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Informist, Thursday, Dec. 19, 2024

 

By Sourabh Kumar

 

MUMBAI – The rupee ended at a record closing low of 85.0700 a dollar as the dollar index surged after the US Federal Open Market Committee indicated a slower pace of rate cuts in 2025, after slashing rates by 25 basis points early Thursday as expected, dealers said. They said the Reserve Bank of India, as has been the case in recent past, intervened in the foreign exchange market by selling dollars, which prevented a further fall in the domestic currency.

 

"The rupee was under pressure first by surge in dollar index, and then importers came in, which put further pressure on the rupee," a dealer with a state-owned bank said. 

 

After moving in a range of 5 paise, the rupee closed at 85.0700 a dollar against Wednesday's close of 84.9525 a dollar. The domestic unit opened at 85.0350 a dollar, nearly 9 paise down from Wednesday's close.

 

The dollar index hit an over two-year-high of 108.27 on Wednesday after the Summary of Economic Projections, released alongside the FOMC statement, showed that Fed officials now see a 50-bps rate cut in 2025 against their earlier projection of a 100-bps cut. The dollar index, which measures the strength in the greenback against a basket of six major currencies, was 107.88 at 1530 IST against Wednesday's 108.02 and Tuesday's 106.94.

 

The rupee also came under pressure as importers started purchasing the greenback as soon as the market opened, on fears that the domestic unit may fall further, dealers said. Domestic equity indices were also down, weighing on the Indian rupee, dealers said. The Nifty 50 and the BSE Sensex closed down 1.0% and 1.25, respectively, on Thursday. Some banks also purchased dollars for overseas investors who withdrew funds from domestic equities, which further weighed on the rupee, dealers said. 

 

"After it breached 85 a dollar, we are now seeing the movement to be rather quick on the upside (fall in rupee)," a dealer with a private bank said. "I do not think they will intervene, or they are intervening as aggressively as earlier."

 

In recent times, the RBI has increased its verbal intervention, according to dealers. Apart from the intervention in the spot dollar/rupee market, the RBI is likely to have recently dialled-up a few banks asking not to bet against the rupee in the spot or the offshore non-deliverable forwards market, dealers said. They said the "verbal intervention" has come at a time when the foreign exchange reserves have fallen significantly to an over five-month low of $654.86 billion in the week ended Dec. 6. The foreign exchange reserves have now declined by over $50 billion from the record high of $704.89 billion in late September.

 

A few dealers also speculated that the RBI had intervened in the offshore non-deliverable forwards market to prevent the rupee from opening further lower on Thursday, dealers said. During the day, some exporters also sold dollars, which supported the rupee. However, most of the exporters still did not place large bets, anticipating a further fall in the rupee, dealers said. 

 

Market participants are now waiting for the policy decision of the Bank of England, due later in the day, with most analysts expecting it to hold rates steady. In the US, unemployment insurance weekly claims data is due later in the day. 

 

	AT 1530 IST	AT 0900 IST	HIGH	LOW	PREVIOUS(AT 1530 IST)
Spot rupee per $1	85.0700	85.0350	85.0350	85.0850	84.9525
1-year dlr/rupee fwd (paise)	191.00	192.50	192.50	188.55	192.00

 

FORWARDS

The premium on the one-year dollar/rupee forward contract ended steady as some banks purchased the greenback for forward delivery, which offset the downward pressure from a rise in US Treasury yield, dealers said. Since the rupee's fall in the offshore market was more than the fall in the onshore market, banks took advantage of the arbitrage opportunity between the dollar/rupee onshore forward and offshore non-deliverable forward levels, dealers said. 

 

The yield on the 10-year US Treasury note rose 10 basis points to 4.50% on Wednesday, as the Fed indicated a slower pace of rate cuts in 2025, after cutting rates by 25 bps early Thursday. However, the forward premiums did not fall due to banks' arbitrage trading. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

   

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 191.00 paise, against 192.00 paise on Wednesday. On an annualised basis, the premium was at 2.24%, up from Wednesday's close of 2.25%.

 

OUTLOOK

On Friday, the rupee will take cues from the movement in the dollar index, dealers said. The Bank of England rate decision is also awaited. Further, dealers expect banks to continue purchasing dollars on behalf of importers, wary of further depreciation in the rupee.

