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Informist, Thursday, Dec. 5, 2024

By Pratiksha

NEW DELHI – The rupee settled largely steady as the Reserve Bank of India's continuous dollar sales neutralised the impact of dollar purchases on behalf of importers, dealers said. The Indian unit was also supported by dollar sales on behalf of foreign portfolio investors, they said. 

"They (RBI) were pretty much active throughout the day, so there was no movement (in the rupee) as such," said a dealer at a private bank. "But its (rupee's) direction is only looking down from here."

After trading in a tight range of 5 paise during the day, the Indian currency settled at 84.7325 a dollar on Thursday, just shy of its record closing low of 84.7400 a dollar on Wednesday. Other Asian currencies gained 0.1-0.6% against the greenback due to a decline in the dollar index. The Indian rupee was the worst performer among its Asian peers after the South Korean won, which fell 0.3% against the US unit.

The rupee began the day broadly unchanged at 84.7225 a dollar. However, it came under pressure shortly afterwards as banks rushed to purchase dollars in fear that the Indian currency may depreciate in the coming days, which exerted pressure on the Indian unit, dealers said. The rupee hit a lifetime low of 84.7700 a dollar on Tuesday. The Indian currency has depreciated 0.3% against the dollar so far in December. 

However, some state-owned banks stepped in to sell the greenback, likely on behalf of the central bank, which prevented losses in the Indian unit, dealers said. The RBI likely sold dollars consistently around 84.73 a dollar, according to dealers. "The protection (of the rupee by the RBI) was on throughout the day, it is visible in the narrow range," said a dealer at a brokerage firm.

Further, some banks also sold the greenback on behalf of foreign portfolio investors, looking to invest in domestic equities, which also aided the Indian unit, dealers said. On Thursday, both the Nifty 50 and Sensex ended 1% higher. So far this month, FPIs have net infused $2.19 billion into domestic markets.  

Meanwhile, traders exercised caution ahead of the outcome of the RBI's Monetary Policy Committee meeting on Friday. The rate-setting panel is expected to keep the policy repo rate at 6.50% for the 11th meeting in a row, according to an Informist poll.

"While we do not expect a rate cut, a reduction in the Cash Reserve Ratio seems likely. This adjustment could offer some support to the rupee in the near term. We anticipate the USD/INR (dollar/rupee) pair to trade within the 84.80 to 85.00 range through December," said Jigar Trivedi, senior analyst – currencies and commodities at Reliance Securities, in a note.

Most dealers said that in case of a rate cut by the RBI's MPC on Friday, the rupee may fall sharply against the dollar. "Most people are not expecting a rate cut even after that GDP number. You can't decide on one print," said a dealer at a state-owned bank. "But if it happens, I think it would be drastic for rupee."

Market participants also remained cautious ahead of Friday's US non-farm payrolls report for November, which is expected to show the US economy added 200,000 jobs in the month, according to a Reuters survey, after only 12,000 jobs were created in October, the lowest number since December 2020.

The dollar index fell on Thursday after weak US economic data cemented hopes of a rate cut by the US Federal Reserve at its December meeting. This aided the Indian unit. The Institute for Supply Management said its non-manufacturing purchasing managers' index fell to 52.1 in November from 56.0 a month ago. It was also lower than the 55.5 forecast by economists in a Reuters poll. A reading above 50 indicates expansion in the sector, while a figure below it shows contraction.

Traders currently price in a 74.0% probability of the US Fed cutting rates by 25 basis points this month and a 26% chance of the central bank maintaining the status quo, according to the latest CME FedWatch Tool.

Most exporters remained on the sidelines and avoided letting go of their dollar holdings around the current dollar/rupee levels in expectation of further depreciation in the Indian unit in the coming days, dealers said. 

FORWARDS

The premium on the one-year dollar/rupee forward contract settled at its lowest level in over four months as the Reserve Bank of India likely sold dollars for forward delivery, dealers said. The RBI's forward dollar sales were likely to nullify its spot interventions and avoid pushing out rupee liquidity, they said. 

The RBI is likely to have conducted buy-sell swaps in the forwards market, maturing in January and February, dealers said. They are also likely to have conducted buy-sell swaps in the forwards market, maturing in October, some dealers said. However, the RBI's forward dollar sales were less aggressive in nature than in the past two days, according to dealers.

