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Informist, Monday, Nov. 11, 2024

By Pratiksha

NEW DELHI – The rupee settled at a record low against the dollar on Monday as banks continuously bought dollars on behalf of foreign portfolio investors and importers, dealers said. This was despite the Reserve Bank of India's active intervention through dollar sales throughout the day, they said.   

"What is happening now is that the big move in the rupee happened after the US election results, and now they (RBI) are just keeping it there, letting it move just a few paisa every day," said a dealer at a big state-owned bank. "Now only a big trigger will lead to a sharp move."

After trading in a tight range of 3 paise throughout the day, the rupee settled at a lifetime low of 84.3925 a dollar, against 84.3750 a dollar on Friday. Other Asian currencies fell between 0.1-0.7% against the greenback, tracking a surge in the dollar index. However, the Indian currency was the second-best performer amongst the emerging market units, with the South Korean won being the best performer.

The Indian currency started the day steady at 84.3875 a dollar, as the central bank likely sold dollars in the offshore non-deliverable forwards market, which countered the impact of a soaring dollar index, dealers said. "RBI sold (dollars) in offshore first and then came in the spot (market) right after opening," said a dealer at a private bank. 

The dollar index surged ahead of key economic data and speeches by several US Federal Reserve policymakers this week. The index also strengthened as the Japanese yen fell after the Bank of Japan's Summary of Opinions from the October meeting showed diverging views amongst policymakers regarding the timing of interest rate hikes. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 105.30 compared to its previous close of 104.95 on Friday and 104.36 on Thursday.

Shortly after the market opened, banks rushed to buy dollars on behalf of importers, which exerted pressure on the Indian currency, dealers said. Importers have been stocking up on the greenback in fear that the Indian unit may depreciate going ahead, they said. 

Following Donald Trump's win in the US Presidential election last week, market participants are of the view that the rupee will depreciate in the near term, as a Trump presidency means lower corporate taxes and stricter trade relations, leading to higher stock prices and bond yields, strengthening the dollar. Since Wednesday, when Trump emerged victorius in the US election, the rupee has depreciated almost 0.3% against the dollar. 

"Importers have started to buy (dollars) on every dip (in dollar/rupee). This has started since the US elections. Of course, nobody thinks that the old levels (of rupee) will be back now," a dealer at a state-owned bank said.

However, the central bank stepped in to sell dollars around the 84.38 a dollar level, which limited losses for the Indian unit, dealers said. The central bank sold dollars actively throughout the day, and managed to keep the Indian unit in a very narrow range.

Further, banks continued to buy dollars on behalf of foreign portfolio investors, looking to pull out funds from domestic equities, which also weighed on the local currency, 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 Indian unit, dealers said. The Chinese yuan was down 0.2% against the dollar after China's stimulus package, unveiled on Friday, disappointed investors who had anticipated a greater fiscal push.  

FORWARDS

The premium on the one-year dollar/rupee forward contract settled at over an 11-week low on Monday as banks persistently sold the greenback for forward delivery, noting a likely shortage of dollars in the system, dealers said. Premium on dollar/rupee forward contracts fell across tenures.

There was a likely dollar crunch in the system owing to continuous foreign fund outflows from domestic markets, dealers said. "There are so much outflows in the market and the supply (of dollars) is not adequate. That has led to the downward movement," said a dealer at a foreign bank. 

If foreign fund outflows continue at the current rate, market participants expect the premium on the one-year dollar/rupee forward to fall further to 2.00% in the coming days. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 176.97 paise, against 184.95 paise Friday. On an annualised basis, the premium was at 2.10% against the previous close of 2.19%. Premium fell to a low of 2.09% during the day, the lowest since Aug. 27. 

OUTLOOK

On Tuesday, the rupee will take cues from the movement in the dollar index and crude oil prices, dealers said. They expect importers to continue purchasing dollars in anticipation of a further fall in the rupee. They also expect banks to continue buying dollars on behalf of foreign portfolio investors. 

However, the RBI is expected to keep the rupee in a tight leash through its intervention, both in the non-deliverable forwards market and the domestic spot market through dollar sales, they said.

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: Yen falls 1% as BoJ report defers rate hike hopes

MUMBAI – The Japanese yen was down 1% against the dollar after the release of the Bank of Japan's Summary of Opinions from the October meeting, which revealed differing views amongst policymakers regarding the timing of interest rate hikes. Bank of Japan members suggested easing adjustment if the outlook is achieved. The members emphasised the importance of monitoring the global economy, particularly the US. They also said that they will adjust monetary support if economic and price forecasts are met. 
 

