More Stories

Informist, Tuesday, Dec. 3, 2024

By Pratiksha

NEW DELHI – The rupee pared all its losses and settled largely steady against the dollar on Tuesday as the Reserve Bank of India heavily sold dollars, dealers said. "They (RBI) were very aggressive (in selling dollars) today (Tuesday). I think they (RBI) are going to keep 84.80 (a dollar) from breaking easily," said a dealer at a foreign bank.

The Indian unit was weighed down by dollar purchases by importers, weakness in the offshore Chinese yuan, and a strong dollar index, according to dealers. After hitting a record low of 84.7700 a dollar during the day, the rupee settled at 84.6850 a dollar on Tuesday, as against its previous close of 84.6950 a dollar. The unit moved in a range of 14 paise during the day.

The rupee started the day largely steady at 84.7100 a dollar, after trading around 84.78 a dollar in the offshore non-deliverable forwards market a few minutes before, as the central bank likely sold dollars in the offshore NDF market to prevent the rupee from falling sharply, dealers said.

Shortly after the market opened, banks rushed to buy dollars on behalf of importers in fear that the rupee may depreciate further going ahead, which weighed on the Indian unit, dealers said. So far this month, the rupee has fallen 0.2% against the dollar.

"There is, of course, some fear that the RBI may let it (the rupee) go from here. Earlier, it was not the case, but yesterday's (Monday) movement has led to more panic," said a dealer at a private bank. After falling 0.3% against the dollar, the rupee settled at a record closing low of 84.6950 a dollar on Monday.

However, banks stepped in to sell dollars on behalf of the RBI, which supported the Indian unit, according to dealers. The central bank likely sold the greenback at around 84.74 a dollar, they said.

The dollar index rose sharply on Monday after data showed a resilient US economy, with manufacturing activity improving in November. The Institute for Supply Management's manufacturing PMI increased to 48.4 last month from 46.5 in October. This weighed on the local currency, dealers said.

The dollar index also gained due to a slump in the euro during early Asian trade. The euro fell amid a likely collapse of the current government in France. Chances of a government collapse sparked fears that plans to curb the French budget deficit might stall.

At 1530 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.25 against 106.38 on Monday and 105.78 on Friday. The index rose to a high of 106.60 earlier in the day.

Further, the offshore Chinese yuan fell 0.2% against the dollar on growing risks of tariff imposition by US President-elect Donald Trump and weakness in China's economy. This also weighed on the Indian currency, according to dealers.

However, as soon as the Indian unit hit its lifetime low of 84.7700 a dollar, the RBI heavily sold dollars, following which the Indian currency erased all losses and touched the day's high of 84.6350 a dollar. Dealers said the central bank may have sold almost $2 billion in the domestic spot market.

"It was not the usual intervention today, they (RBI) were active throughout," said a dealer at a state-owned bank. "I think they are trying to not let it sustain below 84.70 (a dollar)." The Indian currency also received support from rise in domestic equities, according to dealers. The Nifty 50 and Sensex settled 0.8% and 0.7% higher, respectively.

FORWARDS

Premiums on the dollar/rupee forward contract ended lower across tenures, with the one-year contract settling at an over four-month low as the RBI likely sold dollars heavily for one- to three-month forward delivery, dealers said. The RBI's forward dollar sales were likely in a bid to neutralise its spot interventions and avoid draining rupee liquidity, dealers said.

Some dealers said the RBI is likely to have sold dollars for six-month forward delivery as well. Liquidity conditions had deteriorated considerably at the beginning of last month, primarily due to the central bank's active dollar sales intervention in the spot market. Though liquidity was in a surplus of INR 894.51 billion on Monday, it is expected to fall back into deficit in the coming days, dealers said. 

Forward premiums also fell due to a rise in US Treasury yields, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. Market participants now await the key monthly US jobs report, due on Friday, for further cues on the US Federal Reserve's rate cut cycle.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 168.88 paise, against 176.11 paise on Monday. On an annualised basis, the premium was at 1.99% against Monday's close of 2.08%.

OUTLOOK

On Wednesday, the rupee will take cues from movement of the dollar index and crude oil prices, dealers said. The RBI is expected to continue intervening through dollar sales to prevent the rupee from falling sharply and to avert excessive volatility, they said. 

"The Indian rupee is expected to remain at a level of 84.50 to 84.80 on Wednesday as the RBI makes attempts to protect the currency, though temporarily," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

Dealers expect importers to continue purchasing dollars in fear of a further depreciation in the rupee, which may pressure the Indian currency, dealers said. The rupee is seen in a range of 84.60-84.85 a dollar, with strong technical support pegged at 84.80 a dollar.