The 10-year US Treasury yield fell by 4 basis points on Wednesday, which supported forward premiums, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. Since the forward premium on the one-year dollar/rupee contract has fallen more than 25 bps so far this week, a few banks purchased dollars for forward delivery, which supported premiums. 

Market participants now await the result of the RBI's Monetary Policy Committee meeting outcome on Friday. At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 166.80 paise, against 168.50 paise on Wednesday. On an annualised basis, the premium was at 1.97%, against Wednesday's close of 1.98%. 

OUTLOOK

On Friday, the rupee is likely to open steady against the dollar as traders may exercise caution ahead of the outcome of the RBI's MPC on Friday. They also await the key monthly US jobs report, due on Friday, for further cues on the Fed's rate cut cycle.

The rupee will take cues from movement in 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. 

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

India Rupee - World FX: Euro recovers after French govt debacle; yen falls

MUMBAI – The euro recovered and was up 0.1% against the dollar as traders digested news of the collapse of the French government, which has plunged the economy into a crisis by restricting its ability to control the growing fiscal deficit.

Far-right and left-wing legislators supported a no-confidence vote against Michael Barnier, alleging that his government's budget was "defective and detrimental" to the French public. The proposed budget suggested €60 billion in tax hikes and expenditure reductions intended to tackle France's growing deficit, according to Firstpost. Before the no-confidence vote, Barnier told lawmakers, "This reality will not disappear by the magic of a motion of censure." He added that the the budget deficit would come back to haunt whichever government comes next.

The yen was down 0.2% against the dollar after Bank of Japan board member Toyoaki Nakamura said on Thursday that the central bank's decision should be based on data. "I am not against rate hikes but feel the decision should be data-dependent," Nakamura said.  

The dollar index eased Thursday on the back of weak economic data from the US, cementing hopes of a rate cut at the US Federal Reserve's December meeting. The Institute for Supply Management said its non-manufacturing purchasing managers' index fell to 52.1 in November from 56.0 a month ago. It was also lower than the 55.5 forecast by economists in a Reuters poll. A reading above 50 indicates expansion in the sector, while a figure below it shows contraction.

Data also showed that private payrolls in the US last month rose by 146,000, below Dow Jones' forecast of 163,000, and October's 184,000. For the upcoming meeting of the US Federal Open Market Committee this month, the odds of a 25-basis-point rate cut were at 77%, with the remaining chances being that of status quo. San Francisco Fed President Mary Daly said Wednesday that the US central bank did not need to be urgent on rate cuts, adding that the Fed had more work ahead to achieve 2% inflation and lasting growth.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.21 at 1537 IST, against 106.36 on Wednesday and 106.34 on Tuesday. (Kabir Sharma)

India Rupee:Premium steady as RBI's likely fwd dlr sales offset US ylds fall

MUMBAI – The premium on the one-year dollar/rupee forward contract was steady Thursday as the Reserve Bank of India likely sold dollars for forward delivery, which offset the support received from a fall in the benchmark 10-year US Treasury yield, dealers said.

"Today also, there is some receiving by the central bank," a dealer with a private bank said. The RBI's forward dollar sales were likely to nullify its spot interventions and avoid pushing out rupee liquidity, they said. 

The RBI is likely to have conducted buy-sell swaps in the forwards market, maturing in January and February, dealers said. They are also likely to have conducted buy-sell swaps in the forwards market, maturing in October, some dealers said. However, the RBI's forward dollar sales were less aggressive in nature than in the past two days, according to dealers.

The 10-year US Treasury yield fell 4 basis points on Wednesday, which pushed forward premiums higher, dealers said. The yield fell after fresh data showed that the US economy might be experiencing slower growth. Data released Wednesday showed that the services sector in the US expanded at a slower pace. Further, private payrolls in the US last month rose 146,000, below Dow Jones' forecast of 163,000 additions in jobs, and October's figure of 184,000. 

Market participants awaited the result of the RBI's Monetary Policy Committee meeting outcome on Friday, and then employment data from the US, later in the day after Indian market hours. "Tomorrow's (Friday's) MPC is a major event this time, and if there is a surprise 25 bps cut, we may see one-year forward premium falling below 1.90% (on an annualised basis)," a dealer with a state-owned bank said. 

Since the forward premium on the one-year dollar/rupee contract has fallen more than 25 bps so far this week, a few banks purchased dollars for forward delivery, which supported premiums. "Some paying has happened on dips, but a lot of people are waiting for the next set of events— MPC and US data on Friday," the dealer with the state-owned bank said. 

