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Informist, Wednesday, Dec. 11, 2024

By Sourabh Kumar

MUMBAI – The rupee ended steady against the dollar after the Reserve Bank of India likely sold dollars to offset the downward pressure from dollar purchases by banks on behalf of importers, including oil marketing companies, dealers said. 

"There was some good resistance today around 84.86 a dollar amid demand from importers," a dealer with a state-owned bank said. Importers purchased the greenback fearing a further fall in the rupee, dealers said. After moving in a range of six paise and hitting a record low of 84.8700 a dollar, the Indian currency settled at 84.8300 a dollar. On Tuesday, the rupee closed at 84.8525 a dollar.

In the morning, the rupee opened steady, with importers rushing in to purchase the greenback, on the view that the Indian unit would fall sharply going forward. With Revenue Secretary Sanjay Malhotra being appointed the governor of the RBI, market participants now anticipate the central bank to cut rates earlier than previously thought, which weighed on the rupee, dealers said. 

Recent comments by erstwhile RBI governor Shaktikanta Das had pushed back expectations of an early rate cut. However, with a new governor in place, there is a higher likelihood of an early rate cut, dealers said.

Amid rising crude oil prices, oil marketing companies stepped up their dollar purchases, which further weighed on the Indian currency, dealers said. Oil prices rose on expectation of improved demand after China's imports of crude oil rose 14.3% on year in November to 11.81 million barrels a day.

Earlier this week, China's Politburo announced plans to loosen monetary policy in another attempt to spur growth. The Politburo said it would adopt "appropriately loose" monetary policy in 2025. This also supported oil prices. At 1530 IST, the February Brent crude contract on the Intercontinental Exchange was at $72.86 per barrel, against its previous close of $72.19 per barrel and $72.12 per barrel on Monday.

The dollar index strengthened after the European markets opened, which further weighed on the rupee, dealers said. The index rose ahead of the release of the US November inflation figures, which are expected to show an uptick to 2.7% in November from 2.6% a month before, while core CPI is expected to remain steady at 3.3%, according to a poll by Dow Jones. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.80 at 1551 IST against Tuesday's 106.38 and 106.17 on Monday.

The Federal Open Market Committee will announce its rate decision on Dec. 18. Currently, traders have priced in an 86.1% probability, as against 72.9% a week ago, of the Fed lowering interest rates by 25 basis points. There is a 13.9% probability of the central bank maintaining the status quo, according to the CME FedWatch tool. 

Due to the pressure on the rupee, the RBI is likely to have sold dollars to prevent a sharp fall in the Indian currency, dealers said. However, it could not prevent the rupee from hitting another record low of 84.8700 a dollar, they said.

Some banks also sold dollars on behalf of overseas clients who wanted to invest in currently open initial public offerings, which supported the Indian currency. Foreign institutional investors bid 2.6 times the number of shares reserved for them in the IPO of Sai Life Sciences Ltd. 

FORWARDS

Premiums on the dollar/rupee forward contract were up across tenures Wednesday, as the Reserve Bank of India is likely to have delivered dollars against its outstanding forward dollar sales, dealers said. They said the cental bank had been rolling over their forward positions earlier.

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. Market participants were cautiously awaiting the release of the US inflation data for November, due after Indian market hours. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 186.15 paise, against 174.75 paise on Tuesday. On an annualised basis, the premium was at 2.18%, as against Tuesday's close of 2.06%.

OUTLOOK

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

Dealers expect the rupee to fall after a Reuters report on Wednesday said China was considering allowing the yuan to weaken in 2025 to brace for likely higher trade tariffs after Donald Trump takes charge as US president in January.

The central bank is expected to continue intervening through dollar sales to prevent the rupee from falling sharply, they said. They also expect importers to continue purchasing dollars on fears of a further depreciation in the rupee, which may put pressure on the Indian currency, dealers said. The rupee is seen in a range of 84.70-84.90 a dollar, with strong technical support pegged at 84.90 a dollar. 

India Rupee - World FX: Euro falls as ECB likely to cut rates by 25 bps Thu

MUMBAI – The euro was down 0.3% against the greenback ahead of a policy decision by the European Central Bank on Thursday. Market participants expect the ECB to cut rates by 25 bps.

