India Rupee Review
At record closing low despite RBI's active intervention
This story was originally published at 17:44 IST on 23 December 2024
Register to read our real-time news.Informist, Monday, Dec. 23, 2024
By Gowri Lakshmi
MUMBAI – The rupee ended at a record closing low against the dollar Monday as banks continuously purchased the greenback on behalf of importers, dealers said. The fall in the domestic currency was despite the Reserve Bank of India's persistent intervention through dollar sales, they said.
"After a one-day gain to 84.95 on Friday, the rupee again weakened today to 85.1250, its lowest, as buying of dollars resumed, which again seemed to be protected by the RBI," said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP.
After falling to a record low of 85.1250 a dollar in the last leg of the trade, the rupee ended at a record closing low of 85.1175 against the dollar, compared to its previous close of 85.0150 on Friday. The rupee opened marginally above the 85-per-dollar mark due to a fall in the dollar index after data on Friday showed inflation in the US cooled more than expected.
The dollar index fell from the two-year-high hit on Friday after the US personal consumption expenditure data, the Federal Reserve's preferred inflation gauge, came in lower-than-expected in November. The PCE price index rose 2.4% on year in November, up from October's 2.3% rise, but below the market consensus of a 2.5% rise.
The rupee came under pressure as banks rushed to buy dollars on behalf of oil and other importers, looking to fulfil their month-end and calendar year-end payment requirements, dealers said. Some importers also purchased the greenback, fearing a further fall in the rupee in the coming days, they said.
"Market volumes are very less. So even a slight movement is reflected in the rupee's range. There was just buying (of dollars) pressure from importers, which was significantly less compared to other days, the other weighing factor was the strength in the dollar index," a dealer at a private bank said.
The dollar index, which measures the strength of the dollar against six major currencies, rose during the European trade session, owing to a fall in the euro and Japanese yen, which were down 0.3% each. At 1530 IST, the index was at 107.94, against its previous close of 107.82 on Friday and 108.43 on Thursday.
The euro was down against the greenback after investors assessed remarks by European Central Bank President Christine Lagarde on further interest rate cuts. The Japanese yen fell against the US currency due to lack of clarity regarding an interest rate hike by the Bank of Japan at its January meeting.
The Indian currency was also weighed by a fall in the offshore Chinese yuan, dealers said. The Chinese yuan fell 0.1% against the greenback due to the impact of widening yield differentials between the US and China. The offshore Chinese yuan also fell against the US currency as the dollar index strengthened in the European trade session.
Meanwhile, volume in the currency market was lower than usual as traders refrained from placing large bets ahead of the Christmas holiday on Wednesday. Trade volumes were also low as several traders were on leave for Christmas and New Year.
However, the rupee got some cushion as few foreign banks sold the greenback, likely on behalf of foreign portfolio investors, who wanted to invest in the initial public offerings of domestic companies, dealers said.
The IPOs of DAM Capital Advisors Ltd., Concord Enviro Systems Ltd., Sanathan Textiles Ltd., Mamata Machinery Ltd., and Transrail Lighting Ltd., closed on Monday, while Carraro India Ltd., Senores Pharmaceuticals Ltd and Ventive Hospitality will close on Tuesday.
As soon as the domestic unit inched closer to the technical support level of 85.10 a dollar, the central bank stepped in through dollar sales, to limit a sharp fall in the local unit and curb excessive volatility, dealers said. However, the RBI's dollar sales were not aggressive in nature, and the rupee breached the key level and fell to a lifetime low of 85.1250 a dollar during the last 30 minutes of the trading session.
Most exporters remained on the sidelines and did not let go of their dollar holding around the current levels, as they expect the rupee to fall further in the coming days, according to dealers. "Exporters are not hedging vitally. It's year-end too, market volume remains really dull. It's the lack of market activity which largely puts exporters at the back," a dealer at a private bank said.
| AT 1530 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.1175 | 84.9900 | 84.9900 | 85.1250 | 85.0150 |
| 1-year dlr/rupee fwd (paise) | 191.00 | 188.50 | 191.50 | 188.50 | 189.50 |
FORWARDS
The premium on the one-year dollar/rupee forward contract ended largely steady as banks' dollar sales for forward delivery, noting the relatively higher levels, offset the impact of a fall in the 10-year benchmark US Treasury note, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
Premium on the one-year dollar/rupee forward premium touched a high of 2.25?cause of a fall in the 10-year US Treasury yield. The yield on the 10-year US Treasury note fell 5 basis points on Friday after the personal consumption expenditures price index came in lower than expected.