Dealers said the one-year forward premium is expected to remain low due to increased chances of an early rate cut in India after the Jul-Sept GDP growth was way below expectations. At 1359 IST, the premium on the one-year exact-period dollar/rupee forward contract was 167.30 paise, against 168.50 paise on Wednesday. On an annualised basis, the premium was at 1.98%, similar to Wednesday's close.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Dec 5

MUMBAI – At 0900 IST, the rupee was at 84.7225 a dollar, against its previous close of 84.7400. At 1050 IST, the rupee was at 84.7275 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:Steady as bks' dollar sales for exporters offset importers' buys

MUMBAI – The rupee was steady against the dollar as dollar sales by a few banks for exporters offset purchases of the greenback by importers, dealers said. The domestic currency received support as most of its Asian peers were up in early trade Thursday.

"Right now, it is quite steady," a dealer with a private bank said. "Some selling was seen, but again importers were also present." A few dealers said the rupee might fall to a record low later during the day. The domestic currency had hit a record low of 84.77 a dollar on Tuesday.

Importers purchased the greenback, anticipating a fall in the rupee, dealers said. On the other hand, some exporters sold, noting relatively higher dollar/rupee levels. Most exporters, however, waited for the Indian currency to fall further before placing large bets, dealers said. 

The dollar index was steady, as investors waited for the release of more economic data from the US. Weekly unemployment claims data is due later in the day, after Indian market hours, with the US November employment report due on Friday. Data released Wednesday showed that the services sector in the US expanded at a slower pace. Further, private payrolls in the US last month rose 146,000, below the Dow Jones' forecast of 163,000 additions in jobs, and October's 184,000. 

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 106.27 at 0929 IST, against 106.36 on Wednesday and 106.34 on Tuesday. 

Dealers said the dollar/rupee is expected to remain largely steady on Thursday. Market participants await the Reserve Bank of India's Monetary Policy Committee meeting's outcome on Friday. With the latest GDP data showing a sharp fall in India's economic growth in Jul-Sept, a few market participants expect some steps from the RBI to support growth. However, currently the market consensus is that the central bank will keep rates steady.  

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 up; South Korean won dn on political uncertainty

MUMBAI – Most Asian currencies were up against the dollar, except for the South Korean won, which was down 0.1% due to political upheaval in the country. South Korean President Yoon Suk Yeol faced an impeachment vote after he imposed martial law in the country late Tuesday. He reversed the order hours later. 

The dollar index was largely steady as investors appeared to be not paying much attention to the latest set of US economic data, released Wednesday. The data showed that the US services sector expanded at a slower pace. The Institute for Supply Management said its non-manufacturing purchasing managers' index fell to 52.1 in November from 56.0 a month ago. It was also lower than the 55.5 level that economists had forecast in a Reuters poll. A reading above 50 indicates expansion in the sector, while a figure below it shows contraction.

Further, private payrolls in the US rose 146,000 in November, below a Dow Jones forecast of 163,000 additions in jobs. The number was also lower than the 184,000 additions in October. Investors now await the release of the US employment report, due Friday, and unemployment claims, due Thursday, to assess the rate trajectory in the US. At this month's meeting of the US Federal Open Market Committee, the odds of a 25-basis-point rate cut are seen at 74%, with the rest for a status quo. 

The Taiwan dollar was up 0.2% against the dollar. The Taiwanese currency got support from a rise in domestic equity indices. The Taiwan Stock Exchange Capitalization Weighted Stock Index was up 0.4% in early trade Thursday. 

The Thai baht and the Philippines peso rose 0.1% each against the US dollar. The Philippines currency got support from a rise in inflation, which was up 2.5% in November, against the 2.3% rise in October. Economists had forecast it to rise 2.4% in a Wall Street Journal survey. The country's central bank has cut rates twice this year and is expected to announce the next rate decision on Dec. 19.

The Indonesian rupiah was up 0.2% against the greenback. Indonesia's central bank said this week that it was ready to intervene in the foreign exchange market to prevent the rupiah from hitting the psychologically important level of 16,000 a dollar. In early trade Thursday, the Indonesian currency traded at 15,909 a dollar. The Malaysian ringgit rose 0.5% against the greenback.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Dec 5

MUMBAI – Following are the expected support and resistance levels for the rupee on Thursday, 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 Akul Nishant Akhoury

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