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Informist, Wednesday, Dec. 18, 2024

By Gowri Lakshmi 

MUMBAI – The rupee ended at a record closing low against the dollar as banks purchased the greenback for importers, dealers said. They added that some banks also purchased the greenback on behalf of investors due to "risk-off" sentiment ahead of the outcome of the US Federal Open Market Committee's meeting due early Thursday, they said. 

"The rupee makes an all-time low of 84.95 as dollar buying, ahead of the FOMC wherein the Fed will cut rates by 25 basis points and will give future guidance, continues," a dealer at a private bank said.

After falling to a lifetime low of 84.9575, the domestic unit settled at 84.9525 a dollar on Wednesday. The local currency had ended at 84.8950 on Tuesday. The rupee fell 0.1% against the dollar, while other Asian currencies fell between 0.1-0.2%, with the Philippines peso being the worst performer.

The rupee opened largely steady at 84.9100 against the dollar as traders were cautious of placing any large bets ahead of the US FOMC policy decision. "The rupee has been in the same range of moving just 5-6 paisa since the last two days. Since it is the holiday season, trade volumes remained subdued. We can expect the market to be 'back in action' in January," a dealer at a private bank said. "The market activity is also restricted ahead of the Fed (rate) cut tonight," he added.

Traders currently priced in a 95.4% probability of the Fed lowering its interest rates by 25 bps, while they see a slim 4.6% chance of the central bank maintaining status quo. The dollar index remained broadly steady throughout the day as well, before strengthening slightly before the (Indian) market closing hours. 

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 106.995, against its previous close of 106.94 on Tuesday and 106.86 on Monday.

However, shortly after the market opened, the rupee came under downward pressure as banks purchased the greenback for importers, who feared further fall in the rupee, dealers said. Dealers also said some banks bought dollars on behalf of investors due to risk-off sentiment ahead of the Fed policy outcome. Domestic indices ended the day in the red, with the benchmark indices, Nifty 50 and Sensex, ending 0.6% down each.

The rupee briefly breached the key level of 84.95 a dollar, a key level the apex bank has been trying to protect since last week. Some public-sector banks sold the dollars on behalf of exporters, who wanted to take advantage of the higher dollar/rupee levels, which provided some cushion to the domestic unit and limited the fall. Dealers speculated that the Reserve Bank of India may have intervened in the spot market, which prevented the rupee from falling sharply.

"Exporters were waiting for this key level to breach, some of them hedged today, most are now waiting for 85.00 (per dollar) to breach," a dealer at a private bank said. "We can see it breaching 85.25 by March," he added.

FORWARDS

Premiums on dollar/rupee forward contracts ended slightly higher ahead of the outcome of the Federal Open Market Committee's meeting, dealers said. The outcome of the US FOMC meeting will be detailed at 0030 IST Thursday.

Markets will also closely examine the accompanying Summary of Economic Projections, which may show moderation in expectations of rate cuts by the Fed in the coming year due to a persistent rise in inflation and strong economic indicators. Stronger-than-expected retail sales in the US have diminished hopes of faster and deeper rate cuts.

Dealers said dollar/rupee forward premiums were supported by the rise in the dollar/rupee overnight swap rate, or cash-tom. The Reserve Bank of India is likely to have sold forward dollars in the overnight swap market to cool rates, dealers said. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 192.31 paise, against 188.31 paise on Tuesday. On an annualised basis, the premium was at 2.25%, up from Tuesday's close of 2.22%.

OUTLOOK

On Thursday, the rupee will take cues from the dollar movement after the Fed policy outcome due early Thursday. "25 bps (rate cut) is factored in, we can expect the dollar index picking up in the upcoming days. GBP (pound sterling) may weaken and the Bank of England will likely hold rates steady," a dealer at a private bank said. Market participants widely expect the Bank of England to maintain status quo when it announces its policy on Thursday.

Dealers expect banks to continue purchasing dollars on behalf of importers, wary of further depreciation in the rupee. Dealers said they expect exporters to sell the greenback as well, to take advantage of the relatively higher dollar/rupee levels. They also 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 84.80-85.00 a dollar, with strong technical support pegged at 85.00 a dollar.

India Rupee - World FX: Sterling dn; Bk of England, FOMC policy outcome eyed

MUMBAI – The pound sterling was down 0.1% against the greenback ahead of the Bank of England's monetary policy decision due Thursday. The central bank is widely expected to keep rates steady at 4.75%. Further, data on Wednesday showed that UK inflation rose for the second consecutive month, with prices rising at their fastest pace since March, the BBC reported. Inflation in the UK rose 2.6% annually in November.

