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Informist, Thursday, Dec. 12, 2024

By Gowri Lakshmi 

MUMBAI – The rupee ended at a record closing low against the dollar Thursday as importers continuously purchased the greenback, in fear of a further fall in the rupee in the near term, dealers said. This was despite the Reserve Bank of India's persistent intervention through dollar sales during the day, they said.

"Though it (rupee) hit a record low, the market did not move much and wasn't as volatile. People are most probably waiting for the (India) inflation data," a dealer at a private bank said.

After hitting a lifetime low of 84.8800 a dollar during the day, the rupee ended at a record closing low of 84.8575 on Thursday. During the day, the rupee moved in a tight range of just 4 paise.

The rupee opened broadly steady at 84.8425 a dollar as the dollar index remained largely steady after the US inflation data, released on Wednesday, was along expected lines. US inflation rose 0.3% on-month in November after advancing 0.2% for four straight months. On a yearly basis, US CPI rose 2.7% in November, up from October's 2.6% rise.

The dollar index remained steady even after market participants increased bets of the US Federal Reserve cutting interest rates next week following the economic data. Traders now price in a 98.6% probability of the Fed lowering interest rates by a quarter percentage point at its policy announcement on Dec. 18. Before the data, traders were seeing an 84.9% chance of a rate cut. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 106.52, compared to 106.62 on Wednesday and 106.38 on Tuesday.

However, the rupee came under pressure as banks purchased dollars immediately after the market opened in order to take advantage of the arbitrage opportunity with the non-deliverable forwards rates, dealers said. Some banks rushed to buy dollars on behalf of oil importers, following which pushed the local unit to a lifetime low of 84.8800 a dollar, dealers said. Oil marketing companies rushed to purchase the greenback, noting a rise in crude oil prices, they said.

Crude oil prices edged higher after the European Union agreed to additional sanctions on Russian oil flows, potentially disrupting the global supply chain. At 1530 IST, the February Brent crude contract on the Intercontinental Exchange was $73.56 per barrel, against $73.52 per barrel on Wednesday and $72.19 per barrel on Tuesday. During the day, crude prices rose to a high of $74.00 per barrel.

However, as soon as the rupee hit a record low, state-owned banks stepped in with dollar sales, likely on behalf of the Reserve Bank of India, which prevented the rupee from falling sharply, and curbed excessive market volatility, dealers said. "There was heavy intervention from the RBI today. They (RBI) are in no way letting the rupee depreciate to 85.00 a dollar anytime soon. At least not this month. They will continue their (dollar) sales aggressively," a dealer at a private bank said.

Some banks also sold the greenback for exporters, who wanted to make the most of the relatively higher dollar/rupee levels, which also aided the domestic unit, dealers said. "We can see exporters have become active since the last two days. Whenever it is closing near to an 84.85 level, they will try to hedge," another dealer at a private bank said.

However, some exporters were on the sidelines on the expectation that the Indian currency may fall further in the coming days, they said.

FORWARDS

The premium on the one-year dollar/rupee forward contract erased all earlier gains and settled slightly lower as the RBI likely sold dollars for forward delivery in January and March, dealers said. "They (RBI) have been receiving actively across the shorter tenures," said a dealer at a private bank. "But I don't think it's very aggressive."

The RBI has been selling dollars for forward delivery since last week, likely to nullify its spot interventions and avoid pushing out rupee liquidity, dealers said. The central bank has been intervening in the spot market by way of dollar sales to prevent the rupee from a sharp fall.

Earlier in the day, the forward premiums had risen across tenures, with one-year dollar/rupee forward premium hitting over a month-high as some banks purchased dollars for forward delivery in order to take advantage of the arbitrage opportunity between the dollar/rupee onshore forward and offshore NDF levels, dealers said. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 183.66 paise, against 186.15 paise Wednesday. On an annualised basis, the premium was 2.16%, against Wednesday's close of 2.18%.

