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Informist, Monday, Dec. 2, 2024

By Sourabh Kumar

MUMBAI – The rupee ended at a record closing low of 84.6950 a dollar after data released Friday showed sharply weaker-than-expected GDP data for Jul-Sept, dealers said. Further losses in the rupee were limited by the Reserve Bank of India's intervention in the foreign exchange market by way of dollar sales, dealers said.

"It is the GDP number that weighed, and then importers were also there," a dealer with a state-owned bank said. The rupee fell over 20 paise during the day to settle at 84.6950 a dollar on Monday. The Indian currency had settled at 84.4825 on Friday. The rupee opened around 10 paise lower at 84.5850 a dollar, posting its biggest loss at opening since Jun. 4.

The rupee touched a record low of 84.7050 a dollar during the day. The rupee had fallen to near 84.60 a dollar in the offshore market, shortly after GDP data was announced on Friday, dealers said. India's GDP growth fell to a seven-quarter low of 5.4% in the quarter ended September. The Jul-Sept GDP print was sharply below expectations. According to an Informist poll, GDP growth was seen slowing to 6.5% in Jul-Sept. 

As the rupee opened 10 paise lower, importers rushed in to purchase dollars, further weighing on the Indian currency, dealers said. Importers demanded dollars on fears that the rupee may fall further, dealers said. 

Apart from importers, a strength in the dollar index also weighed on the rupee, dealers said. "While we did expect the rupee to fall beyond 84.50 a dollar, we did not expect the fall to be so much," a dealer with another state-owned bank said.

The dollar index strengthened ahead of the release of multiple economic data in the US this week, and on US President-elect Donald Trump's demand that BRICS member countries commit to not creating a new currency or supporting another currency that could replace the dollar or face 100% tariffs. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.32 at 1530 IST, up from 105.78 on Friday and 106.15 on Thursday.

The US jobless rate, which is due to be released this week, is seen rising to 4.2% in November from 4.1%, as per Reuters. It may keep the Federal Reserve on course to cut rates by 25 basis points. Further, the US manufacturing PMI data is scheduled to be released late Monday. 

The dollar index strengthened in early European trade due to a weakness in the euro, which has a weight of 57.6% of the index. The euro was down 0.6% against the dollar on political upheaval in France, with the likely collapse of the current government. Chances of a government collapse sparked fears that plans to curb the French budget deficit may stall, which weighed on the euro. 

France's far-right National Rally said it will back a no-confidence motion against the government led by Prime Minister Michel Barnier. Marine Le Pen, leader of the National Rally, gave Barnier time till Monday to fulfil the group's budget demands. If he did not, the National Rally would back a no-confidence motion.

Market participants expect the dollar index to remain strong, even if the US Federal Reserve cuts interest rates this month. The reasoning for the view is that, while investors expect the Fed to cut rates this month, the overall quantum of rate cuts in 2025 is seen lower with Trump coming to power. As of Monday, the odds of a 25 bps rate cut by the Fed this month were nearly 62%, up from around 52% a week ago. 

With the rupee coming under pressure, the RBI sold dollars to prevent the rupee from falling sharply, dealers said. They said the RBI intervened, albeit not as aggressively as before. India's foreign exchange reserves have fallen to a near five-month low of $656.58 billion in the week ended Nov. 22, primarily due to the intervention by the central bank in recent weeks. During the week, reserves fell by $1.31 billion.

"I don't think they will be able to save the rupee as much, now that even reserves have started to show its impact," another dealer with a private bank said. "For how long will they continue burning reserves?"

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at a near three-week low, after India's weaker-than-expected GDP growth print raised expectations of a rate cut by the RBI this week, dealers said.

Forward premiums also fell due to a likely dollar shortage, as the rupee hit a record low Monday, falling by over 20 paise, dealers said. With the rupee falling in the spot market, importers rushed in to purchase the greenback, anticipating a further fall in the Indian currency, dealers said.

Trump's return to power has raised expectations of protectionist policies and using tools such as imposing tariffs against other countries, making the path of inflation towards the Federal Reserve's target of 2% difficult. With expectations of relatively more rate cuts in India and less in the US, the interest rate differential between the US and India is not expected to widen as much as previously thought, dealers said. They said this weighed on the one-year dollar/rupee forward premium.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 176.11 paise against 188.11 paise on Friday. On an annualised basis, the premium was at 2.08%, down from Friday's close of 2.23%.

OUTLOOK

On Tuesday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said. Dealers expect the RBI to continue intervening in the market through dollar sales to prevent the rupee from falling sharply and to reduce volatility.

Importers are expected to purchase dollars, should the rupee fall further, which could pressure on the Indian currency, dealers said. On Tuesday, the rupee is seen in a range of 84.50-84.80 a dollar, with strong technical support pegged at 84.80 a dollar.

