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Informist, Monday, Nov. 18, 2024

By Gowri Lakshmi

MUMBAI – The rupee ended largely steady against the dollar Monday as state-owned banks sold the greenback, likely on behalf of the Reserve Bank of India, which neutralised the impact of banks' dollar purchases for importers and foreign portfolio investors, dealers said. A strong dollar index following the US Federal Reserve Chair Jerome Powell's speech on Thursday also weighed on the rupee, they said.

After moving in a tight range of just 3 paise during the day, the rupee settled at 84.3850 against the dollar, just a whisker away from the record closing low of 84.3950 on Thursday. A fall in the offshore Chinese yuan also weighed on the rupee. The Chinese currency fell 0.2% against the dollar. 

The rupee opened flat against the dollar, but came under pressure shortly afterwards as banks continued to buy dollars on behalf of foreign portfolio investors, who wanted to exit the Indian equity market, dealers said.

So far in November, FPIs have pulled out more than $2 billion from the domestic equities market. On Monday, both the benchmark indices ended in the red, with both the Sensex and Nifty 50 settling 0.3% lower.

The rupee opened at 84.3950 against the after trading around 84.44 a dollar in the offshore non-deliverable forwards market few minutes before the domestic spot market opened. Dealers speculated that the central bank likely intervened in the offshore NDF market through its dollar sales, which brought the rupee back to 84.39-84.40 level and prevented a sharp depreciation. 

"The levels at which the rupee was trading in NDF seemed like it would open at a record low and may even fall to 84.4500 a dollar during the day, but RBI offered (dollars) to keep it within the range," a dealer at a private bank said.

The rupee also came under downward pressure as importers continued to purchase the greenback, as they were anticipating a further fall in the rupee in the near-term, dealers said. So far in November, the rupee has depreciated almost 0.4% against the US unit. 

Further, the dollar index strengthened after Powell on Thursday hinted that the Fed may not go for aggressive rate cuts in the coming months. Powell said that the ongoing economic growth and a robust job market do not warrant a need to rush to lower rates. This, too, weighed on the Indian currency, dealers said. 

The dollar index was also boosted after data released Friday showed that US retail sales increased more than expected in October. US retail sales rose 0.4% last month, more than the expectation of a 0.3% rise. Another data showed that initial state unemployment claims fell 4,000 to a seasonally adjusted 217,000, against Reuters' poll forecast of 223,000 claims for the week ended Nov 9. 

As per CME FedWatch Tool, as of Monday, the chances of an interest rate cut by the Fed next month were 61.9%, down from 64.6% a week ago. Traders are pricing in a 38.1% chance of the Fed maintaining status quo in December.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 106.69 against 106.67 on Friday and 106.87 on Thursday.

Public-sector banks sold the greenback, likely on behalf of the RBI throughout the day, which ensured that the rupee remained in a tight range and did not fall against the US unit, dealers said. The RBI likely sold dollars around 84.40 a dollar, they said. 

Further, dealers said the rupee was also aided by some banks' dollar sales on behalf of overseas investors looking to invest in the initial public offering of domestic companies. The IPO of NTPC Green Energy Ltd. will open for subscription on Tuesday and close on Friday.

FORWARDS 

The premium on the one-year dollar/rupee forward contract ended slightly lower Monday as some banks sold the greenback for forward delivery, noting a rise in the forward premium after it fell to a near three-month low on Wednesday, dealers said. Premium on the one-year dollar/rupee forward has jumped almost 10 bps since Wednesday.

Premiums came under pressure as the odds of aggressive rate cuts by the US Federal Reserve going ahead have faded. With lower chances of aggressive rate cuts, the US-India interest rate differential is also not likely to widen as much as expected earlier, keeping the forward premium relatively low, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 180.94 paise, against 181.69 paise Thursday. On an annualised basis, the premium was 2.14%, down from Thursday's close of 2.15%.

OUTLOOK

On Tuesday, the rupee will take cues from movement in the dollar index and crude oil prices. Dealers expect FPIs to keep pulling out funds from Indian equities in the coming days, keeping the Indian currency under pressure. Dealers also expect banks to continue buying dollars on behalf of importers, anticipating a further fall in the rupee. 

"There is no global data lined up soon, the rupee will remain range bound within 84.40 a dollar level for the week," a dealer at a private bank said.

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. During the day, the rupee is seen in a range of 84.35-84.50 a dollar, with strong technical support pegged at 84.45.

India Rupee - World FX: Yen down due to uncertainty around BoJ rate hike

MUMBAI – The Japanese yen was down 0.4% against the dollar as market participants exercised caution due to uncertainty about Bank of Japan hiking its interest rate in December. Bank of Japan Governor Kazuo Ueda on Monday said the economy was "progressing towards sustained wages-driven inflation". While he indicated that rates could be increased, he did not mention the timeline.

"There are numerous uncertainties we need to scrutinise. But that doesn't mean we will wait until all of them clear up. We'll decide policy by looking at data and information available at the time of each meeting," Ueda said, addressing the media.