OUTLOOK

On Friday, the rupee will take cues from the movement of the dollar index after the weekly jobless claims data and producer price index are detailed later in the day. The economic data will give market participants more cues on the rate cut cycle of the Fed. 

The local unit will also take cues from movement in crude oil prices and the offshore Chinese yuan, they said.  "If you see a trend, for the past 1 year or 6 months, the rupee has reacted to any movements amongst its Asian peers. If the Chinese yuan is going to fall, then we can see the rupee hitting 85.00 a dollar, sooner than we expected earlier," a dealer at a private bank said. "But it is unlikely that the rupee will break the psychologically crucial level (of 85.00 a dollar) soon since its already December 12 and holidays are around, the trade volumes are going to be lacklustre," he added.

Market participants also await the monetary policy decision by the European central bank later in the day. Analysts widely expect the central bank to lower interest rates by a quarter percentage point, taking the benchmark rate to 3.0%.

The rupee may come under pressure as traders may ramp up bets of an interest rate cut by the RBI's Monetary Policy Committee at its February policy meeting after India's November CPI inflation came in softer than expected on Thursday. "It was unexpected; we were seeing the (inflation) print to come higher. We cannot strongly say if they (RBI) will go for a rate cut immediately, but it is now more likely. We have got a few more days to see how the new governor and his stance is," a dealer at a private bank said. India's CPI inflation moderated to 5.48% in the previous month, from a 14-month high of 6.21% in October. According to an Informist poll, the headline inflation was seen at 5.6% in November.

Dealers expect importers to continue purchasing dollars in fear of a further depreciation in the rupee going ahead, which may put pressure on the Indian currency, dealers said. The central bank is expected to continue intervening through dollar sales to prevent the rupee from falling sharply, they said.

The rupee is seen in a range of 84.80-85.00 a dollar, with strong immediate technical support pegged at 84.90 a dollar. If the Indian currency breaks the 84.90 a dollar level, it may fall beyond the psychologically crucial level of 85-per-dollar, according to dealers. 

India Rupee - World FX: Australian dollar jumps 0.7% on strong jobs data

MUMBAI – The Australian dollar surged 0.7% against the greenback after data released on Thursday showed that the country's labour market remained surprisingly resilient in November. The Australian economy added 35,600 jobs last month, against the analyst estimates of 26,000. Additionally, the unemployment rate dropped from 4.1% to an eight-month low of 3.9%. The strong jobs data pushed back the expectations of an interest rate cut by the Reserve Bank of Australia at its February meeting.

The New Zealand dollar was up 0.4% against the US currency, tracking gains in crude oil prices. The commodity-linked currency gained as oil prices rose over $1 on Wednesday after the European Union agreed on additional sanctions on Russian oil flows, potentially disrupting the global supply chain. At 1015 IST, the February Brent Crude contract on the Intercontinental Exchange was $73.80 per barrel, against its previous close of $73.52 and $72.19 per barrel on Tuesday. February Brent Crude prices rose as high as $74.00 per barrel during the day.

However, gains in both currencies of Australia and New Zealand were capped after reports said that the Chinese authorities were planning to allow the yuan to depreciate next year to tackle tariff threats from President-elect Donald Trump's new administration. Decisions impacting the Chinese economy directly influence the currencies of Australia and New Zealand due to their close bi-lateral trade with China. 

The euro was up 0.1% against the dollar ahead of the monetary policy decision by the European Central bank due later in the day. Market participants expect the central bank to lower interest rate by a quarter percentage point, bringing the benchmark rate to 3.0%. 

The dollar index remained largely unchanged after the release of the US consumer price index on Wednesday. US inflation rose 0.3% on month in November, in line with analysts' estimates. On a yearly basis, US CPI rose 2.7% in November, up from October's 2.6% rise. After the data, expectations of a 25-basis-point rate cut by the US Federal Open Market Committee on Dec. 18 was 98.5%, according to the CME FedWatch tool.

At 1607 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 106.55, compared with 106.62 on Wednesday and 106.38 on Tuesday. 