India Rupee - World FX: Euro falls on possible government collapse in France

MUMBAI – The euro was down 0.6% against the dollar on possible political upheaval in France, starting with the collapse of the current government. France's far-right National Rally said it will back a no-confidence motion against the government led by Prime Minister Michel Barnier. 

Marine Le Pen, National Rally lawmaker, gave Barnier time till Monday to fulfil the far-right group's budget demands. If he did not, the National Rally would back a no-confidence motion. WIth the collapse of the government, there are fears that plans to curb the budget deficit may stall.

The Australian dollar was down 0.2% against the greenback, as the dollar index strengthened after US President-elect Donald Trump threatened to impose tariffs against member countries of the BRICS grouping, should they attempt to replace the dollar in trade. His stance gave strength to the dollar.

The losses in the Australian currency were limited as the country's retail sales rose for the third straight month in October. The sales rose 0.6% on-month, higher than the market forecast of a 0.4% gain. Data released Monday showed retail sales rose 3.4% on year.

The Canadian dollar was down 0.2% against the dollar, largely on a fall in crude oil prices. Crude oil is a major export from Canada to the US. With oil prices decreasing, the Canadian currency also comes under pressure as it reduces the value of the country's exports.

The pound sterling fell 0.3% against the dollar, and the Japanese yen fell 0.2%. The dollar index strengthened ahead of the release of multiple crucial economic data from the US which could indicate the quantum of rate cuts by the US Federal Reserve going forward. 

The jobless rate, data for which is scheduled to be released this week, is seen rising to 4.2% last month from 4.1%, as per Reuters. It may keep the Fed on course to cut rates by 25 basis points. Further, the US Manufacturing Purchasing Managers' Index data are scheduled to be released late Monday. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.27 at 1508 IST, up from 105.78 on Friday and 106.15 on Thursday.  (Sourabh Kumar)

India Rupee: Premium down to near 3-week low on weaker-than-view India GDP

MUMBAI – The premium on the one-year dollar/rupee forward contract fell to a near three-week low after India's weaker-than-expected GDP growth print raised expectations of a larger rate cut by the Reserve Bank of India, dealers said.

"It is because of the GDP numbers," a dealer with a state-owned bank said. "With bad GDP data, there are now expectations of a higher rate cut by India, whenever the rate cut cycle begins." 

Dealers said with the latest GDP growth figure falling sharply to a seven-quarter low in Jul-Sept, market participants now expect a rise in the quantum of rate cuts by the RBI. India's GDP growth fell to 5.4% in the quarter ended September. At the same time, the rate cuts in the US were not seen as aggressive as earlier due to Donald Trump being elected the US president.

Trump's return to power has raised expectations of protectionist policies and using tools such as imposing tariffs against other countries, making the path of inflation towards the Federal Reserve's target of 2% difficult. Therefore, with expectations of relatively more rate cuts in India and less in the US, the interest rate differential between the US and India is not expected to widen as much as previously thought, dealers said. They said this weighed on the one-year dollar/rupee forward premium.

On Saturday, Trump had threatened to impose 100% tariff on BRICS nations, should they attempt to replace the US dollar in trade. Earlier, he had threatened to impose a 25% tax on all imports from Canada and Mexico, and an additional 10% tariff on imports from China.

Forward premiums also fell due to a likely dollar shortage, as the rupee hit a record low Monday, falling by over 20 paise, dealers said. With the rupee falling in the spot market, importers rushed in to purchase the greenback, anticipating further fall in the Indian currency, dealers said.

At 1438 IST, the premium on the one-year exact-period dollar/rupee forward contract was 179.11 paise, against 188.11 paise on Friday. On an annualised basis, the premium was at 2.11% against Friday's close of 2.23%.  (Sourabh Kumar)

India Rupee: Falls more than 20 paise to record low despite RBI dollar sales

MUMBAI – The rupee fell to a record low on Monday despite the Reserve Bank of India's intervention in the foreign exchange spot market, dealers said. Banks sold dollars, likely for RBI, to limit the fall of the rupee, dealers said. So far during the day, the Indian currency has fallen more than 20 paise. On Friday, it had closed at 84.4825 a dollar.

"They (banks) are protecting this level, but selling mildly now," a dealer with a brokerage firm said. "In the morning, they were selling quite aggressively." The rupee came under pressure after India's GDP growth fell sharply to a seven-quarter low of 5.4% in the quarter ended September, dealers said.

The Jul-Sept GDP print was sharply below expectations. According to an Informist poll, GDP growth was seen slowing to 6.5% in Jul-Sept. The GDP growth in Jul-Sept was also much lower than the RBI's projection of 7.0%.

Demand for dollars from importers also weighed on the rupee, dealers said. They said some importers purchased the greenback, anticipating a further fall in the domestic unit. Further, rise of the dollar index also weighed on the Indian rupee, dealers said. The dollar index strengthened ahead of slew of US economic data, including the jobless rate and purchasing managers' index. The latter is due to be released after Indian market hours Monday.

