friday, media reports said.

The Australian dollar was down 0.5% against the dollar after data released on Thursday showed the country’s trade balance shrank more than expected to a four-year low in September as the country's key metal and mineral exports were hit by weak demand in China. Trade balance fell to a surplus of A$4.61 billion in September, from a surplus of A$5.64 billion in the previous month. (Pratiksha)

India Rupee: 1-year forward premium at 2-month low on dollar shortage amid FPI outflows

NEW DELHI – The premium on the one-year dollar/rupee forward contract fell to a low of over two months as banks persistently sold the greenback for forward delivery owing to a shortage of dollars in the system, dealers said. Premium on dollar/rupee forward contracts fell across tenures.

There was a dollar crunch in the system owing to continuous foreign fund outflows from domestic markets, they said. Foreign portfolio investors, who net withdrew $11.12 billion from Indian markets in October, have pulled out another $1.02 billion so far in November.

"It seems that RBI's onshore selling (of dollars) is not enough to fulfil the supply, therefore the shortage and fall in premiums," said a dealer at a brokerage firm. Amid the strong FPI outflows, the Reserve Bank of India has been actively selling dollars in the domestic spot market to support the rupee.

Further, some banks sold dollars for forward delivery on behalf of exporters, noting a fall in the Indian unit, dealers said. The rupee fell to a record low of 84.3800 Friday.

However, a fall in US Treasury yields limited losses in the forwards premiums, dealers said. US Treasury yields fell sharply after the Federal Open Market Committee cut the Fed funds target range by 25 basis points to 4.50-4.75% early Friday, in line with expectations. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

Market participants have been wary that US President-elect Donald 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. However, US Federal Reserve Chair Jerome Powell said Trump's win in the US presidential election would have no "near-term" impact on the FOMC's rate decisions.

At 1410 IST, the premium on the one-year exact-period dollar/rupee forward contract was 183.95 paise, against 187.55 paise Thursday. On an annualised basis, the premium was at 2.18% against the previous close of 2.22%. The premium fell to 2.16% earlier in the day, the lowest level since Sept. 4. (Pratiksha) 

India Rupee: Hits record low on FPI outflows; RBI's dollar sales limit fall

MUMBAI – The rupee fell to a record low of 84.3800 a dollar Friday, as banks continuously purchased the greenback on behalf of foreign investors, dealers said. However, some state-owned banks sold the greenback, likely on behalf of the Reserve Bank of India, which limited the fall in the currency, they said. 

"Everyone is in a selling (of dollars) mode today. There are outflows seen as well. RBI may be more active at the next level since we expect them to not let the rupee breach the 84.40 (a dollar) level," a dealer at a state-owned bank said.

Banks bought dollars on behalf of foreign portfolio investors looking to withdraw funds from domestic equities, which weighed on the local currency. FPIs, who net sold Indian equities worth $10.94 billion in October, have net sold another $1.19 billion so far in November. At 1345 IST, the Sensex and Nifty 50 were down 0.1 and 0.2%, respectively. 

Further, some banks purchased the greenback for importers, anticipating further fall in the rupee, which also put the rupee under pressure, dealers said. However, the central bank stepped in with its dollar sales to prevent sharp depreciation in the Indian currency and to curb any sudden volatility in the market. The RBI likely supplied dollars around the level of 84.38 a dollar. 

A fall in the dollar index also supported the rupee. The dollar index fell after the US Federal Open Market Committee announced a rate cut for the second consecutive policy meeting in November. The US Fed lowered interest rates by 25 basis points, in line with market expectations, bringing the federal funds target range to 4.50-4.75%. At 1345 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.63, compared to 104.36 on Thursday and 105.12 on Wednesday.

