More Stories

Informist, Tuesday, Nov. 12, 2024

By Gowri Lakshmi

MUMBAI – The rupee ended unchanged against the dollar Tuesday as public sector banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset the impact of the dollar purchases by importers and foreign portfolio investors, dealers said. A surge in the dollar index to an over four-month high also weighed on the local unit, they said.

"The dollar buying continued keeping the rupee at its lowest, and we expect the rupee to touch 83.50 soon with the weakening of yuan and other currencies," Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, said. "RBI continued to support the rupee intraday and could have sold $1 billion today," Bhansali said.

After falling to a record low of 84.4100 a dollar during the day, the rupee settled at 84.3925 against the dollar, flat from its previous close. The local unit moved in a tight range of just 3 paise during the day.

A fall in other Asian currencies also weighed on the rupee. Other Asian currencies fell between 0.3-0.9% against the US unit, with the Thai baht being the worst performer. The Indian currency was the best performer amongst its peers.

The rupee opened steady at 84.3825 a dollar. However, the local unit came under pressure as soon as the domestic spot market opened as banks rushed to purchase the greenback, on behalf of importers anticipating a further fall in the rupee, dealers said. Oil marketing companies also rushed to purchase dollars, tracking a fall in crude oil prices, weighing the rupee further, they said. 

Oil prices fell almost 2% on Monday due to a dampened growth outlook from China and as the latest economic stimulus package got a lukewarm reaction from investors due to lack of clarity. January Brent Crude prices fell to a low of $71.55 per barrel during the day, compared to its close of $71.83 per barrel on Monday and $75.63 per barrel on Friday.

The dollar index soared due to a fall in the euro and pound sterling, which exerted pressure on the Indian unit, dealers said. The euro fell as political instability in Germany continued to prevail and as Germany's economic sentiment fell in November. The pound sterling fell after data revealed the UK's unemployment rate rose in Jul-Sept. The dollar index surged to a high of 105.92, its highest level since Jul.2.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 105.90, compared to the previous close of 105.52 on Monday and 104.95 on Friday.   

Some banks also purchased the greenback on behalf of foreign portfolio investors, looking to withdraw funds from the domestic equity market, weighing on the rupee, dealers said. So far in November, overseas investors have withdrawn $2.32 billion from Indian equities. On Tuesday, both the BSE Sensex and the Nifty 50 ended 1.0% and 1.1% lower, respectively.

"The US markets were shut yesterday (Monday), we can see people were rushing to get hold of it (dollars) before it went any higher. There is also selling of equity, which has become a common factor weighing on the rupee now," a dealer at a state-owned bank said.

However, as soon as the rupee hit the lifetime low of 84.4100 a dollar, public-sector banks stepped in with dollar sales, likely on behalf of the RBI, which limited the fall in the rupee. The central bank maintained its tight grip on the currency throughout the day, and managed to keep the currency in a thin band. "See, that is the thing, once it (rupee) has fallen sharply, they (RBI) will soften the blow by removing the volatility," a dealer at a private bank said. 

Further, some banks' dollar sales, likely on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, aided the local unit, dealers said. "It's a boon for exporters now. Major events have happened already. Those who hedged already are safe. Others are now selling at every drop (of the rupee) while some still anticipate a further fall (in rupee)," a dealer at a state-owned bank said.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended flat as the impact of banks' dollar sales for forward delivery due to a dollar shortage in the system was offset by banks' dollar buys for forward delivery to take advantage of the relatively lower premium levels, dealers said. 

The one-year dollar/rupee forward premium fell to a near three-month low of 2.07% during the day as banks sold the greenback for forward delivery, noting a likely shortage of dollars in the system amid strong foreign portfolio outflows, dealers said.

Premiums also fell as chances of the US Federal Reserve going for another rate cut in December decreased after Trump's win in the US Presidential elections, dealers said. The odds of another interest rate cut by the Fed at its next meeting in December were seen at around 65%, down from around 77% seen a week ago, according to the CME FedWatch tool. The Fed cut the benchmark rate by 25 basis points to 4.50-4.75% on Nov. 7.

"The rate gap view and the FPI outflows have led to this fall. Trump coming to power has changed things for the market," said a dealer at a foreign bank. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

Meanwhile, data released post market hours showed, India's CPI inflation rose to a 14-month high of 6.21% in October from 5.49% in September, pushing expectations of a rate cut in India further away. This was the first month since August 2023 that headline inflation was above the upper bound of the Reserve Bank of India's medium-term target range of 2-6%. This may weigh on the premiums, dealers said. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 177.08 paise, against 176.97 paise on Monday. On an annualised basis, the premium was 2.10%, unchanged from Monday's close.  