The forward premiums were also supported due to a widening deficit in the banking system liquidity. Further, some foreign fund inflows, related to currently open initial public offerings, pushed the dollar/rupee overnight swap rate, or cash-tom higher, dealers said.
At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 191.00 paise, against 189.50 paise Friday. On an annualised basis, the premium was at 2.24%, against Friday's close of 2.23%.
OUTLOOK
On Tuesday, the rupee is expected to take cues from movement in the dollar index and offshore Chinese yuan, dealers said. Trade volume is expected to remain largely lacklustre due to the holiday season.
"Until New Year, we don't have to expect any large movement in the market. There is no data globally which is awaited that could trigger the rupee," a dealer at a state-owned bank said. "The dollar index will continue to strengthen, which is something that will weigh on it (rupee)," he added.
Dealers expect importers to continue purchasing dollars in the expectation that the rupee may fall further, which may put pressure on the Indian currency. The central bank may continue to intervene through dollar sales and protect the rupee from falling sharply, they said.
The rupee is seen in a range of 84.95-85.20 a dollar, with strong technical support pegged at 85.15 a dollar.
India Rupee - World FX: Euro down as ECB Lagarde's remarks hint at rate cuts
| AT 1612 IST | HIGH | LOW | PREVIOUS | |
| GBP/USD | 1.2551 | 1.2588 | 1.2552 | 1.2569 |
| EUR/USD | 1.0397 | 1.0446 | 1.0396 | 1.0430 |
| NZD/USD | 0.5652 | 0.5661 | 0.5643 | 0.5654 |
| AUD/USD | 0.6254 | 0.6265 | 0.6245 | 0.6250 |
| USD/JPY | 156.7740 | 156.8090 | 156.3410 | 156.4500 |
| USD/CAD | 1.4395 | 1.4395 | 1.4349 | 1.0905 |
| EUR/JPY | 162.9760 | 163.6336 | 162.9100 | 163.1500 |
| CHF/USD | 1.1168 | 1.1208 | 1.1162 | 1.1194 |
| EUR/CHF | 0.9309 | 0.9340 | 0.9308 | 0.9315 |
MUMBAI – The euro was down 0.3% against the US dollar as market participants assessed the chances of more rate cuts by the European Central Bank after its president, Christine Lagarde, in an interview with the Financial Times, said the eurozone was near its inflation goal. Lagarde had said earlier this month that more rate cuts were on the table, should inflation ease towards the central bank's target of 2%.
The Japanese yen was down 0.3% against the US currency, weighed by doubts among market participants about a rate hike by the Bank of Japan at its next meeting in January. Further, broadly higher US Treasury yields kept investors' interest in the US markets, away from Japan. This weighed on the Japanese currency, reports said. Market participants were also waiting for the release of the Bank of Japan's 'Summary of Opinions', after the central bank decided to keep rates steady at 0.25% at its policy meeting outcome on Thursday.
The pound sterling was down 0.1?ter the UK economy failed to grow in Jul-Sept, as per data released by the government on Monday. The GDP growth was 0.0% in Jul-Sept, against the estimate of 0.1% growth. Further, the growth in the preceding quarter was also cut to 0.4% from the previous figure of 0.5%.
The Australian dollar rose 0.1% against the greenback ahead of the release of the minutes of the latest Reserve Bank of Australia's monetary policy meeting on Dec. 10. The Canadian dollar was down 0.2% against the US currency after crude oil prices, a major export item of Canada to the US, retreated on Monday, after rising in early trade.
The dollar index eased from over a two-year high it hit early Friday, after data released the same day showed inflation in the US fell more than expected. The US personal consumption expenditure index rose 0.1% on-month in November, against expectations of 0.2% rise. On a yearly basis, it was at 2.4%, below the market consensus of a 2.5% rise.
