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Informist, Tuesday, Dec. 17, 2024

By Sourabh Kumar

MUMBAI – The rupee ended at a record closing low on Tuesday after coming under downward pressure as India's trade deficit in November hit an all-time high of $37.84 billion, dealers said. However, the fall in the Indian currency was limited due to the Reserve Bank of India's intervention in the foreign exchange market by selling dollars, dealers added.

India's trade deficit jumped in November, primarily on account of a spike in gold imports. India's gold imports in November rose more than four times on year to $14.86 billion.  

"There was not much movement today, largely the upside movement was due to trade deficit data, and then the central bank was present," a dealer with a private bank said.

The rupee, which hit an all-time low of 84.9300 a dollar during the day, settled at a record closing low of 84.8950 a dollar. The rupee had ended at 84.8625 a dollar on Monday. In the morning, the rupee had opened slightly down against the dollar, largely because of the trade deficit numbers in November.

After opening, the rupee fell against the dollar, coming under pressure from banks' dollar purchases on behalf of importers, dealers said. Dollar purchases by importers, coupled with an all-time high trade deficit, weighed on the rupee so much that it hit a lifetime low of 84.9300 a dollar. 

And as in the recent past, the RBI intervened in the market via dollar sales, dealers said. "Now, everyone knows, the rupee is soon going to cross 85 a dollar, even if the RBI keeps intervening," a dealer with a foreign bank said. Therefore, most of the exporters did not sell dollars in large quantities, and preferred to wait, dealers said.

Some exporters, however, did sell dollars, which supported the rupee, dealers said. Coupled with foreign fund inflows, mainly for initial public offerings, it eased some pressure on the rupee, dealers said.

A few banks sold dollars, albeit in small amounts, for overseas investments in the currently open IPOs. Most of such inflows had come in last week and on Monday, they said. Currently, the IPO of International Gemmological Institute (India) Ltd. is open for subscription. As per data on the BSE website as of 1609 IST, bids from foreign institutional investors at 654.22 million shares, constituted slightly less than half the total number of bids received under the 'Qualified Institutional Buyers' category. In total, the number of shares bid in this category was 45.8 times the total shares reserved under the category. 

The overall trade volumes in the currency market were lower-than-usual on Tuesday, as market participants refrained from placing large bets ahead of the release of the US retail sales data, due later in the day, and the outcome of the US Federal Open Market Committee meeting on Thursday. Traders have priced in a 97.3% probability of the Fed lowering its rates by 25 basis points, according to CME FedWatch tool.

The dollar index was largely steady during the day ahead of the release of the economic data. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 107.02, compared with 106.86 on Monday and 106.95 on Friday.

FORWARDS

Premiums on dollar/rupee forward contracts ended up across tenures due to dollar inflows and liquidity deficit in the banking system, dealers said. Dollar inflows were on account of overseas investments in initial public offerings that are currently open, dealers said.

Liquidity in the banking system was in a deficit of INR 1.10 trillion on Monday, the highest since late June, mainly due to advance tax outflows, as per dealers. Advance tax outflows began on Friday, though the major chunk left the system on Monday, they said.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 188.31 paise, against 185.32 paise on Monday. On an annualised basis, the premium was at 2.22%, up from Monday's close of 2.18%.

OUTLOOK

On Wednesday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said. The rupee will also closely track movements in its Asian peers, especially the Chinese yuan, they said. 

"With the rupee near the figure (85 a dollar), I think importers will keep buying dollars, and that is going to keep the rupee under pressure," a dealer with a foreign bank said. Dealers said they also expect exporters to sell the greenback to take advantage of the relatively higher dollar/rupee levels. They said the central bank could intervene through dollar sales if the rupee falls near 85 a dollar. The rupee is seen in a range of 84.75-85.00 a dollar, with strong technical support pegged at 85.00 a dollar.

India Rupee - World FX: Euro dn; ECB policymaker's remark hints at rate cuts

MUMBAI – The euro was down 0.2% against the US dollar after Finnish European Central Bank policymaker Olli Reh said on Tuesday that inflation in the eurozone was clearly stabilising near its 2% target, which could pave the way for more rate cuts in the eurozone.