The Canadian dollar was up 0.2% against the US currency. However, gains in the currency were limited as the Bank of Canada slashed its interest rates by a jumbo 50 bps, to 3.25% on Wednesday. Speaking to the media, Bank of Canada Chief Tiff Macklem warned for the first time a possibility of imposition of higher tariffs by the Trump administration on Canada and said it projected "a major new uncertainty".

The Swiss franc was down 0.4% against the dollar after Swiss National Bank lowered its interest rate by 50 bps on Thursday, for the first time in over a decade. "Underlying inflationary pressure has decreased again this quarter. The SNB's easing of monetary policy today takes this development into account," the central bank said.
 

The Japanese yen was up 0.1% despite analysts pushing back the possibility of an interest rate hike by the Bank of Japan at its December policy meeting. The Bank of Japan will announce its policy decision on Dec. 19. However, reports suggest a surprise shift in monetary policy decision by the US Fed, such as holding rates steady, will likely prompt the Bank of Japan to act accordingly to tackle a potential yen depreciation. (Gowri Lakshmi)

India Rupee: Stays steady as RBI intervention offsets importer dollar buys

India Rupee: Stays steady as RBI intervention offsets importer dollar buys

MUMBAI – The rupee remained largely steady against the dollar as some banks sold the greenback, likely on behalf of the Reserve Bank of India and exporters, which offset the impact of dollar purchases by banks for importers, dealers said. "The stability (in rupee) is purely because nats (nationalised banks) are selling (dollars), other than that not much movement," a dealer at a private bank said. The rupee has moved only 4 paise so far during the day. 

The rupee fell to a record low of 84.8800 earlier in the day due to dollar demand from importers, including oil marketing companies, on expectation that the Indian unit may depreciate further in the near term. The rupee has depreciated 0.5% against the dollar so far this month. 

As the rupee hovered near its lifetime low, some public-sector banks stepped in with dollar sales, likely on behalf of the RBI to prevent the rupee from falling sharply, and to curb excessive volatility in the market, dealers said. Some banks also sold the greenback on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, which gave some cushion to the domestic currency, dealers said.

Some exporters sold the greenback as they feared the rupee may appreciate slightly in the upcoming weeks on the back of foreign fund inflows, they said. However, some exporters are still on the sidelines as they expect the rupee to fall further in the coming days, they said. 

Dealers expect the central bank to keep up with its intervention through dollar sales in the domestic spot market to prevent the Indian currency from breaching the psychologically-crucial level of 85 per dollar. 

Market participants now await the release of the India CPI data, later in the day, for more cues on the RBI's rate cut cycle. India's headline retail inflation rate likely moderated to 5.6% in November from October's 14-month high of 6.21%, according to an Informist poll. 

For the rest of the day, the rupee is likely to move in the range of 84.70-84.90 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.90 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Mixed as mkts assess US Fed rate outlook post US CPI

MUMBAI – Asian currencies moved on a mixed note against the dollar as market participants assessed the US Federal Reserve's rate cut cycle after the release of the US inflation print on Wednesday. US inflation rose 0.3% on month in November after advancing 0.2% for four straight months. On a yearly basis, US CPI rose 2.7% in November, up from October's 2.6% rise. The rise in the CPI was in line with expectations.

Traders have now priced in a 98.5% probability of the US Fed lowering its interest rate by a quarter percentage point at its policy announcement on Dec. 18. Before the data, traders were seeing an 84.9% chance of a rate cut next week. However, investors are still uncertain about the Fed's interest rate trajectory post December meeting. 

The dollar index was largely unchanged after the US inflation print came in line with expectations. At 1109 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 106.54, compared to 106.62 on Wednesday and 106.38 on Tuesday. 

The South Korean won was down 0.2% against the dollar as political instability continues to loom large over the country. The Bank of Korea on Wednesday, stepped up to inject liquidity into their financial markets, and vowed "unlimited liquidity" amid escalating political turmoil, Bloomberg reported. Further, Deputy Prime Minister and Minister of Economy and Finance Choi Sang Mok assured the media on Tuesday that the government and the central bank were ready to manage market volatility. "We will closely monitor trends on the financial and foreign exchange markets and respond to excessive volatility," Choi said.

