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Informist, Wednesday, Nov. 13, 2024

By Sourabh Kumar

MUMBAI – The rupee ended the day steady against the dollar Wednesday thanks to the Reserve Bank of India's likely intervention through dollar sales, dealers said. The RBI intervened after the rupee touched a record low of 84.4100 a dollar during the day, coming under pressure from foreign fund outflows from domestic equities.

"Equity outflows are here to stay at least for this month. They have come down from last month but are still there," said a dealer at a foreign bank. "RBI has made sure there is only a gradual depreciation (in the rupee) and nothing more."

After moving in a range of four paise, the Indian unit settled at 84.3775 a dollar. It had closed at 84.3925 a dollar Tuesday. The rupee was steady in the morning as market participants were cautious ahead of the release of US CPI data, due later Wednesday.

While the rupee opened at 84.3925 a dollar, the level it closed at on the previous day, the Indian unit soon came under pressure as overseas investors pulled out their money from domestic equities, dealers said. So far this month, foreign investors have pulled out $2.32 billion from the Indian stock market.

The rupee also came under pressure as banks purchased the greenback on behalf of importers, who were afraid the currency would depreciate further, dealers said. So far this month, the rupee has fallen more than 30 paise against the greenback. "Importers were also present in the market buying dollars, but the quantum of FPI (foreign portfolio investor) buying was significantly higher," a dealer at a private bank said.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, surged to 106.21, its highest level in nearly six and a half months. This, too, weighed on the rupee, dealers said. The index has been rising since Donald Trump won the US presidential election. With Trump set to return to the White House, investors expect US policies to favour lower taxes and increased tariffs, which could keep US inflation relatively high, reducing the chances for the US Federal Reserve to ease interest rates, dealers said. The dollar index was at 105.95 at 1530 IST, against 105.96 Tuesday and 105.52 Monday.

The dollar index also strengthened ahead of the release of US CPI data later Wednesday. US consumer prices are expected to rise 0.2% on month in October, with the core CPI seen rising 0.3% on month, according to a poll by Dow Jones.

With downward pressure from a strong dollar index, importers' purchases of dollars, and overseas investors pulling their money out of Indian equities, the rupee was under constant pressure, forcing the RBI to intervene to prevent the rupee falling further after it touched its lifetime low, dealers said.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at its lowest in nearly three months owing to a sharp rise in the 10-year US Treasury yield, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. The yield on the 10-year benchmark US Treasury note rose by 13 basis points Tuesday ahead of the release of US CPI data.

"There is some sort of dollar shortage in the system obviously, as exporters won't sell and importers will keep buying. Forward premiums have come down considerably, but further reduction looks unlikely," said Sajal Gupta, executive director and head of foreign exchange and commodities at Nuvama Institutional Equities.

Dealers said most market participants refrained from placing significant bets ahead of the release of US CPI data, leading to lower overall volumes in the market. At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 175.51 paise, against 177.08 paise Tuesday. On an annualised basis, the premium was 2.07%, down from Tuesday's close of 2.10%.

OUTLOOK

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

Dealers expect overseas investors to keep pulling out their money from Indian equities in the coming days, keeping the Indian currency under pressure.

"Rupee should depreciate gradually, but a bit faster now," Gupta said. "We should see 85 coming soon, maybe this year itself. It is hardly 60 paise from here. The fact that RBI has allowed it to depreciate till here from 84 shows that they are okay with 85 (a dollar)."

Dealers also expect banks to continue buying dollars on behalf of importers, anticipating a further fall in the rupee. 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 sudden volatility in the market.

Traders will 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 84.30-84.50 a dollar, with strong technical support pegged at 84.50.

India Rupee - World FX: Dollar index surges to 6-mo high before US CPI data

MUMBAI – The dollar index surged to an over six-month high during European trade ahead of US inflation data later in the day. Consumer inflation in the US is likely to have risen to 2.6% in October from 2.4% in September due to a base effect, according to Dow Jones. A reading higher than this is likely to prompt the US Federal Reserve to not proceed with a 25 basis point rate cut next month.

"The trend has been 'great', with core inflation down to 2.7% from a peak of 5.6%. But the level is still above the Fed's 2% target," Richmond Fed President Tom Barkin said on Tuesday. "So, inflation might be coming under control, or the level of core might give a signal that it risks getting stuck above target," he added.

The dollar index also gained due to expectations that Republican President-elect Donald Trump's policies will lower taxes and impose new trade tariffs, measures seen as inflationary, and prompt the Fed to limit the extent of its easing of interest rates. Traders have currently priced in a 65.8% probability of the Fed lowering its benchmark rates by a quarter percentage point next month, while they see a 37.9% chance of the central bank maintaining status quo, according to CME FedWatch tool.