The dollar was also supported by comments from Federal Reserve Bank of Minneapolis President Neel Kashkari, who said the central bank needs more evidence before going for another rate cut. "The economy has remained remarkably strong, not all the way home on inflation," Kashkari said. "The Fed wants to have confidence inflation will go all the way back to 2%; need to see more evidence before deciding on another cut," he said. At 1601 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 105.30, compared to the previous close of 104.95 on Friday and 104.36 on Thursday.

The euro was down 0.3% against the dollar after European Central Bank Governing Council Member Robert Holzmann said Sunday that a December rate cut is a possibility. "As things look at the moment, it is possible (that there will be a cut in December). There is nothing at the moment that would argue against that, but that does not mean it will automatically happen," Holzmann said. 

The pound sterling was down 0.2% against the dollar. Economists expect that the Unemployment Rate rose to 4.1% in the three months to September from 4.0% in the quarter ending August, according to FX Street. 

The Swiss Franc was down 0.4% against the dollar. Swiss National Bank Vice Chairman Antoine Martin said on Monday that the SNB had made "absolutely no commitment" to its next course of action. "It is not useful for central banks to lock themselves into forward-looking communication," Martin said. 

The Mexican Peso was down 1% against the dollar. The peso weakened on rumours that Donald Trump has offered the job of trade representative to Robert Lighthizer. The former US trade rep is known for his protectionist stance and could squeeze Mexico in future talks. (Kabir Sharma)

India Rupee: 1-year forward premium hits over 10-wk low on dollar shortage

NEW DELHI – The premium on the one-year dollar/rupee forward contract fell to an over 10-week low on Monday as banks persistently sold the greenback for forward delivery, noting a likely shortage of dollars in the system, dealers said. Premium on dollar/rupee forward contracts fell across tenures.

There was a likely dollar crunch in the system owing to continuous foreign fund outflows from domestic markets, dealers said. Foreign portfolio investors, who net withdrew $11.12 billion from Indian equities markets in October, have pulled out another $1.81 billion so far in November. "See, the RBI (Reserve Bank of India) is supplying dollars to the market, but the amount (of dollars) that is going out is a lot, it has to show somewhere eventually," said a dealer at a foreign bank. 

If foreign fund outflows continue at the current rate, market participants expect the premium on the one-year dollar/rupee forward to fall further to 2.00% in the coming days. 

At 1340 IST, the premium on the one-year exact-period dollar/rupee forward contract was 178.47 paise, against 184.95 paise Friday. On an annualised basis, the premium was at 2.12% against the previous close of 2.19%. (Pratiksha) 

India Rupee: In thin band; RBI's active dlr sales offset dlr demand by FPIs

MUMBAI – The rupee moved in a thin band against the dollar as the impact of dollar demand on behalf of importers and foreign portfolio investors was offset by dollar sales by state-owned banks, likely on behalf of the Reserve Bank of India, dealers said. The rupee has moved in a range of just 3 paise so far on Monday. 

"The rupee is moving in a very tight range, almost nil, the RBI has restricted its (rupee's) movement," a dealer at a private bank said. The central bank continuously sold the greenback around 84.38 a dollar, which kept the Indian unit from falling sharply, dealers said. Dealers expect the RBI to keep its tight grip on the currency intact for the rest of the day. 

The domestic unit was weighed down by banks' dollar purchases on behalf of importers, anticipating a further fall in the rupee in the coming days, dealers said. The Indian currency has depreciated 0.4% so far in November. 

Banks also continued to buy dollars on behalf of foreign portfolio investors, looking to withdraw funds from domestic equities. FPIs, who net sold Indian equities worth $10.94 billion in October, have net sold another $1.86 billion so far in November.

The domestic currency also came under pressure due to a fall in other Asian currencies, following a surge in the dollar index. The index surged ahead of key economic data, including on consumer price inflation, due Thursday. Market participants also await several speeches by the US Federal Reserve policymakers, including Fed Chair Jerome Powell, scheduled to speak on Thursday, for more cues on the rate cut cycle of the Fed. 

Currently, traders are pricing in a 64.9% probability of the Fed lowering interest rates by another 25 basis points at its December policy meeting, while they see a 35.1% chance of the central bank holding rates steady. At 1230 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 105.09, compared to the previous close of 104.95 on Friday and 104.36 on Thursday.