 

Exporters are expected to sell the greenback, taking advantage of relatively higher dollar/rupee levels. They also said the central bank could continue intervening through dollar sales if the rupee falls further. The rupee is seen in a range of 84.95-85.15 a dollar, with strong technical support pegged at 85.10 a dollar.

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Indian Rupee - World FX: Dlr index eases from 2-year high on FOMC outcome

 

	AT 1534 IST	HIGH	LOW	PREVIOUS
GBP/USD	1.2652	1.2667	1.2563	1.2572
EUR/USD	1.0406	1.0423	1.0340	1.0354
NZD/USD	0.5655	0.5659	0.5609	0.5621
AUD/USD	0.6241	0.6247	0.6199	0.6216
USD/JPY	156.9380	157.1450	154.4400	154.8000
USD/CAD	1.4396	1.4467	1.4390	1.4444
EUR/JPY	163.3170	163.6680	159.8670	160.2600
CHF/USD	1.1151	1.1162	1.1067	1.1086
EUR/CHF	0.9330	0.9357	0.9327	0.9327

 

MUMBAI – The dollar index eased slightly in early European trade, after hitting an over a two-year high of 108.27 on Wednesday, as the Federal Open Market Committee indicated a slower pace of rate cuts in 2025. The Fed's remark came after it cut the Fed funds target range by 25 basis points to 4.25-4.50?rly Thursday. The Summary of Economic Projections, released along with the FOMC statement, showed Fed officials now expect another 50 bps of rate cuts in 2025, against their previous expectation of 100 bps.

 

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was 107.87 at 1457 IST from 108.20 on Wednesday and 106.94 on Tuesday. It had hit an over two-year high of 108.27 on Wednesday.

 

The Japanese yen fell 1.4% against the greenback after the Bank of Japan kept rates unchanged. With a majority of 8 to 1, the Bank of Japan decided to keep the short-term policy rate unchanged at 0.25%. The central bank governor, Kazuo Ueda, said while the real interest rates remained very low, there could be fresh risks to the outlook due to US President-elect Donald Trump's proposed trade policies.

The pound sterling rose 0.6% against the US currency ahead of the Bank of England's rate decision later in the day. It is expected to keep the rates steady at 4.75%, as per a poll by Reuters.

 

The euro rose 0.6% against the US dollar on hope that the European Central Bank may not be aggressive on rate cuts, after the data released on Wednesday showed that despite a downward revision in Eurozone inflation, the final reading for November was still above the previous month. The inflation was 2.2% in November, as compared to 2.0% in October. Core inflation was 2.7%, the same for the last three months. 

Both the Australian dollar and the Canadian dollar rose 0.4?ch against the greenback.  (Sourabh Kumar)

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India Rupee: Hits record low as dollar index surges, importers buy dollars

 

	AT 1345 IST	AT 0900 IST	HIGH	LOW	PREVIOUS(AT 1530 IST)
Spot rupee per $1	85.0725	85.0350	85.0350	85.0750	84.9525

 

MUMBAI – The rupee hit a record low of 85.0750 a dollar due to a surge in the dollar index, dealers said. Banks also purchased the greenback on behalf of importers, who demanded the greenback fearing further fall in the domestic currency, they said, adding that this further weighed on the rupee.

 

"There is only buying pressure in the market, and only one supplier, that is the RBI (Reserve Bank of India)," a dealer with a foreign bank said. Due to a rise in downward pressure on the rupee, the RBI intervened in the foreign exchange market by way of dollar sales, which prevented the domestic currency from falling sharply, dealers said. 

 

The dollar index surged after the US Federal Open Market Committee indicated a slower pace of rate cuts in 2025, after having cut the Fed funds target range by 25 basis points to 4.25-4.50%. The Summary of Economic Projections, released along with the FOMC statement, showed Fed officials now expect another 50 bps of rate cuts in 2025, against their previous expectation of 100 bps.

 

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was 108.08 at 1341 IST, against 108.20 on Wednesday and 106.94 on Tuesday. It had hit an over two-year high of 108.27 on Wednesday. 