Investors are also waiting for Fed Chair Jerome Powell's speech on Thursday. At 1600 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 105.98, compared to its previous close of 105.96 and 105.52 on Monday.

The euro extended its losses from Tuesday and was down 0.1% against the dollar amid political uncertainty as Germany, the bloc's biggest economy, is set to hold snap elections on Feb. 23, after the collapse of Chancellor Olaf Scholz's governing coalition last week. 

The Japanese yen was down 0.2% against the dollar, after data released earlier in the day showed that Japan's wholesale inflation accelerated in October at the fastest annual pace in more than a year, leading to more uncertainty over the timeline of rate hikes by the Bank of Japan. 

The pound sterling was flat against the dollar. Commodity-linked currencies, the Australian dollar and the New Zealand dollar, were down 0.1% against the greenback, tracking a fall in crude oil prices. Crude oil prices fell after the Organization of the Petroleum Exporting Countries cut its oil demand growth forecast for 2024-25. This is the fourth consecutive downward revision of the growth outlook by the organisation. (Gowri Lakshmi)

India Rupee: Premium down on sharp rise in US yield; market eyes US CPI Wed

MUMBAI – The premium on the one-year dollar/rupee forward contract fell Wednesday, primarily due to a sharp rise in the 10-year US Treasury yield, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. The yield on the 10-year benchmark US Treasury note rose by 13 basis points on Tuesday ahead of the release of US CPI data.

"The movement in UST (US Treasury yield) led to a slight fall in the premium, and most people are not taking positions today before the US CPI data," a dealer with a state-owned bank said. US consumer prices are expected to rise 0.2% on month in October, with the core CPI seen rising 0.3%, according to a poll by Dow Jones.

Dealers said most market participants refrained from placing significant bets ahead of the release of the data, due later in the day after Indian market hours. Therefore, the overall volumes in the market were lower, dealers said. "We saw lower volumes today, around 70% of the volume that we get normally," the dealer said.

The forward premium has been falling since Donald Trump won the US presidential election, primarily on expectations that the interest rate differential between the US and India may not widen as much as previously thought, dealers said. The US-India rate differential is not expected to widen much as chances of continuous and aggressive interest rate cuts by the US Federal Reserve have reduced after Trump's win. The odds of another interest rate cut of 25 basis points by the Fed at its next meeting in December were seen at around 62%, down from around 77% seen just before the US election, according to the CME FedWatch tool.

However, dealers said the one-year dollar/rupee forward premium may not fall below 2.0% on an annualised basis. "I think it will remain somewhere between 2.00% and 2.15%," a dealer with a private bank said. Dealers said the forward premium may also not fall as they don't see an interest rate cut in India soon, especially after India's CPI inflation rose to a 14-month high of 6.21% in October from 5.49% in September. 

At 1426 IST, the premium on the one-year exact-period dollar/rupee forward contract was 175.53 paise, against 177.08 paise Tuesday. On an annualised basis, the premium was 2.07%, down from Tuesday's close of 2.10%. (Sourabh Kumar)

India Rupee: Touches record low; RBI's active dollar sales offset FPI outflows

MUMBAI – The rupee touched its lifetime low of 84.41 a dollar hit on Tuesday, as banks persistently purchased the greenback, likely on behalf of foreign portfolio investors after withdrawing funds from domestic stock market, dealers said. However, state-owned banks sold dollars, likely on behalf of the Reserve Bank of India, which limited the fall of the local currency, they said.

"Public-sector banks are supplying (dollars) at every falling level now, the central bank is very much active in keeping the rupee steady," a dealer at a foreign bank said. The rupee has moved in a range of only 2 paise so far Wednesday. Dealers expect the central bank to keep up with its intervention for the rest of the day and prevent the currency from falling sharply.

Dealers expect foreign portfolio investors to continue exiting domestic equities and reallocate their funds to China, which announced another economic stimulus package to boost its economy. So far in November, FPIs have withdrawn $2.32 billion from Indian equities. At 1330 IST, both the benchmark indices, Sensex and Nifty 50, were down 0.9% and 1.0%, respectively.

The rupee was also weighed down by dollar purchases by banks on behalf of importers, who expect the local unit to fall further. "Panic buying (of dollars) for importers is there. Banks are also supplying as much (dollars) as the demand is. It (rupee) can breach 84.42 a dollar, but not beyond that," a dealer at a private bank said.