The dollar index strengthened ahead of the release of the US November inflation figures, which are expected to show an uptick in the annual headline inflation to 2.7% from 2.6% in October, while core CPI is expected to remain steady at 3.3%, according to a poll by Dow Jones. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.80 at 1551 IST against Tuesday's 106.38 and 106.17 on Monday.

The US Federal Open Market Committee will announce its rate decision on Dec. 18. Currently, traders have priced in an 86.1% probability, as against 72.9% a week ago, of the FOMC lowering interest rates by 25 basis points. There is a 13.9% probability of the central bank maintaining the status quo, according to the CME FedWatch tool.

The Japanese yen, after having risen on Wednesday morning, was down 0.4% against the dollar, due to the strengthening dollar index. The Japanese currency carries a weightage of 13.6% in the dollar index. The yen rose early Wednesday before falling as data showed a stronger Producer Price Index, keeping the door open for the Bank of Japan to hike rates at its policy meeting next week. In November, Japan's Producer Price Index was up 0.3% on month, stronger than the analyst forecast of a 0.2% rise. The Bank of Japan will also announce its monetary policy decision on Dec. 18.

The pound sterling was down 0.4% against the dollar ahead of the Bank of England's rate decision. The BoE is scheduled to announce its rate decision on Dec. 19. It is expected to keep the benchmark rates steady at 4.75% as the headline inflation in the UK has risen slightly after falling below the central bank's 2% target.

The New Zealand dollar was down 0.5% against the greenback. However, losses in the commodity-linked currency were capped by an increase in oil prices. Crude oil prices were up on expectations of greater demand from China, which reported an increase in crude imports for the first time in seven months, as per Reuters. At 1559 IST, the February Brent Crude contract on the Intercontinental Exchange was at $72.92 per barrel, against its previous close of $72.19 on Tuesday. The Australian dollar was down 0.4% against the greenback.

The Canadian dollar was flat against the US currency ahead of the policy decision by the Bank of Canada due later in the day. The central bank is expected to deliver a jumbo cut of 50 basis points, bringing the benchmark rate to 3.25%.  (Gowri Lakshmi)

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

MUMBAI – The rupee remained steady against the dollar as some banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset the impact of importers' dollar purchases, dealers said. Some exporters also sold dollars which aided the local unit, while most exporters were in a "wait and watch" mode, they said.

"The rupee is just stuck in one level today (Wednesday). Market participants are largely now waiting for the US CPI data. They are also looking forward to the new RBI governor's press meeting in the evening," a dealer at a state-owned bank said. Sanjay Malhotra, who took charge as the 26th governor of the RBI earlier in the day, will hold his first press conference at 1500 IST. Market participants expect Malhotra to address key economic issues like inflation, labour market and economic growth. With a new governor in place, and his support for growth, market participants now anticipate the central bank to cut rates earlier than previously thought, dealers said. 

The rupee touched the record low of 84.8600 a dollar earlier in the day as importers, including oil marketing companies, rushed to purchase the greenback tracking a rise in crude oil prices and fearing further fall in the rupee. Oil prices edged higher on expectations of increased demand from China, the world's largest crude oil importer, after its central bank announced plans to loosen monetary policy in another attempt to spur growth.

At 1235 IST, the February Brent crude contract on the Intercontinental Exchange was at $72.74 per barrel, against its previous close of $72.19 per barrel and $72.12 per barrel on Monday. 

As the rupee came under pressure, some banks stepped in to sell dollars, likely on behalf of the RBI, which prevented the local unit from falling sharply and curbed excessive volatility in the market, dealers said. Some banks also sold the greenback on behalf of exporters, which provided further cushion to the local currency, they said. However, dealers said most exporters are waiting for the rupee to breach the 84.9000 a dollar level, where they see multiple stop-losses getting triggered. 

The dollar index was steady ahead of the release of the US CPI data, due after Indian market hours.  The data is expected to show a rise in annual headline inflation to 2.7% in November from 2.6% a month before, while core CPI is expected to remain steady at 3.3%, according to a poll by Dow Jones. The Federal Open Market Committee will announce its rate decision on Dec. 18. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.38, unchanged from Tuesday but higher than 106.17 on Monday. 