 

Some banks also purchased the greenback on behalf of overseas investors, who withdrew funds from the domestic equities market, dealers said. The Nifty 50 and the BSE Sensex were down 1.0% and 1.2%, respectively, at 1343 IST. 

 

During the day, the rupee is likely to move in a range of 85.00-85.10 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.10 a dollar.  (Sourabh Kumar)

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India Rupee: Premium steady as banks' fwd dlr sales offset rise in US yields

 

	AT 1316 IST	AT 0900 IST	HIGH	LOW	PREVIOUS(AT 1530 IST)
Spot rupee per $1	85.0700	85.0350	85.0350	85.0750	84.9525
1-year dlr/rupee fwd (paise)	190.50	192.50	192.50	188.55	192.00

 

MUMBAI – The premium on the one-year dollar/rupee forward contract was steady as some banks purchased the greenback for forward delivery, which offset the downward pressure from a rise in US Treasury yield, dealers said. Since the rupee's fall in the offshore market was more than the fall in the onshore market, banks took advantage of the arbitrage opportunity between the dollar/rupee onshore forward and offshore non-deliverable forward levels, dealers said. 

 

"The rupee is going further down in offshore, and that is why you see some banks are paying in forwards to take advantage of the spread," a dealer with a private bank said. 

 

It was because of such arbitrage trading that the one-year dollar/rupee forward premium did not fall despite a sharp rise in the benchmark 10-year US Treasury yield. The yield on the 10-year US Treasury note rose 10 basis points to 4.50% on Wednesday, after the Fed indicated a slower pace of rate cuts in 2025, after cutting rates by 25 bps early Thursday as per India time. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

 

The US Federal Open Market Committee voted with an 11-1 majority to cut the Fed funds target range by 25 bps to 4.25-4.50%. The Summary of Economic Projections, released along with the FOMC statement, showed the median Federal Reserve official expects another 50 bps of rate cuts in 2025, against the previous guidance of 100 bps.

 

After the reduction in the expected quantum of rate cuts in 2025 by the Fed, market participants do not see US-India interest rate differential widening as much as was expected earlier. This put downward pressure on forward premiums, dealers said. 

 

Most of the dealers anticipated the dollar/rupee forward premium to fall down, should the "arbitrage trading fade off". Some dealers also speculated that the Reserve Bank of India sold dollars for forward delivery, likely to nullify its spot interventions and avoid pushing out rupee liquidity. Liquidity in the banking system was in a deficit of INR 1.51 trillion on Wednesday, the highest since late June. A deficit in the banking system liquidity also pushed dollar/rupee premiums higher, dealers said. 

 

At 1315 IST, the premium on the one-year exact-period dollar/rupee forward contract was 190.50 paise, against 192.00 paise on Wednesday. On an annualised basis, the premium was at 2.24%, against Wednesday's close of 2.25%. (Sourabh Kumar)

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India Rupee: Technical Levels for rupee - Dec 19

 

MUMBAI – At 1136 IST, the rupee was at 85.0625 per dollar. At 0900 IST, the rupee was at 85.0350 a dollar against its previous close of 84.9525. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

 

Participants	S2	S1	R1	R2
State-owned bank	85.17	85.10	85.00	84.95
State-owned bank	85.30	85.17	84.95	84.82
Private bank	85.15	85.10	85.04	84.98
Private bank	85.30	85.15	85.00	84.96

(Gowri Lakshmi, Sourabh Kumar, and Pratiksha)

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India Rupee - Asia FX: Most down as dlr index surges post FOMC meet outcome

 

MUMBAI – Most Asian currencies were down against the dollar as the dollar index surged to an over two-year-high after the US Federal Open Market Committee hinted at a slower pace of monetary policy easing in 2025. The FOMC announced a 25 basis point rate cut, as widely expected, taking the Federal fund rates to 4.25-4.50%, but policy members reduced the guidance for monetary easing to a 50-bps cut. Earlier, the US Fed was expected to deliver another 100 bps of cuts in the next 12 months.

 

Following this, the dollar index jumped to 108.26 on Wednesday. At 0955 IST, the dollar index, which measures the strength of the greenback against six major currencies, was at 108.10, compared to 108.20 on Wednesday and 106.94 on Tuesday.