Meanwhile, dealers said the trade volume in the currency market was lacklustre due to US bond markets being shut on account of Veterans Day. For the rest of the day, the rupee is seen in the range of 84.30-84.45 against the dollar, dealers said. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Nov 11

MUMBAI – At 0900 IST, the rupee was at 84.3875 a dollar, from its previous close of 84.3750. At 1117 IST, the rupee was at 84.3825 per dollar. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee: Opens at record low on strong dlr index, importers' dlr buys

MUMBAI – The rupee opened at a record low of 84.3875 a dollar Monday as banks purchased the greenback, likely on behalf of importers anticipating a further fall in the rupee, dealers said. "They (importers) expect the rupee to now fall as much as 84.40, so they are placing orders quickly," a dealer at a state-owned bank said.

The rupee was also weighed down by a strong dollar index, dealers said. However, the Indian currency market may be less volatile Monday and the trade volume lacklustre as the US money market is shut on account of Veterans Day. "It will be range bound too, 84.36-84.40 a dollar we can expect, with sufficient supply (of dollars) upon touching 84.40 a dollar," a dealer at a state-owned bank said. 

The dollar index gained strength owing largely to the "Trump Trade". Further, market participants also await key economic data from the US, including inflation data due on Thursday. Investors also await speeches by several US Fed policymakers due this week, including Fed Chair Jerome Powell, scheduled for Thursday. Market participants will assess the economic data and speeches by policymakers to find more cues on the rate cut cycle of the US Fed. According to the CME FedWatch tool, traders price in a 64.9% probability of the Fed lowering interest rates by 25 basis points in December, while there is a 35.1% probability of the central bank maintaining a status quo.

At 0955 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 105.08, compared with its previous close of 104.95 on Friday and 104.36 on Thursday.

Meanwhile, some dealers speculated that the central bank may be selling dollars around the 84.38 a dollar level to prevent the Indian unit from falling sharply. They see strong technical support for the Indian currency at 84.40 a dollar.

Dealers also expect some exporters to sell dollars to take advantage of the relatively higher dollar/rupee levels, which will aid the rupee. For the rest of the day, the rupee is seen in the range of 84.30-84.50 against the dollar, dealers said. (Gowri Lakshmi)

India Rupee - Asia FX: Most down as dollar strengthens on weak yen

MUMBAI – Most Asian currencies were down against the dollar on Monday as the dollar index strengthened on the back of a fall in the Japanese yen. Trade volume is expected to be lacklustre Monday as the US money market is shut on account of Veterans Day.

The dollar index rose as the Japanese Yen weakened on Monday, following the release of the Bank of Japan's Summary of Opinions from the October meeting, which revealed differing views among policymakers regarding the timing of interest rate increases.

The Chinese yuan traded 0.1% lower against the dollar as the economic stimulus plan announced by China's National People's Congress disappointed investors, further triggering a risk aversion among them. Though the standing committee announced an economic package to scale-up the local government's debt resolution programme, it failed to announce any direct stimulus plan to boost consumer spending, bank recapitalisation or property purchases, an MUFG Bank note said.

The South Korean won was down 0.5%. On Friday, the central bank of South Korea announced that uncertainties have increased regarding global economic growth, inflation, and the monetary policy directions of key economies after Donald Trump's election win, promising improved market oversight and prompt reactions. "Uncertainties run high surrounding global growth and inflation, as well as the monetary policy path by major nations. We cannot rule out the possibility of volatility in the foreign exchange and financial markets growing further," Ryoo said.

The Thai Baht was largely steady against the dollar. Over 800 prominent Thai economists, among them four former governors of the Bank of Thailand, cautioned on Saturday about the risks of political influence in the appointment of the central bank’s board chairman, stating it could jeopardise the long-term economic stability.

The Indonesian rupiah was down 0.1% against the dollar. Indonesia has developed strategies to prepare for the effects of possible policies from US president-elect Donald Trump, according to a finance ministry representative on Friday. Febrio Kacaribu, who leads the ministry's fiscal policy agency, stated that these strategies aim not only to reduce adverse effects but also to identify potential opportunities during a Trump administration.

Back home, India's CPI data for October is scheduled for release at 1600 IST on Tuesday. The country's headline inflation rate is likely to have risen to a 14-month high of 5.9% in October, led by a surge in food prices, according to an Informist poll of 20 economists. (Kabir Sharma)

India Rupee: Expected range for rupee - Nov 11

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 Tanima Banerjee

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