The rupee was also weighed down by a surge in the dollar index, dealers said. The dollar index hovered near the six-month high hit on Tuesday, on expectations that president-elect Donald Trump will lower corporate taxes and increase import tariffs. At 1330 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 106.05, against 105.96 on Tuesday and 105.52 on Monday. The index rose to 106.18 on Tuesday, its highest level since May 1.

Market participants are waiting for the US consumer price index for cues on the US Federal Reserve's rate cycle. The data will be released later in the day. Consumer inflation in US likely rose to 2.6% from 2.4% in September due to a base effect, according to Dow Jones. A higher reading may weigh on US rate cut hopes in the near term, dealers said.

Traders have currently priced in a 62.1% probability of the Fed lowering its benchmark rates by 25 basis points next month, while they see a 37.9% chance of the central bank maintaining status quo at its December policy meeting, according to CME FedWatch tool. Traders are also waiting for Fed Chair Jerome Powell's speech on Thursday.

For the rest of the day, the rupee is seen in a 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 13

NEW DELHI – At 0900 IST, the rupee was at 84.3925 a dollar, unchanged from its previous close. At 1200 IST, the rupee was at 84.4025 per dollar. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee: Steady as traders remain cautious ahead of US CPI data

MUMBAI – The rupee was steady against the dollar Wednesday as traders remained cautious ahead of the US inflation data, due later in the day, dealers said. However, the rupee was weighed down by a surge in the dollar index, which soared to a six-month high of 106.18 on Tuesday amid expectations that Republican President-elect Donald Trump's policies will likely lower corporate taxes and increase trade-tariffs. 

At 0943 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 105.99, compared to the previous close of 105.96 on Tuesday and 105.52 on Monday. Currently, traders price in a 62.4% probability of the US Fed lowering its benchmark rates by 25 basis points while they see a 37.6% chance of the central bank maintaining a status quo in its December meeting.

Other Asian currencies also fell due to a strengthening dollar index, which weighed on the local unit, dealers said. The offshore Chinese yuan fell 0.2% against the greenback. 

Further, some banks purchased the greenback, likely on behalf of importers wary of a further fall in the rupee. This weighed on the domestic currency. "There is buying (of dollars) pressure, like every other day, we expect some appreciation (of the rupee), so importers will likely purchase (dollars) at every dip (in dollar/rupee)," a dealer at a state-owned bank said.

Dealers expect banks to sell dollars, likely on behalf of the Reserve Bank of India, around 84.41-84.42 a dollar, to prevent the rupee from falling sharply and to curb any sudden volatility in the market. 

Market participants will also assess the speech by Fed Chair Jerome Powell, scheduled Thursday to get more cues on future interest rate policies. 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 - Asia FX: Mixed ahead of US CPI; dollar index rises to 6-month high

MUMBAI – Asian currencies traded mixed ahead of US consumer price data due later in the day. Reports suggest that if core inflation goes above the estimated 0.3%, the likelihood of the US Federal Reserve cutting rates at its next policy meeting will be reduced. 

The dollar index soared to a six-month high on Tuesday, as investors expect US president-elect Donald Trump's administration to lower corporate taxes and increase trade tariffs. At 0844 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 105.93, compared to the previous close of 105.96 on Tuesday and 105.52 on Monday. The dollar index rose to a six-month high of 106.18 on Tuesday, the highest since May.1. The Malaysian ringgit was down 0.2%.

The Chinese yuan was up 0.2% against the greenback as China's central bank announced new counter-cyclical adjustments to boost the sluggish economy, reports said. People's Bank of China Governor Pan Gongsheng on Tuesday said the central bank would continue with its supportive monetary policy stance and enhance the intensity and precision of policy regulation.

The South Korean won was down 0.2% against the dollar due to a slump in its equity indices, with the benchmark KOSPI index down 1.66%. The Philippines' peso was down 0.3% against the dollar, tracking a fall in domestic equities as well. At 0906 IST, the benchmark PSEi index was down 0.57%. 

The Thai baht was down 0.3% against the dollar amid concerns over the central bank's autonomy, reports said. Thailand is set to appoint former Finance Minister Kittiratt Na-Ranong as the new chairman of the Bank of Thailand. Na-Ranong is a critic of the central bank and the move is seen as an indication of the government seeking to tighten grip over central bank decisions. 

The Taiwan dollar was down 0.1% against the dollar. Data on Tuesday revealed that the country's tax revenue rose 50.9% in October, supported by gains in corporate and personal income as well as securities transaction taxes, the ministry of finance said. The Indonesian rupiah traded flat against the dollar. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Nov 13

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 Rajeev Pai

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