 

The Malaysian ringgit is down 0.8%. The South Korean won was down 0.8% against the greenback and hit a 15-year low. South Korea's finance minister Thursday said the government and the central bank would swiftly and boldly deploy measures to stabilise financial markets if volatility was seen as excessive. Moreover, the country's financial regulator asked local banks to consider flexibly adjusting the maturity of foreign exchange transactions and loans for companies amid heightened volatility in the currency market, reports said.

 

Thailand's baht was down 0.4% against the dollar. On Wednesday, Bank of Thailand held its key rates steady at 2.25%, largely in line with market expectations.

 

The Indonesian rupiah was down 1.2% against the US currency and the worst hit amongst its peers. However, the fall was limited as Bank Indonesia held benchmark rates unchanged at 6% on Wednesday due to weakness in the rupiah. "The focus of monetary policy is directed towards strengthening the rupiah's stability against the impact of an increasingly uncertain global economy," Bank Indonesia Governor Perry Warjiyo told a press conference.

 

The Chinese yuan was down 0.2% against the dollar. China's central bank on Thursday set the fixing at the strongest bias since July to support the falling yuan and to tackle growing tariff threats from the US, a Bloomberg report said.  (Gowri Lakshmi)

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India Rupee: Breaches 85/$1 as dlr surges; RBI's likely dlr sales limit fall

 

	AT 0944 IST	AT 0900 IST	HIGH	LOW	PREVIOUS(AT 1530 IST)
Spot rupee per $1	85.0625	85.0350	85.0350	85.0650	84.9525

 

MUMBAI – The rupee fell below the psychologically-crucial level of 85 per dollar and hit a record low of 85.0650 as the dollar index surged to an over two-year-high after the US Federal Open Market Committee hinted at a slower pace of easing in 2025, dealers said. However, the Reserve Bank of India likely intervened through dollar sales in the offshore non-deliverable forwards and the domestic spot market, which prevented the rupee from falling sharply.

 

State-owned banks sold dollars around 85.06 a dollar, likely on behalf of the central bank, dealers said. "See, if they (RBI) were not there in the market, the rupee would have easily broken 85.20 (a dollar) by now. They (RBI) are not letting that happen," said a dealer at a private bank.

 

The dollar index on Wednesday surged to 108.27, the highest level since November 2022, after the Federal Open Market Committee hinted that the central bank may only cut interest rates by a total of 50 basis points in the next 12 months instead of the 100 bps projected earlier. At 0944 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 108.09, compared to 108.20 on Wednesday and 106.94 on Tuesday. The FOMC delivered a 25 bps rate cut as widely expected, bringing the Federal Fund rates to 4.25-4.50%.

 

"The market movement is just a reaction to their (FOMC) commentary that they are only going for 2 rate cuts next year. The reaction is for that rather than the rate cut since that was already factored in," a dealer at a public sector bank said.

 

The rupee also came under pressure as banks purchased the greenback for importers, who fear a further fall in the rupee, dealers said. "We expect the rupee will likely fall to 85.08 and may even touch 85.10 easily," a dealer at a big public sector bank said.

 

A slump in domestic equities also weighed on the rupee, according to dealers. At 0945 IST, both the benchmark indices, the Nifty 50 and Sensex, were down 0.8% each.

 

Market participants are now waiting for the policy decision of Bank of England, due later in the day, with most analysts expecting it to hold rates steady. "Jobless data from the US is also expected. What the market will do is to correlate the slower rate cut stance and the data, and analyse if their move was right, we will get a clearer picture then," a dealer at a state-owned bank said.

 

During the day, the rupee is likely to move in a range of 84.95-85.10 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.10 a dollar.  (Gowri Lakshmi)

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India Rupee: Expected range for rupee - Dec 19

 

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:

 

PARTICIPANT	SUPPORT	RESISTANCE
Private bank	85.10	84.95
Private bank	85.05	84.95
Private bank	85.10	84.90
Foreign bank	85.20	84.88
Brokerage firm	85.17	84.97
Brokerage firm	85.15	84.90
Brokerage firm	85.15	84.97

 

 

 

 

 

 

 

 

 

 

 

(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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