For the rest of the day, the rupee is likely to move in the range of 84.75-84.95 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.90 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Dec 11

MUMBAI – At 0900 IST, the rupee was at 84.8450 a dollar, against its previous close of 84.8525. At 1136 IST, the rupee was at 84.8400 per dollar. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar, Gowri Lakshmi and Pratiksha)

India Rupee: Touches record low on importers' dlr buys; RBI dlr sales support

MUMBAI – The rupee touched the record low of 84.86-a-dollar, hit on Tuesday, as banks purchased the greenback on behalf of importers, including oil marketing companies, dealers said. Consequently, the Reserve Bank of India intervened in the foreign exchange market via dollar sales to prevent the rupee from falling further, they added.

"The central bank is protecting this level, and they are allowing a very steady and slight fall (in the rupee) amid pressure from oilers, importers, and the new governor's (appointment) announcement," a dealer with a private bank said. Some exporters also sold dollars, taking advantage of relatively higher dollar/rupee levels, while most others waited for the rupee to fall more, dealers said. 

Importers purchased the US currency on fears that the rupee may hit another record low, dealers said. Oil marketing companies demanded dollars, noting the rise in crude prices. Oil prices inched up on expectations of increased demand from China, the world's largest crude oil importer, after its central bank announced plans to loosen monetary policy in another attempt to spur growth. It said it would adopt "appropriately loose" monetary policy in 2025.

Dealers said the Indian rupee may quickly touch 85.00 a dollar if it falls below 84.90 a dollar under pressure from importers and amid expectations of a rate cut in India after the new RBI governor takes charge Wednesday. With Revenue Secretary Sanjay Malhotra being appointed the new governor of the RBI, market participants now anticipate the central bank to cut rates earlier than previously thought, dealers said. 

Recent comments by erstwhile RBI governor Shaktikanta Das had pushed back expectations of an early rate cut. However, with a new governor in place, and his support for growth, there is a higher likelihood of an early rate cut, dealers said.

The dollar index was steady ahead of the release of the US CPI data, due after Indian market hours. The data is expected to show a rise in annual headline inflation to 2.7% in November from 2.6% a month before, while core CPI is expected to remain steady at 3.3%, according to a poll by Dow Jones. The Federal Open Market Committee will announce its rate decision on Dec. 18. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.35 against 106.38 on Tuesday and 106.17 on Monday. 

For the rest of the day, the rupee is likely to move in the range of 84.75-84.90 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.90 a dollar.  (Sourabh Kumar)

India Rupee - Asia FX: Mixed ahead of US CPI data; South Korean won up 0.1%

MUMBAI – Asian currencies traded mixed against the dollar Wednesday, ahead of the release of US inflation data later in the day. The key economic data is awaited for insight on the US Federal Open Market Committee's interest rate decision next week. The data is expected to show a rise in annual headline inflation to 2.7% in November from 2.6% a month before, while core CPI is expected to remain steady at 3.3%, according to a poll by Dow Jones. The Federal Open Market Committee will announce its rate decision on Dec. 18.

Currently, traders have priced in an 85.8% probability of the Fed lowering interest rates by 25 basis points next week, against 72.9% a week ago. There is a 14.2% probability of the central bank maintaining status quo, according to the CME FedWatch tool. At 0938 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 106.35, against its previous close of 106.38, and 106.17 on Monday.

The South Korean won was up 0.1% against the greenback due to gains in the domestic stock market. At 0858 IST, the benchmark index, KOSPI, was up 0.7%. However, gains in the currency were limited due to ongoing political instability. Meanwhile, on Tuesday, the Bank of Korea chief said it would be difficult for the won-dollar exchange rate to return to previous levels due to the domestic turmoil.

The Chinese yuan was flat against the dollar as investors reacted positively to the government's decision to shift its monetary stance to "appropriately loose" from next year. Market participants will now closely watch the annual economic work conference on Wednesday to outline economic policies and growth targets for next year, CNBC reported.

The Thai baht was up 0.1% owing to gains in the domestic stock market. At 0930 IST, the Thai Set Index was up 0.1%. 

The Malaysian ringgit was flat against the dollar. Data released on Tuesday showed that Malaysia's industrial output rose 2.1% on year in October, against the forecast of 2.5% in a Reuters poll.

The Philippine peso was down 0.4%, tracking a fall in the equity market. At 0937 IST, the benchmark index PSEiX was down 0.3%. The Taiwan dollar and Indonesian Rupiah were down 0.1% and 0.2%, respectively.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Dec 11

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:

(Pratiksha and Sourabh Kumar)

End

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

Edited by Saji George Titus

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