Reports suggest that South Korean police tried to search President Yoon Suk Yeol's office on Wednesday, which significantly escalated the investigation against Yoon and military officers. The turmoil began over a martial law declaration on Dec. 3.

The Indonesian rupiah was down 0.1% against the dollar. On Wednesday, Indonesia reported the budget deficit for January to November to be 1.81% or $25.27 billion of GDP. Finance minister Sri Mulyani Indrawati said that the total revenue for the months leading to November rose 1.3% annually, while spending rose 15.3%. The government has previously said the full-year 2024 budget deficit was seen at 2.7% of GDP, according to reports.

The Philippines peso was up 0.1% against the greenback, while the Malaysian ringgit was down 0.1%. The Thai baht and Taiwan dollar were up 0.1% and 0.3% against the greenback, respectively, tracking gains in domestic equities. At 1110 IST, the benchmark Thai Set Index was up 0.4%, while the Taiwan benchmark index Taiex was up 0.6%. 

The Chinese yuan traded flat against the dollar despite reports suggesting that the government authorities were planning to allow the Chinese currency to depreciate next year to tackle the higher tariff threats from US President-elect Donald Trump's new administration. Following this, multiple regional peer currencies dropped, including the New Zealand dollar and Australian dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Dec 12

MUMBAI – At 0900 IST, the rupee was at 84.8425 a dollar, against its previous close of 84.8300. At 1125 IST, the rupee was at 84.8650 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: At record low on importers' dlr buys; RBI's dlr sales limit fall

India Rupee: At record low on importers' dlr buys; RBI's dlr sales limit fall

MUMBAI – The rupee hit a lifetime low of 84.8800 a dollar as importers persistently purchased dollars, wary of a further fall in the Indian unit, dealers said. However, some public-sector banks sold the greenback, likely on behalf of the Reserve Bank of India, which prevented the local unit from depreciating sharply and curbed excessive volatility, they said. "Even if there is buying (of dollars) pressure, the rupee will likely be held below 84.90 (a dollar) by the RBI," a dealer at a state-owned bank said.

Oil marketing companies also rushed to purchase the greenback, noting a rise in crude prices, which also exerted pressure on the Indian unit, dealers said. Oil prices edged 1% higher on Wednesday after the European Union agreed on additional sanctions on Russian oil flows, potentially disrupting the global supply chain. At 1015 IST, the February Brent crude contract on the Intercontinental Exchange was $73.57 per barrel, against its previous close of $73.52 and $72.19 per barrel on Tuesday. February Brent crude prices rose as high as $73.69 per barrel in early trade.

Meanwhile, data on Wednesday showed that US inflation rose 0.3% on-month in November after advancing 0.2% for four straight months. On an yearly basis, US CPI rose 2.7% in November, up from October's 2.6% rise. The rise in the CPI was in line with expectations.

The dollar index remained steady even after market participants ramped up bets of the US Federal Reserve cutting interest rates next week. Following the US inflation data, traders priced in a 98.5% probability of the Fed lowering interest rates by a quarter percentage point at its policy announcement on Dec. 18. Before the data, traders were seeing an 84.9% chance of a rate cut. At 1015 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 106.53, compared to 106.62 on Wednesday and 106.38 on Tuesday. 

Market participants now await the release of the India CPI data, later in the day, for more cues on the RBI's rate cut cycle. India's headline retail inflation rate likely moderated to 5.6% in November from October's 14-month high of 6.21%, according to an Informist poll. 

Dealers expect the central bank to keep up with its intervention through dollar sales in the domestic spot market to prevent the Indian currency from testing the psychologically-crucial level of 85 per dollar. 

For the rest of the day, the rupee is likely to move in the range of 84.70-84.90 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.90 a dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Dec 12

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 Ashish Shirke

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