The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 108.03 at 1606 IST against 107.82 on Friday and 108.43 on Thursday. The dollar index had fallen further earlier on Monday, before recovering some losses, once the European markets opened. (Sourabh Kumar)
India Rupee: Premium steady; banks' fwd dollar sales offset fall in US yield
| AT 1418 IST | AT 0900 IST | HIGH | LOW | PREVIOUS (AT 1530 IST) | |
| Spot rupee per $1 | 85.0900 | 84.9900 | 84.9900 | 85.0925 | 85.0150 |
| 1-year dlr/rupee fwd (paise) | 190.25 | 189.50 | 191.50 | 188.50 | 189.50 |
MUMBAI – The premium on the one-year dollar/rupee forward contract was steady as a few banks sold dollars for forward delivery, noting the relatively higher forward levels, which offset the upward push from the fall in the 10-year benchmark US Treasury note, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
"(One-year dollar/rupee forward level of) 2.25% or thereabouts is a good level to receive, so the forwards, if you see, have come down from there," a dealer with a state-owned bank said.
Dealers said banks sold dollars for forward delivery after the one-year forward premium reached close to 2.25%. The forward premium rose earlier in the day in reaction to the fall in the 10-year US Treasury yield. The yield on the 10-year US Treasury note fell 5 basis points Friday after the Personal Consumption Expenditures Price Index came in lower than expected. The US Federal Reserve's preferred gauge for measuring inflation showed personal consumption expenditures in November rising by 2.4%, below the market consensus of a 2.5% rise.
The forward premiums were also elevated due to a deficit in the banking system liquidity, which was at INR 1.88 trillion Sunday against INR 1.91 trillion Saturday, according to data from the RBI website. Further, some foreign fund inflows, related to currently open initial public offerings, also pushed the forward premiums, especially near-term forward premiums, higher, dealers said.
The overall volume in the forward contract was low ahead of the Christmas holiday, dealers said. They said the cooling down of inflation in the US suggested by recent data would support the view of more rate cuts in 2025. However, "it remains to be seen if the Fed will change its revised forecast of 50 bps cut (in 2025), once we get to see other data points," a dealer with a private bank said.
At 1417 IST, the premium on the one-year exact-period dollar/rupee forward contract was 190.25 paise, against 189.50 paise Friday. On an annualised basis, the premium was at 2.24%, against Friday's close of 2.23%. (Sourabh Kumar)
India Rupee: Remains down as importers buy dlrs; RBI's dlr sales limit fall
| AT 1428 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.0900 | 84.9900 | 84.9900 | 85.0950 | 85.0150 |
MUMBAI – The rupee remained slightly down against the dollar as banks purchased the greenback for oil marketing companies and other importers, dealers said. However, some dollar sales by banks, likely on behalf of the Reserve Bank of India, limited the losses for the Indian unit, they said.
Banks bought the greenback on behalf of importers to fulfil their month-end and calendar year-end requirements, dealers said. "Importers are buying (dollars) on compulsion. It's mostly the purchase of their month-end payment obligations. Gold prices are on the upside. That's triggering buying (of dollars)," a dealer at a state-owned bank said.
Meanwhile, the central bank likely sold the US unit around 85.09 a dollar, to prevent the local currency from falling sharply and hitting a record low, dealers said. The rupee hit a lifetime low of 85.1000 a dollar on Friday. Dealers expect the RBI to keep its grip on the currency intact throughout the day.
Some foreign banks also sold greenback on behalf of overseas investors looking to invest in the initial public offerings of domestic companies, which also supported the Indian unit, dealers said. "The IPO inflows are not huge, but they do have some impact in aiding the rupee," a dealer at a private bank said.
The IPOs of DAM Capital Advisors Ltd., Concord Enviro Systems Ltd., Sanathan Textiles Ltd., Mamata Machinery Ltd., and Transrail Lighting Ltd., all currently open for subscription, with Monday being the last day. The public offers of Carraro India Ltd., Senores Pharmaceuticals Ltd and Ventive Hospitality opened on Friday and will close on Tuesday.
A strengthening dollar index during European trade also weighed on the domestic unit, dealers said. At 1429 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 107.93, compared to 107.82 on Friday and 108.43 on Thursday. "Exporters aren't actively selling (dollars) because they see the dollar index strengthening in the future. Big exporters are aiming for the rupee to hit 85.10-85.12 (a dollar)," a dealer at a public sector bank said.