The euro was up 0.1% against the greenback ahead of European Central Bank President Christine Lagarde's speech at an event in Paris later in the day. Market participants are now waiting for the Eurozone harmonised consumer price index on Tuesday.

The dollar index was strong after multiple data showed that the US economy and the labour market were in good shape. Data released Friday showed US retail sales increased more than expected in October. US retail sales rose 0.4% last month, against expectations of a 0.3% rise. Data for the previous month was also revised higher to show a 0.8% rise in September, up from the originally reported 0.4% increase.

Data released Thursday had pointed to a robust US labour market. The initial state unemployment claims fell 4,000 to a seasonally adjusted 217,000 for the week ended Nov 9. They fell more than the expectation of 223,000 claims by a Reuters poll. At 1526 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 106.56 against 106.67 on Friday and 106.87 on Thursday.

Such strong economic data, coupled with comments by US Federal Reserve Chair Jerome Powell on Thursday, strengthened the dollar index. Powell's comments indicated that the Fed may not go for aggressive rate cuts in the coming months. Powell said the ongoing economic growth and a robust job market do not warrant a need to rush in to lower rates. After his remarks, the odds of an interest rate cut by the Fed in December fell. As of Monday, the chances of an interest rate cut were 61.6%, down from 64.6% a week ago.

The pound sterling was up 0.1% against the dollar after data on Monday showed that consumer confidence in the UK rose to 98.6 in October, compared to 97.75 from last year.

The New Zealand dollar was down 0.3% against the greenback. The fall was limited as the services purchasing managers' index was up at 46.0 in October, from 45.7 in September. Tracking the fall of the New Zealand currency, the Australian dollar was down 0.1%. (Gowri Lakshmi)

India Rupee: Premium falls as banks sell forward dollars at higher levels

MUMBAI – The premium on the one-year dollar/rupee forward contract was down slightly Monday as some banks sold the greenback for forward delivery, noting a rise in the forward premium after it fell to a near three-month low Wednesday, dealers said.

"It is just oscillating in a range, and I don't think it will break away from the range of 2.00-2.15%," a dealer with a state-owned bank said. Dealers said that should the forward premium drift lower towards 2.00%, banks are likely to sell dollars for forward delivery, which may contain the fall, dealers said.

"Currently there is a bit of confusion as to where exactly the forward premium will move to," a dealer with a state-owned bank said. They said the one-year dollar/rupee forward premium came under pressure as the odds of aggressive rate cuts by the US Federal Reserve are seen lower. With lower chances of aggressive rate cuts, the US-India interest rate differential is also not likely to widen as much as expected earlier, keeping the forward premium relatively low, dealers said.

Multiple economic data from the US released last week indicated an underlying strength in the world's largest economy. Further, comments by US Federal Reserve Chair Jerome Powell indicated that the central bank may cut rates slower than previously thought. Powell said Thursday the ongoing economic growth and a robust job market do not warrant a need to rush in lower rates, which also supported the dollar. After his remarks, the odds of an interest rate cut by the Fed in December fell. As of Monday, the chances of an interest rate cut were 61.9%, down from 64.6% a week ago.

Further, economic data released Thursday and Friday showed a robust labour market and strong retail sales. The unemployment claims for the week ended Nov. 9 fell more than expected, indicating strength in the US labour market. Retail sales in October were also higher than expected.

At 1412 IST, the premium on the one-year exact-period dollar/rupee forward contract was 179.61 paise, against 181.69 paise Thursday. On an annualised basis, the premium was 2.13%, down from Thursday's close of 2.15%. The market was closed on Friday for Guru Nanak Jayanti. (Sourabh Kumar)

India Rupee: Remains steady as RBI dollar sales offset importers' dollar buys

MUMBAI – The rupee remained steady as public sector banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset the impact of dollar demand from importers, dealers said. Banks purchased dollars on behalf of importers, who were wary of further fall in the rupee, which weighed on the local unit, they said. 

"It is a buying (of dollars) market today, so nats are supplying as much as it is demanding," a dealer at a public sector bank said.

Banks also purchased the greenback on behalf of overseas investors looking to withdraw funds from the domestic equity market. Consequently, the rupee came under pressure. At 1306 IST, the benchmark Sensex and the Nifty 50 were down 0.27% and 0.25%, respectively. 

The rupee also came under pressure due to strength in the dollar index. The dollar index strengthened after multiple data showed that the US economy and the labour market were in good health. The dollar index was also firm after Federal Reserve Chair Jerome Powell on Thursday hinted that the US Fed might only proceed with a moderate rate cut at its upcoming policy meeting. 

Currently, traders have priced in a 61.9% probability of the Fed cutting its interest rate by 25 basis points at its December policy meeting, while 38.1% see a chance that the central bank will maintain status quo, according to the CME FedWatch tool. At 1325 IST, the dollar index which measures the strength of the dollar against six major currencies, was at 106.72, compared to its close of 106.67 on Friday and 106.87 on Thursday.