OUTLOOK

On Wednesday, the rupee will take cues from movement in the dollar index ahead of the US CPI data, dealers said. The local unit will also take cues from movement in the crude oil prices and offshore Chinese yuan, they said. 

Dealers also expect banks to continue buying dollars on behalf of importers, anticipating a further fall in the rupee and overseas investors, looking to withdraw funds from domestic equities. However, dealers also expect banks to continue to sell dollars, on behalf of the RBI, to prevent a sharp fall in the local unit and to curb any sudden volatility in the market.

Market participants may remain cautious ahead of the US consumer price index due Wednesday. Traders will also assess speeches by several Fed policymakers this week, including Fed Chair Jerome Powell, to get more cues on the likely rate cut trajectory of the US central bank. 

During the day, the rupee is seen in a range of 84.20-84.50 a dollar, with strong technical support pegged at 84.50.

India Rupee - World FX: Sterling down post UK jobless data, dlr index surge

India Rupee - World FX: Sterling down post UK jobless data, dollar index surge

MUMBAI – The pound sterling fell to a three-month low, down 0.4% against the dollar Tuesday, after data showed that the UK's unemployment rate rose to 4.3% in Jul-Sept from 4.1% the previous quarter. The data also showed the UK's wage growth fell during the three months to September, dropping to its lowest level in more than two years.

The Australian dollar was down 0.4% against the greenback. However, losses in the currency were limited as data on Tuesday showed that unemployment in the country dropped 60,000 to 1,450,000 as full-time employment grew in October. Tracking a fall in the Australian dollar, the New Zealand dollar was down 0.2%.

The euro traded 0.2% lower against the greenback as political instability in Germany prevailed. German Chancellor Olaf Schloz's coalition lost a parliamentary majority and is under growing pressure to call for a quick election, with opposition parties urging the Chancellor to provide more clarity, Reuters reported. Market participants are now waiting for Germany's ZEW economic sentiment indicator later in the day.

Due to the fall in the euro and pound sterling, the dollar index soared to a fresh four-month high of 105.78 during London trade. At 1502 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 105.79, compared to its previous close of 105.52 on Monday and 104.95 on Friday.

The Japanese yen and the Canadian dollar were down 0.2% each against the greenback due to a surge in the dollar index.

Traders are now awaiting the consumer price index from the US on Wednesday, as well as speeches by several Federal Reserve policymakers, including Fed Chair Jerome Powell, on Thursday. If the inflation figure comes above the estimated 0.3%, it may prompt the US Fed not to cut interest rates at its December policy meeting. 

Currently, traders are pricing in a 68.8% probability of the US Fed lowering its interest rate by 25 basis points at its December policy meeting, while 31.2% see a chance of the central bank maintaining status quo, according to the CME FedWatch tool. (Gowri Lakshmi)

India Rupee: In thin band; RBI's dollar sales offset dollar buys by importers, FPIs

MUMBAI – The rupee was in a thin band against the dollar as dollar sales by public sector banks, likely for the Reserve Bank of India, offset the impact of dollar demand from importers and foreign portfolio investors, dealers said. Further, a surge in the dollar index due to a fall in the euro and pound sterling also weighed on the rupee, they said. The rupee has moved in a range of only 3 paise so far on Tuesday. 

The central bank sold dollars around 84.40 a dollar level to prevent the Indian unit from depreciating sharply, dealers said. They expect the RBI to continue intervening throughout the day. 

The rupee was under pressure due to strong dollar demand on behalf of importers, who are anticipating a further fall in the currency, dealers said. "Importers' dollar purchases are an everyday thing. Those who have done hedging are better off now, others are booking their prices," a dealer at a state-owned bank said. The rupee fell to a lifetime low of 84.41 a dollar during the day. 

A surge in the dollar index also weighed on the rupee, dealers said. The dollar index surged to an over four-month high on Tuesday, due to a fall in the euro and pound sterling. The euro extended its losses from Monday as political instability in Germany prevailed, while the pound sterling traded down as the latest data showed a rise in unemployment in Jul-Sept. 

At 1302 IST, the dollar index, which measures the strength of the greenback against six major currencies, was at 105.733, compared to the previous close of 105.52 on Monday and 104.95 on Friday. The dollar index surged to a high of 105.82 during the day, its highest level since Jul. 3.