The US economic data may help to assess the quantum of rate cuts by the US Federal Reserve in the coming months, with the latest policy meeting due later this month. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 106.33 at 1258 IST against 105.78 on Friday and 106.15 on Thursday. While investors expect the Fed to cut rates this month, the overall quantum of rate cuts in 2025 are seen lower with president-elect Donald Trump coming to power.

With constant downward pressure, the RBI likely intervened by selling dollars through banks to prevent the rupee from falling further, dealers said. A few exporters also sold dollars, noting relatively higher dollar/rupee levels, which supported the rupee, dealers said. For the rest of the day, the rupee is likely to move in a range of 84.55-84.75 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.70 a dollar.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Dec 2

NEW DELHI – At 0900 IST, the rupee was at 84.5850 a dollar, against its previous close of 84.4825. At 1145 IST, the rupee was at 84.6800 per dollar. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Pratiksha) 

India Rupee - Asia FX: Most down as dollar strengthens; mkt eyes US economic data

MUMBAI – Most Asian currencies fell against the dollar due to a strengthening dollar index. The US currency strengthened ahead of the release of multiple crucial economic data from the US which could indicate the quantum of rate cuts by the Federal Reserve going forward.

The jobless rate, data for which is scheduled to be released this week, is seen rising to 4.2% last month from 4.1%, as per Reuters. It may keep the Federal Reserve on course to cut rates by 25 basis points. Further, the US manufacturing PMI data is scheduled to be released late Monday. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.27 at 0858 IST, up from 105.78 on Friday and 106.15 on Thursday. 

The losses in Asian currencies were limited as investors assessed better-than-expected economic data from China. Beating analysts' forecasts of 50.5 in a Reuters poll, the Caixin/S&P Global manufacturing purchasing managers' index rose to 51.5 in November from 50.3 in October. It touched the highest level since June. Before the private sector survey, the official reading on Saturday had also shown a rise in the country's manufacturing PMI. The official manufacturing PMI rose to 50.3 in November--up from the expectation of 50.2--as against 50.1 in October.

The South Korean won was down 0.4% as data showed that the country's exports growth fell to a 14-month low in November. Exports rose 1.4% on year to $56.4 billion in November, data released Sunday showed. The Taiwan dollar was down 0.3% against the greenback. The Philippines peso was down 0.2% against the US dollar.

The Indonesian rupiah fell 0.4% after the country's inflation eased month-on-month. It was 1.55% in November, down from 1.71% the month before. The reading was, however, slightly above expectations of 1.50% in a Reuters poll. The inflation was near the lower level of the Bank Indonesia's target range of 1.5-3.5%.

The Malaysian ringgit was down 0.4% against the greenback. The Thai baht fell 0.6% against the dollar. However, the losses were limited as the S&P Global manufacturing PMI came in at 50.2 in November, up from 50.0 the month before.  (Sourabh Kumar)

India Rupee: Hits record low after poor Jul-Sept GDP data; RBI limits fall

NEW DELHI – The rupee fell sharply, hitting a record low of 84.6100 a dollar, after data released on Friday showed India's GDP growth fell sharply to a seven-quarter low of 5.4% in the quarter ended September, dealers said. "It (rupee) fell to 84.60 in the offshore market right after the (GDP) data, so today's levels are not a surprise," said a dealer at a private bank. "They (RBI) may try to hold 84.60 for some time I think."

The Jul-Sept GDP print was sharply below expectations. According to an Informist poll, GDP growth was seen slowing to 6.5% in Jul-Sept. GDP growth in Jul-Sept was also much lower than the Reserve Bank of India's projection of 7.0%.

Further, the dollar index strengthened ahead of multiple key economic data this week. The November US payrolls report is due on Friday. A host of Fed officials are due to speak this week, including Fed Chair Jerome Powell on Wednesday, while other data include surveys of manufacturing and services sectors.

The dollar also got a boost after US president-elect Donald Trump on Saturday demanded that BRICS member countries commit to not creating a new currency or supporting another currency that could replace the dollar or face 100% tariffs. This, too, weighed on the Indian currency, dealers said. 

At 0955 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.28, against 105.78 on Friday and 106.15 on Thursday.

However, some banks stepped in to sell dollars, likely on behalf of the Reserve Bank of India, which limited losses for the Indian unit, dealers said. The central bank is likely to have sold the greenback at around 84.60 a dollar, they said. Dealers expect the RBI to continue intervening for the rest of the day, and keep the Indian unit in a tight range. 

For the rest of the day, the rupee is likely to move in a range of 84.55-84.70 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.65 a dollar.  (Pratiksha)

India Rupee: Expected range for rupee - Dec 2

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:

(Sourabh Kumar and Pratiksha)

End

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

Edited by Saji George Titus

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