India Rupee - World FX: Euro recovers but mkt wary as French govt may topple

MUMBAI – The euro recovered slightly against the dollar, after having fallen over 0.6% on Monday. On Tuesday, it rose nearly 0.3%. Investors, however, were cautious due to the possibility of the collapse of the French government amid a row over the budget. Marine Le Pen, a National Rally lawmaker, gave Prime Minister Michel Barnier time till Monday to fulfil the far-right group's budget demands, failing which 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 Japanese yen was down 0.2% against the dollar. However, the currency was still better placed compared to where the yen was trading a week ago, as investors anticipated a rate hike by the Bank of Japan on Dec. 19.

The dollar index retreated in early European trade. The euro and the yen account for 57.6% and 13.6% of the dollar index, respectively. The index retreated ahead of the release of US labour data this week. Investors assessed the US manufacturing sector data released Monday. The US manufacturing purchasing managers' index stood at 48.4 in November, against a forecast of 47.5 and up from the previous month's figure of 46.5. A reading below 50 shows the sector in contraction, while a figure above it indicates expansion.

The pound sterling was up 0.3% as the UK Office of National Statistics revised the country's employment rate higher by 0.1%, weighing on chances of a rate cut by the Bank of England. An upward revision in the employment rate meant the overall employment in the country was about 313,000 higher than pre-COVID levels.

The Australian dollar and the Canadian dollar rose 0.4% and 0.3%, respectively, against the greenback. The Canadian currency got support from expansion in the manufacturing sector. The S&P Global Canada Manufacturing PMI rose to 52.0 in November, the highest since February 2023, and up from 51.1 the month before. It was also the third straight month above the 50.0 mark.  (Sourabh Kumar)

India Rupee: Premiums fall as RBI likely sells dollars for forward delivery

NEW DELHI – Premiums on the dollar/rupee forward contract fell across tenures, with the one-year contract falling to a four-month low, as the Reserve Bank of India likely sold dollars heavily for one- to three-month forward delivery, dealers said. The RBI's forward dollar sales are likely in a bid to neutralise its spot interventions and avoid draining rupee liquidity, dealers said.

Some dealers said the RBI is likely to have sold dollars for six-month forward delivery as well. "They (RBI) have been receiving pretty aggressively since yesterday (Monday)," said a dealer at a state-owned bank. "I think they are trying to support (rupee) liquidity."

Liquidity conditions had deteriorated considerably at the beginning of last month, primarily due to the central bank's active dollar sales intervention in the spot market. Though liquidity was in a surplus of INR 894.51 billion on Monday, it is expected to fall back into deficit in the coming days, dealers said. 

Forward premiums also fell due to a rise in US Treasury yields, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. Recent data showed the US manufacturing purchasing managers' index improved to 48.4 in November from the previous month's 46.5. A reading below 50 shows the sector in contraction. Market participants now await the key monthly US jobs report, due on Friday, for further cues on the US Federal Reserve's rate cut cycle.

At 1425 IST, the premium on the one-year exact-period dollar/rupee forward contract was 169.50 paise, against 176.11 paise on Monday. On an annualised basis, the premium was at 2.00% against Monday's close of 2.08%. Premium had fallen to 1.98% during the day, its lowest level since Aug. 5. (Pratiksha)

India Rupee: Recovers all losses on banks' dollar sales for RBI, FPIs

MUMBAI – The rupee recovered all its losses, and was trading steady after banks sold dollars, likely for the Reserve Bank of India, dealers said. Some dealers also cited foreign fund inflows as the reason for the rupee's rise. The rupee had, earlier in the day, hit a record low of 84.77 a dollar.

"The RBI has now started selling aggressively, after they were present with mild intervention in the morning," a dealer with a private bank said. The rupee was under pressure Tuesday due to the purchase of dollars by importers, who demanded the greenback, anticipating a further fall in the domestic currency, dealers said.

A strength in the dollar index also put pressure on the Indian currency, dealers said. The dollar index was strong after data showed slower contraction in the US manufacturing sector. The index, which measures the strength of the greenback against a basket of six major currencies, was 106.41 at 1325 IST against 106.38 on Monday and 105.78 on Friday.

Some dealers said the rupee gained as foreign banks sold dollars on behalf of their overseas clients looking to invest in Indian equities. Both the Nifty 50 and the BSE Sensex were up 0.6% at 1326 IST. 