The dollar index recovered ahead of the release of the US retail sales data for November. The index, which measures the strength of the greenback against a basket of six major currencies, was 107.04 at 1521 IST against 106.86 on Monday and 106.95 on Friday. The advanced overall monthly sales for retail and food services in November is expected to rise 0.6% against the previous month's 0.4% rise. 

Market participants now await the outcome of the US Federal Open Market Committee's meeting early Thursday. While the market consensus is of a 25-basis-point rate cut by the Fed, they are keeping an eye on the Fed chair's speech, looking for any indication on the future course of rate movements, dealers said. They added that most market participants expect a pause in the rate cut after this month's cut. As of Tuesday, the chances of a 25-bps cut by the Fed were 97.3%, as per the CME FedWatch tool.

The Japanese yen was up 0.2% against the US currency ahead of the Bank of Japan's rate decision on Thursday, where it is expected to keep rates steady.

The pound sterling was up 0.1% against the US currency after data released Tuesday showed that wage growth in the UK was more than expected. Salaries rose 5.2% in Aug-Oct, higher than the forecast of 5.0% in a Reuters poll. It weighed on expectations of a rate cut by the Bank of England. Market consensus is that the rates would remain unchanged on Thursday. 

The Swiss Franc was down 0.2% against the US dollar, after the Swiss government revised down its economic growth forecast to 1.5% next year. In the current year, the country's economy is expected to grow at 0.9%. The Australian dollar was down 0.4%, with the Canadian dollar falling 0.3% against the greenback.  (Sourabh Kumar)

India Rupee: Premiums up on IPO-linked dlr inflows, rupee liquidity deficit

MUMBAI – Premiums on dollar/rupee forward contracts were up across tenures due to dollar inflows and a deficit in liquidity in the banking system, dealers said. Dollar inflows were on account of overseas investments into initial public offerings that are currently open, dealers said.

"The medium-term and far-ends are higher today also mainly due to IPO flows, but the cash-tom is normal today," a dealer with a state-owned bank said. 

Liquidity in the banking system was in a deficit of INR 1.10 trillion on Monday, the highest since late June, mainly due to advance tax outflows, as per dealers. They said outflows for advance tax payments began on Friday, but the major chunk left the system on Monday.

Further, foreign fund inflows into IPOs that are currently open pushed dollar liquidity higher, dealers said. Currently, the IPO of International Gemmological Institute (India) Ltd is open for subscription. As per data on the BSE website as of 1403 IST, foreign institutional investors bid over seven times the number of shares reserved for qualified institutional buyers, the category that the former comes under.

Market participants now await the outcome of the US Federal Open Market Committee's Dec. 17-18 meeting. While the market consensus is of a 25-basis-point rate cut by the Fed, they are keeping an eye on the Fed chair's speech, looking for any indication on the future course of rate movements, dealers said. They added that most market participants expect a pause in the rate cut after this month's cut. As of Tuesday, the chances of a 25-bps cut by the Fed were 97.3%, as per the CME FedWatch tool.

At 1410 IST, the premium on the one-year exact-period dollar/rupee forward contract was 188.00 paise, against 185.32 paise on Monday. On an annualised basis, the premium was at 2.21%, against Monday's close of 2.18%.  (Sourabh Kumar)

India Rupee:Down as importers buy dlrs; RBI's active intervention limit fall

MUMBAI – The rupee was down against the dollar Tuesday as banks purchased the greenback on behalf of importers, fearing a further fall in the rupee, dealers said. However, some state-owned banks sold the greenback, likely on behalf of the Reserve Bank of India, which limited the fall of the rupee, they said. The rupee has moved in a range of 5 paise so far.

"There is buying (of dollars) pressure, mostly from the negative trade data which came out. There is dollar demand from importers, all of which weigh on the rupee," a dealer at a small public-sector bank said. Data on Monday showed that India's merchandise trade deficit shot up to an all-time high of $37.84 billion in November because of record high imports and fall in exports.

State-owned banks persistently sold the greenback, likely on behalf of the RBI around 84.92-84.93 a dollar, which limited the fall in the local currency, dealers said. They expect the central bank to keep up with its intervention in the spot market and keep the Indian unit in a tight range. They said some banks also sold dollars for exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, aiding the Indian currency. 