Dealers expect the RBI to continue intervening through dollar sales in the spot market for the rest of the day. Dealers see strong immediate technical support for the Indian unit at 84.45 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Nov 18

MUMBAI – At 0900 IST, the rupee was at 84.3950 a dollar, unchanged from its previous close. At 1100 IST, the rupee was at 84.3875 per dollar. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha and Sourabh Kumar)

India Rupee: Steady as banks' dollar sales, likely for RBI, offset FPI outflows

MUMBAI – The rupee was largely steady against the dollar on Monday as banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset the impact of dollar purchases by foreign portfolio investors and importers, dealers said. They also said the strength in the dollar index weighed on the rupee.

Banks purchased the greenback, likely on behalf of overseas investors looking to withdraw funds from the domestic equity market, dealers said. So far in November, overseas investors have pulled out more than $2 billion from the domestic equities market. However, the central bank stepped in with its dollar sales, which prevented the rupee from falling sharply, dealers said. Dealers also speculated that the RBI sold dollars in the offshore non-deliverable forwards market to prevent the rupee from hitting a record low at opening.

Banks purchased the greenback on behalf of importers who anticipated a further fall in the rupee, putting downward pressure on the Indian currency, dealers said. "Buy (dollars) on every dip is happening, no one is going short (on dollars)," a dealer at a state-owned bank said. "Importers' panic buying has come down a bit, the panic might get triggered when the rupee inches toward 84.4500 a dollar," he added. However, despite the dollar demand, dealers expect the rupee to be range-bound, moving within 84.38-84.42 a dollar during the day. 

The rupee was weighed down by the strength in the dollar index. The dollar index strengthened after multiple data showed that the US economy and the labour market were in good health. The dollar index was also firm after Federal Reserve Chair Jerome Powell on Thursday hinted that the US Fed may only proceed with a moderate rate cut at its upcoming policy meeting. 

Currently, traders have priced in a 63.5% probability of the Fed cutting its interest rate by 25 basis points at its December policy meeting, while 36.5% see a chance that the central bank will maintain the status quo, according to the CME FedWatch tool. At 1023 IST, the dollar index which measures the strength of the dollar against six major currencies was at 106.72, compared to its close of 106.67 on Friday and 106.87 on Thursday.

Dealers said the domestic unit may be aided by overseas investors looking to invest in the initial public offering of domestic companies. Market participants look forward to the IPO of NTPC Green Energy Ltd., which will open for subscription on Tuesday and will close on Friday.

A rise in other Asian currencies also supported the rupee, dealers said. Asian currencies rose between 0.1-0.4%, with the Korean won being the best performer.

Dealers expect the RBI to continue intervening through dollar sales in the spot market for the rest of the day. The rupee is likely to move in a tight range of 84.35-84.45 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.45 a dollar. (Gowri Lakshmi)

India Rupee - Asia FX: Most up; South Korean won leads gains

MUMBAI – Most Asian currencies were up in early trade, with the South Korean won leading the gains, with a rise of 0.4% against the US dollar. While the dollar index has remained strong, it came off from over a year-high of 107.06 that it touched on Thursday, which supported Asian currencies.

The South Korean currency got a boost from a rise in its domestic equity market. The Korea Composite Stock Price Index, or KOSPI, was up over 2% in early trade. Another major stock index in the region, the Japanese Nikkei 225, was down nearly 0.9%.

The rise in the South Korean stock index was driven by Samsung Electronics, whose shares rose after a buyback plan announced late Friday. It led to overseas investors' interest in the stock, as reported by The Wall Street Journal, which benefited the South Korean currency.

The dollar index remained strong after the release of multiple economic data from the US last week. The index, which measures the strength of the greenback against a basket of six major currencies, was at 106.74 at 0934 IST, against 106.67 on Friday and 106.87 on Thursday.

Data released Friday showed that US retail sales increased more than expected in October. US retail sales rose 0.4% last month, more than the expectation of a 0.3% rise. Further, data for the previous month was also revised higher to show a 0.8% rise in September, up from the originally reported 0.4% increase. 

Another data released Thursday pointed to a robust US labour market. The initial state unemployment claims fell 4,000 to a seasonally adjusted 217,000 for the week ended Nov 9. They fell more than the expectation of 223,000 claims for the week in a Reuters poll. On Thursday, US Federal Reserve Chair Jerome Powell said the ongoing economic growth and a robust job market do not warrant a need to rush in lower rates, which also supported the dollar.

The Thai baht and the Malaysian ringgit were up 0.2% each against the greenback. The Malaysian ringgit grew on optimism around its strong economic growth. While its economic growth slowed in Jul-Sept, the country's central bank said Friday that the year-to-date growth remained strong at 5.2% and within its projected forecast for this year of 4.8-5.3%.

The Thai baht was up due to its strong economic growth of 3.0% during Jul-Sept, aided by a strong recovery in the tourism sector and exports of the country. Data released Monday showed economic growth to have risen more than the forecast of 2.6% in a Reuters poll. 

The Indonesian rupiah was up 0.2% against the greenback. The Philippines peso was steady against the US currency. The Taiwan dollar, on the other hand, was down against the US unit. (Sourabh Kumar)

India Rupee: Expected range for rupee - Nov 18

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: 

(Pratiksha and Sourabh Kumar)

End

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

Edited by Vandana Hingorani

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