Before continuous intervention in the spot market on Tuesday, the central bank had also sold dollars in the offshore non-deliverable forward market to support the rupee. Before opening at 84.71 a dollar, the rupee was trading around 84.78 a dollar in the offshore market.

Dealers expect importers to continue buying dollars, thus keeping the rupee under pressure. For the rest of the day, the rupee is likely to move in a range of 84.60-84.80 against the dollar. Dealers see strong immediate technical resistance for the Indian unit at 84.60 a dollar.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Dec 3

MUMBAI – At 0900 IST, the rupee was at 84.7100 a dollar, against its previous close of 84.6950. At 1044 IST, the rupee was at 84.7475 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:Hits record low on importers' dlr buys; RBI dlr sales limit fall

MUMBAI – The rupee hit a record low against the dollar as importers stepped up purchases of the greenback in anticipation of further fall in the rupee, dealers said. The Reserve Bank of India is likely to have sold dollars, limiting losses in the Indian unit, dealers said. 

"The central bank is present, but the demand is too much right now," a dealer with a private bank said. "I think it (rupee) may go towards 80 level (84.80 a dollar), but the fall may be capped due to RBI."

Importers demanded dollars, anticipating that the rupee may further fall after already falling 20 paise on Monday, dealers said. The dollar index strengthened after data showed slower contraction in the US manufacturing sector. The US manufacturing PMI stood at 48.4 in November, against a forecast of 47.5 and up from the previous month's figure of 46.5. A reading below 50 shows the sector in contraction, while a figure above it indicates expansion.

The dollar index also found strength from a fall in the euro, which was down on the possibility of a collapse of the French government. The index, which measures the strength of the greenback against a basket of six major currencies, was 106.50 at 0927 IST against 106.38 on Monday and 105.78 on Friday.

With the pressure on the rupee, dealers said the RBI sold the greenback to prevent the Indian unit from falling sharply. Before the intervention in the spot market, dealers said the central bank sold dollars in the offshore non-deliverable forward market to support the rupee. Before opening in the spot market, the rupee was trading around 84.78 a dollar in the offshore market.

Even with such a fall in the rupee, most exporters did not sell dollars, dealers said. In the past one week itself, the rupee has fallen by over 30 paise. "I think they (exporters) have become greedy now," a dealer with a foreign bank said. "Some did sell yesterday (Monday) but a lot of them are just waiting for better levels. They think it is going to fall further, and that is when they will sell (dollars)."

For the rest of the day, the rupee is likely to move in a range of 84.60-84.80 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.80 a dollar.  (Sourabh Kumar)

India Rupee - Asia FX: Most fall on strong dollar index; South Korean won up

MUMBAI – Most Asian currencies fell against the US dollar due to strength in the dollar index after data, released Monday, showed that the US manufacturing sector contracted at a slower pace. The index also received support from a falling euro, which was weak due to political uncertainty in France amid the likely collapse of the current government. The possibility of the government's 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 does not, the National Rally would back a no-confidence motion, it said.

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 106.55 at 0808 IST, against 106.38 on Monday and 105.78 on Friday. The US manufacturing PMI rose to 48.4 in November, against a forecast of 47.5 and up from the previous month's figure of 46.5. While it rose, the sector remained in contraction. A reading below 50 shows the sector in contraction, while a figure above it indicates expansion.

Asian currencies also came under pressure due to a falling Chinese yuan. It was down about 0.3% against the dollar in early trade Tuesday. The Malaysian ringgit fell 0.3% against the greenback. The Thai baht and Taiwan dollar were also down 0.1% each against the US unit. 

The Indonesian rupiah was down 0.3% against the US currency after a fall in inflation spurred talks of rate cuts by Bank Indonesia. Data showed that while the headline inflation was at 1.55% on year in November, slightly higher than the forecast of 1.50%, it fell from the previous month's reading of 1.71%. The country's central bank is expected to announce a rate decision on Dec. 18.

The South Korean won, however, rose 0.2% against the US dollar on expectations of a pause in rate cuts by the Bank of Korea in January, as the market expects inflation in December to rise further. The latest data showed that the consumer price index in the country rose 1.5% on year last month, up from 1.3%, but below the market expectation of a 1.7% rise. 

The Philippines peso was steady against the US dollar, as a rise in the domestic stock market offset the impact of a strong dollar index. The southeast Asian currency was under pressure after the Philippines reduced its growth forecast for 2024. It reduced its growth target to 6.0-6.5% from 7.0% earlier.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Dec 3

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:

(Sourbah Kumar and Pratiksha)

End

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

Edited by Ashish Shirke

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 (11) 4220-1000

Send comments to feedback@informistmedia.com

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