However, trade volume in the currency market was subdued as traders were cautious ahead of the outcome of the US Federal Open Market Committee meeting early Thursday. Traders have priced in a 96.3% probability of the Fed lowering its rates by 25 basis points, while they see a 3.7% chance of the central bank maintaining a status quo. At 1415 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 107.04, compared with 106.86 on Monday and 106.95 on Friday.

A slump in domestic equities also put the rupee under pressure, according to some dealers. At 1348 IST, both the benchmark indices, the Nifty 50 and the Sensex were down 1.3% and 1.2%, respectively.

For the rest of the day, the rupee is likely to move in a range of 84.80-85.00 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.95 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Dec 17

MUMBAI – At 0900 IST, the rupee was at 84.8825 a dollar, against its previous close of 84.8625. At 1150 IST, the rupee was at 84.9200 per dollar. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha)

India Rupee: Falls to record low as India trade gap at all-time high

MUMBAI – The rupee fell to a record low of 84.9225 to the dollar as India's merchandise trade deficit shot up to an all-time high of $37.84 billion in November because of record high imports and fall in exports.

"The WPI (wholesale price index) and trade data came yesterday (Monday). Though the inflation print came lower than expected, the trade deficit was high, which weighed on the rupee today (Tuesday) morning," a dealer at a public-sector bank said.

However, some banks sold dollars near the 84.92 a dollar level likely on behalf of the Reserve Bank of India to prevent runaway depreciation of the Indian currency, dealers said. 

Market participants are waiting for the outcome of the US Federal Open Market Committee meeting early Thursday. Traders have priced in a 96.3% probability of the Fed lowering its rates by 25 basis points, while they see 3.7% chance of the central bank maintaining status quo.

"Since the US Fed rate cut is awaited, the trade volume remains subdued today. We can expect the rupee to be in a range of 84.87-84.95," a dealer at a state-owned bank said. The dollar index was steady ahead of the FOMC meeting. At 0926 IST, the index, which measures the strength of the dollar against six major currencies, was at 106.83, against 106.86 on Monday and 106.95 on Friday.

Dealers said some banks sold the greenback on behalf of exporters who wanted to take advantage of the relatively higher dollar/rupee levels, which supported the local unit. "Some (exporters) are active while most are waiting for further fall; they are waiting for 84.95 (a dollar) levels," a dealer at a state-owned bank said.

For the rest of the day, the rupee is likely to move in a range of 84.80-85.00 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.95 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Mixed; Indonesian rupiah dn before policy meet outcome

MUMBAI – Asian currencies were mixed against the dollar Tuesday ahead of monetary policy decisions by several regional and global central banks. The US Federal Open Market Committee's meeting is scheduled to commence on Tuesday and the policy decision will be announced early Thursday. 

The dollar index was steady ahead of the Federal Open Market Committee's meeting outcome. Market participants widely expect the US Federal Reserve's rate-setting panel to deliver a quarter-percentage-point rate cut. Currently, traders have priced in a 96.3% probability of the Fed lowering its interest rate by 25 basis points, with a slim 3.7% chance of it maintaining the status quo. At 0854 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 106.80, against its previous close of 106.86 and 106.95 on Friday. 

The Indonesian rupiah was down 0.3% against the greenback. The rupiah crossed the crucial 16,000-per-dollar mark, which could impact Bank Indonesia's monetary policy decision on Wednesday, where it is anticipated to keep interest rates steady. Despite interventions from the central bank, the rupiah has dropped over 6% since its peak in September and has become a primary concern for policymakers following four straight days of decline.

The Malaysian ringgit continued its downward trend for the sixth consecutive session, falling 0.1% against the dollar to reach its lowest point since Dec. 4, influenced by increases in headline inflation from Friday's data.

The Thai baht and Philippine peso remained mostly unchanged against the dollar on Tuesday. The Bank of Thailand is expected to maintain its interest rates on Wednesday, whereas the central bank of the Philippines is likely to declare a rate reduction on Thursday, following a 25-basis-point cut in October.  (Kabir Sharma)

End

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

Edited by Saji George Titus

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