The dollar index remained broadly steady ahead of the policy outcome of the US Federal Open Market Committee meeting, due early Thursday. Traders are currently pricing in a 95.4% probability of the Fed lowering its interest rates by 25 basis points, while they see a slim 4.6% chance of the central bank maintaining status quo.

At 1530 IST, the dollar index which measures the strength of the dollar against six major currencies was 106.92, against its previous close of 106.94 on Tuesday and 106.86 on Monday.

The Japanese yen was down 0.1% against the greenback as data on Wednesday showed a fall in the country's imports last month. Japan's imports fell 3.8% in November on a year-on-year basis, indicating a slump in domestic demand, a key factor in the central bank's inflation outlook. However, losses in the currency were limited as exports rose 3.8% in November. The Bank of Japan began its last monetary policy meeting of the year and is expected to announce the outcome on Thursday. Markets expect the central bank to keep the benchmark rates steady, with most analysts estimating an interest rate hike in March.

The Australian dollar fell to a 13-week low and was down 0.4% against the US currency as investors remained cautious ahead of the US FOMC outcome. Reports from FX Street also suggest increased risk aversion from investors and a higher likelihood of a rate cut by the Reserve Bank of Australia. Tracking a fall in the Australian currency, the New Zealand dollar was down 0.4%. Any change in the Australian economy directly impacts the New Zealand currency due to its close bilateral trade relations.

The Canadian dollar was down 0.1% against the greenback after data on Tuesday showed Canadian inflation cooling further. The headline inflation eased to 1.9% in November, below the central bank's target of 2%. Core consumer price index inflation remained sticky at 2.7% year-on-year. (Gowri Lakshmi)

India Rupee: At record low as importers buy dlrs; exporters' dlr sales aid

MUMBAI – The rupee fell to a record low of 84.9400 a dollar as banks purchased the greenback for importers, fearing further fall in the rupee, dealers said. However, some nationalised banks sold dollars on behalf of exporters, which provided some cushion to the domestic currency and prevented it from falling sharply, they said. The rupee has moved in a tight range of just 3 paise so far.

Dealers said trade volumes were largely subdued due to lack of activity in the market ahead of the outcome of the US Federal Open Market Committee's meeting, due early Thursday. Traders have priced in a 95.4% probability of the Fed lowering its interest rates by 25 basis points, while they see a 4.6% chance of the central bank maintaining status quo.

"Post tonight, we can see some movement in the market but since the 25 bps is factored in, there is a high chance of the market stabilising as well. Even with the Bank of England, we don't see a rate cut. After tomorrow (Thursday), there isn't much the market is looking forward to this month," a dealer at a private bank said.

The dollar index was broadly steady before the policy outcome of the FOMC meeting. At 1325 IST, the index, which measures the strength of the dollar against six major currencies, was nearly flat at 106.91, against its close of 106.94 on Tuesday and 106.86 on Monday.  

However, some public sector banks sold the greenback on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, dealers said. This prevented the rupee from falling sharply, they said. Dealers also expect the Reserve Bank of India to intervene in the foreign exchange market with its dollar sales if the rupee comes under immense pressure and inches towards the key level of 84.95 a dollar.

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: Premiums steady across tenures ahead of US FOMC meet outcome

MUMBAI – Premiums on dollar/rupee forward contracts were steady across the curve on Wednesday as banks refrained from taking significant positions ahead of the outcome of the Federal Open Market Committee's meeting, dealers said. "Anything other than 25 bps will shock the markets," a dealer at a state-owned bank said. "We are expecting premiums to rise slightly if everything goes as expected," she said. 

Traders in Fed Fund futures have priced in an almost 100% chance of a 25-basis-point cut by the Federal Reserve at the meeting, according to the CME FedWatch tool. The outcome of the US FOMC meeting will be detailed at 0030 IST.

Markets will also closely examine the accompanying Summary of Economic Projections, which may show moderation in expectations of rate cuts by the Fed in the coming year due to a persistent rise in inflation and strong economic indicators. Stronger than expected retail sales in the US have diminished hopes of faster and deeper rate cuts.

Dealers said dollar/rupee forward premiums were also supported by the rise in the dollar/rupee overnight swap rate, or cash-tom. The Reserve Bank of India is likely to have sold forward dollars in the overnight swap market to cool rates, dealers said. 

At 1325 IST, the premium on the one-year exact-period dollar/rupee forward contract was 189.00 paise, against 188.31 paise on Tuesday. On an annualised basis, the premium was at 2.21%, against Tuesday's close of 2.22%. (Kabir Sharma)

India Rupee: Technical Levels for rupee - Dec 18

MUMBAI – At 0900 IST, the rupee was at 84.9100 a dollar, against its previous close of 84.8950. At 1124 IST, the rupee was at 84.9325 per dollar. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Kabir Sharma, Gowri Lakshmi, Sourabh Kumar, and Pratiksha)

India Rupee - Asia FX: Most dn as dlr index firm after US retail sales data

MUMBAI – Most Asian currencies were down against the dollar Wednesday as the dollar index firmed up after the US retail sales data on Tuesday. US retail sales data came in hotter than expected, reflecting the continued resilience of the US economy. Retail sales rose 0.7% on month in November, against a 0.6% rise estimated by economists in a Bloomberg poll. 