For the rest of the day, the rupee is seen in the range of 84.30-84.50 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 8

MUMBAI – At 0900 IST, the rupee was at 84.3350 a dollar, from its previous close of 84.3725. At 1153 IST, the rupee was at 84.3700 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: Mixed after US FOMC cuts interest rate by 25 bps

MUMBAI – Asian currencies traded mixed against the dollar Friday as the dollar index weakened after the US Federal Open Market Committee announced its interest rate decision. Policymakers unanimously voted for a 25-basis-point rate cut, in line with market expectations, at the November policy meeting. However, the prospect of a rate cut in December, as was expected before, remains bleak after the US elections. 

"If the economy remains strong and inflation is not sustainably moving toward 2%, we can dial back policy restraint more slowly. If the labour market were to weaken unexpectedly, or inflation were to fall more quickly than anticipated, we can move more quickly,” Federal Reserve Chair Jerome Powell said in his address to the media.

Market participants also assessed the weekly jobless claims data in the US, which showed that the number of people filing for unemployment benefits rose in the week ended Nov. 2. Initial claims increased to 221,000, broadly in line with market forecasts of 220,000 claims. At 0956 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 104.46, compared to its previous close of 104.36 on Thursday and 105.12 on Wednesday.

The Malaysian ringgit was up 0.5% against the dollar. The Chinese yuan was down 0.1% against the dollar ahead of the conclusion of the five-day meeting of the Standing Committee of the National People's Congress later in the day. Market participants will closely assess it for more cues on the economic stimulus package.

The Indonesian rupiah was up 0.4% against the greenback, tracking gains in the domestic equities market. At 1003 IST, the benchmark index, Jakarta Composite Index, was up 0.95%.

The South Korean won was down 0.1% against the dollar. However, losses in the currency were limited as data on Thursday showed that the country recorded a current account surplus for the fifth consecutive month in September, driven by robust exports. Data by the Bank of Korea showed that the current account surplus of the country reached $11.12 billion in the month ended September.

The Thai baht was down 0.1% against the dollar as market participants mulled over a possible US-China trade war after US President-elect Donald Trump assumes office in January. Thailand Commerce Minister Pichai Naripthaphan on Thursday said the country could gain from a potential Sino-US trade war. "In a trade war, US imports of Chinese goods would drop and Thai products should replace them, meaning that Thai exports to the US will increase," he said. (Gowri Lakshmi)

India Rupee: Hits record low as importers buy dollars; dlr weakness limits fall

MUMBAI – The rupee opened at a record low against the US dollar Friday as banks purchased the greenback on behalf of importers, dealers said. Importers rushed to buy dollars as soon as the domestic spot market opened, wary of further fall in the rupee, they said.  

"There is a general dollar weakness, which is aiding the rupee. We see some inflows for the day too. But Trump trade and unwinding is still prevalent. Let's see where it goes. We expect the rupee to breach 84.40 a dollar today, but we can expect nats (nationalised banks) to supply dollars at 84.39 a dollar," a dealer at a state-owned bank said.

The rupee's weakness was limited by a fall in the dollar index after the US Federal Open Market Committee unanimously voted for a 25-basis-point interest rate cut. However, the odds of a rate cut in December are seen bleak after Republican candidate Donald Trump was declared president-elect as the expansionary policies proposed by him are seen stoking inflation.

At 0935 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 104.53, compared to 104.89 around 1530 IST on Thursday and 105.12 on Wednesday.

Dealers said some exporters sold the greenback, which supported the rupee. "Current levels are still very attractive for them. Some are seen booking profits, while most are waiting for the rupee to breach 84.40 a dollar," a dealer at a state-owned bank said. 

Dealers also expect foreign banks to sell dollars on behalf of overseas investors looking to invest in the initial public offering of domestic companies. The IPO of food delivery giant Swiggy opened for subscription on Wednesday and will close Friday. "Some dip (in dollar) is seen from the Swiggy IPO. It may not be significant, but it can save rupee by 3-4 paisa range," a dealer at a state-owned bank said.

Dealers also expect the Reserve Bank of India to step in with its dollar sales to prevent the rupee from falling sharply and curb any sudden volatility. For the rest of the day, the rupee is seen in the range of 84.30-50 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.40 a dollar. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Nov 8

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