Further, banks also purchased the greenback, on behalf of foreign portfolio investors looking to withdraw funds from the domestic equity market, dealers said. So far in November, overseas investors have withdrawn $2.28 billion from Indian equities. At 1252 IST, both domestic indices, the BSE Sensex and the Nifty 50, were down 0.88% and 0.91%, respectively.

Market participants are now waiting for key economic data from the US and speeches by several US Federal Reserve policymakers, including a speech by Fed Chair Jerome Powell, scheduled to speak Thursday. The US consumer price figures are due Wednesday. Traders will closely assess the inflation data and speeches to get more cues on the future interest rate policy decisions by the US Fed.

Currently, traders price in a 65.1% chance of the Fed lowering its interest rates by 25 basis points at its December policy meeting, while they see a 34.9% chance of the central bank maintaining a status quo.

For the rest of the day, the rupee is seen in the range of 84.35-84.45 against the dollar, dealers said. They see strong technical support for the rupee at 84.45 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Nov 12

MUMBAI – At 0900 IST, the rupee was at 84.3825 a dollar, from its previous close of 84.3925. At 1216 IST, the rupee was at 84.3975 per dollar. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

 India Rupee: Falls to record low on importers' dlr buys, surge in dlr index

MUMBAI – The rupee fell to a record low of 84.40000 a dollar Tuesday as banks continuously bought the greenback, on behalf of importers, dealers said. The rupee was also weighed down by a surge in the dollar index, which rose to a 4-month high of 105.70 on Monday and hovered around the same level on Tuesday, they said.

"The dollar strength could take the rupee down to 84.4300 a dollar. We are seeing a range of 84.3700-84.4300 during the day, even though the trade volume is normal and nothing out of the ordinary. It's purely the strength in the dollar index," a dealer at a state-owned bank said. The dollar index soared due to a fall in the euro to a 7-month low and a fall in the yen as well.

At 0936 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 105.64, compared to its previous close of 105.52 on Monday and 104.95 on Friday.

The rupee came under downward pressure as banks persistently bought the greenback, on behalf of importers, anticipating a further fall in the rupee. Oil marketing companies also rushed to purchase dollars, tracking a fall in crude prices. Crude prices fell over 2% Monday due to a dampened growth outlook from China. 

At 0944 IST, the January Brent Crude contract was $71.72 per barrel, compared with its previous close of $71.57 per barrel on Monday and $73.87 on Friday.

Traders now await key economic data from the US, including the consumer price index due Thursday. A reading above the estimated 0.3% will likely prompt the US Federal Reserve to not lower its interest rates at its next policy meeting. Currently, traders price in a 68.5% probability of the US Fed cutting its interest rate by 25 basis points at the December policy meeting, while 31.5% see a chance of the central bank maintaining status quo.

However, dealers said some banks also sold the greenback, likely on behalf of exporters who wanted to take advantage of the higher dollar/rupee levels. They also speculated that public-sector banks stepped in with dollar supplies, likely on behalf of the Reserve Bank of India, which limited the fall for rupee. 

For the rest of the day, the rupee is seen in the range of 84.35-84.45 against the dollar, dealers said. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Nov 12

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)

India Rupee - Asia FX: Most down; Malaysia minister vows to aid currency

MUMBAI – Most Asian currencies were down against the dollar as the US unit strengthened across the board after a sharp fall in the euro and the yen. The euro fell to its lowest against the dollar in almost seven months on Monday, as investor concerns about potential tariffs from a new White House administration emerged, raising fears about the impact on the Eurozone's economy.

The Malaysian ringgit was down 0.6% against the dollar. The country's Deputy Finance Minister Lim Hui Ying said the government recognised the impact of the ongoing geopolitical circumstances in West Asia, as well as the recent US presidential election on the ringgit and the currencies of emerging markets. "Despite that, the positive prospects of the Malaysian economy, which include the government's commitment to carry out structural reforms, will give continuous support to the ringgit," Lim said on Monday.

The Taiwan dollar was down 0.3% against the dollar. According to the Taipei Times, Taiwan's Ministry of Foreign Affairs has suggested its most significant confidential budget in the past six years, totalling about $56.71 million for the forthcoming year. This marks an increase of 53.5% from the current year's budget. 

The Philippines peso was down 0.3% against the dollar. The peso could rebound from its recent decline, supported by an increase in overseas remittances typically seen before the Christmas season, Bloomberg reported. 

The Indonesian rupiah was down 0.6% against the dollar. Indonesia has set up a six-month period window until May 2025 for specific businesses to obtain complete loan forgiveness from state banks. This is designed to stimulate both loan activity and economic expansion, as outlined in a recent regulation. (Kabir Sharma)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.