The dollar index rose to a high of 107.08 after the data. However, the index broadly remained near its previous close as traders exercised caution ahead of the US Federal Open Market Committee meeting's policy outcome due early Thursday. Traders are currently pricing in a 95.4% probability of the Fed lowering its interest rates by 25 basis points. However, they see a 4.6% chance of the central bank maintaining status quo. 

At 1009 IST, the dollar index, which measures the strength of the dollar against six major currencies, was nearly flat at 106.93, compared to its close of 106.94 on Tuesday and 106.86 on Monday.

The Philippines peso was down 0.2% against the dollar, the biggest fall amongst its other Asian peers, ahead of the Philippines central bank's policy decision on Thursday. Market participants widely expect the Bangko Sentral ng Pilipinas to deliver a quarter percentage point rate cut for the third time.

The Indonesian rupiah was down 0.1% against the greenback after reports said that Indonesia's anti-graft agency raided the headquarters of the central bank in Jakarta on Monday over alleged mishandling of a corporate social responsibility programme, Reuters reported on Tuesday. Bank Indonesia Governor Perry Warjiyo was amongst those who were raided, as the agency suspected he had donated some of its corporate social responsibility funds to several foundations improperly, the Reuters report said. "We've already had two suspects that we allege had received funds from BI's (Bank Indonesia) CSR," chief investigator Rudi Setiwan said. Market participants are now waiting for the central bank's policy decision due later in the day, with analysts factoring in a rate cut of 25 basis points amid weaker growth and falling inflation, an MUFG report said.

The Thai baht was down 0.1% against the dollar ahead of the policy outcome by the Bank of Thailand later in the day. The central bank is facing growing pressure to lower its benchmark rates as Finance Minister Pichai Chunhavachira on Tuesday reaffirmed his call for a reduction in interest rates to stimulate the country's sluggish economy.

The Korean won was slightly up against the dollar. Losses in the currency due to political instability were offset by data from the central bank which showed that the country's economy grew at an annualised rate of almost 7% after a change in the base year for economic growth compilation. According to the data, South Korea's economy expanded at 6.9% on average per year from 1954 till the previous year under the new base year of 2020.

Further, Bank of Korea monetary policy board members called for caution and a need to respond immediately to the slowing economy, as per the minutes of the November policy meet released Tuesday. "Given heightened domestic and global uncertainties, monetary policy should closely examine the nature and impact of economic shocks and respond to them promptly and flexibly," a board member said.

The Chinese yuan and Malayian ringgit traded flat against the US currency.  (Gowri Lakshmi)

India Rupee:At record opening low on firm dlr index; mkt awaits FOMC outcome

MUMBAI – The rupee started the day at a record opening low against the dollar as the dollar index was firm after US retail sales came in higher than expected, dealers said. Traders are cautious about placing any large bets before the US Federal Reserve's policy announcement early Thursday, they said.

"It (rupee) will be range-bound like yesterday (Tuesday). At max, the rupee may fall to 84.95 (per dollar), trade volume is expected to remain subdued for the day," a dealer at a state-owned bank said.

The dollar index rose slightly after data released Tuesday showed US retail sales rose 0.7% on month in November, against a 0.6% rise estimated by economists in a Bloomberg poll. The dollar index had risen to a high of 107.08 after the data. Wednesday, the index was broadly steady before the policy outcome of the Federal Open Market Committee meeting.

At 0923 IST, the dollar index, which measures the strength of the dollar against six major currencies, was nearly flat at 106.92, against its close of 106.94 on Tuesday and 106.86 on Monday. Traders have priced in a 95.4% probability of the Fed lowering its interest rates by 25 basis points. However, they see a 4.6% chance of the central bank maintaining status quo. 

The rupee was also weighed down by dollar purchases by banks for importers, who fear the rupee may fall further. "Importers are not aggressive, they are hedging as and when required, their responses (to the rupee falling) are subdued too," a dealer at a public sector bank said. However, some banks sold the greenback, on behalf of exporters, which provided some cushion to the domestic currency, dealers said. "Exporters are still waiting, they are waiting for the rupee to breach 85.00 a dollar ever since it breached the big figure (of 84.00 per dollar)," a dealer at a state-owned bank said.

During 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: Expected range for rupee - Dec 18

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:

(Pratiskha)

End

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

Edited by Tanima Banerjee

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