For the day, the rupee is likely to move in a range of 85.00-85.15 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.10 a dollar. (Gowri Lakshmi)
India Rupee: Technical Levels for rupee - Dec. 23
MUMBAI – At 1207 IST, the rupee was at 85.0700 per dollar. At 0900 IST, the rupee was at 84.9900 a dollar against its previous close of 85.0150. 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 | 85.10 | 85.00 | 84.98 | 84.96 |
| Brokerage firm | 85.17 | 85.10 | 84.95 | 84.70 |
| Brokerage firm | 85.18 | 85.10 | 85.00 | 84.90 |
(Pratiksha and Gowri Lakshmi)
India Rupee - Asia FX: Most up as dollar index retreats from over 2-yr high
MUMBAI – Most Asian currencies rose against the dollar as the dollar index fell after cooler-than-expected US inflation data. The dollar index eased from its 2-year highs hit on Friday after data showed that the US personal consumption expenditure, the Fed's preferred inflation gauge, missed analyst estimates. Data showed the headline inflation rose 2.4% on year in November, up from October's 2.3% rise, but below the market consensus of a 2.5% rise.
At 1004 IST, the dollar index, which measures the strength of the US dollar against six major currencies, was at 107.72, against its previous close of 107.82 on Friday and 108.43 on Thursday. The Malaysian ringgit was up 0.3% against the greenback.
The Indonesian rupiah was up 0.5% against the greenback, tracking gains in its domestic stock market. At 1010 IST, the benchmark index, the Jakarta Composite Index, was up 1.2%. Gains in the currency were limited after reports on Sunday said that Indonesia's anti-graft agency raided the office of the financial services authority as a part of an investigation into alleged misuse of corporate social responsibility funds.
The Financial Services Authority said in a statement Friday that it respects and supports the investigation by the anti-corruption agency and that it is committed to the principles of good governance, transparency and accountability in all its tasks. Bank Indonesia Governor Perry Warjiyo was also raided last week on suspicion of mishandling of CSR funds.
The Philippines peso was up 0.3% against the greenback. However, gains on the currency were limited as data from the central bank showed that the Philippines' outstanding external debt hit a record high as of September. The external debt climbed to $139.64 billion, up 17.5% on an annual basis.
The South Korean won was down 0.3% against the greenback amidst protests to oust President Yoon Suk Yeol. The Chinese yuan was slightly down, while the Thai Baht was slightly up against the greenback. (Gowri Lakshmi)
India Rupee: Down on importers' dollar buys; fall in dollar index limits fall
| AT 0925 IST | AT 0900 IST | HIGH | LOW | PREVIOUS (AT 1530 IST) | |
| Spot rupee per $1 | 85.0425 | 84.9900 | 84.9900 | 85.0625 | 85.0150 |
MUMBAI – The rupee was down against the dollar Monday as banks purchased the greenback on behalf of importers, dealers said. However, a fall in the dollar index limited the fall in the rupee, they said.
"The market mantra is buy (dollar) on dips today. We expect the rupee to be in 85.00-85.10-a-dollar range," a dealer at a public-sector bank said. The market may not be volatile, but it will not be steady either for the rest of the day, dealers said. "It's the festive season, so liquidity remains less and volumes are low," the aforementioned dealer said.
The dollar index plummeted from over a two-year high it hit Friday after the US Federal Reserve's preferred inflation gauge, the personal consumption expenditure data, missed analysts' expectations for November. At 0931 IST, the dollar index, which measures the strength of the US dollar against six major currencies, was at 107.72, against its previous close of 107.82 on Friday and 108.43 on Thursday.
However, dealers expect foreign banks to sell dollars on behalf of overseas investors looking to invest in the initial public offerings of domestic companies, which may aid the local currency. The initial public offerings of DAM Capital Advisors Ltd., Concord Enviro Systems Ltd., Sanathan Textiles Ltd., Mamata Machinery Ltd., and Transrail Lighting Ltd., are all currently open for subscription, with Monday being their last day.
A rise in domestic equities also supported the domestic unit, dealers said. At 0938 IST, both benchmark indices, the Nifty 50 and Sensex, were in the green, up 0.6?ch.
With pressure on the rupee from importers' dollar purchases, dealers expect the Reserve Bank of India to step in with dollar sales to prevent the rupee from falling sharply and to curb any market volatility. They expect some exporters to sell dollars as well to take advantage of the relatively lower rupee.
During the day, the rupee is likely to move in a range of 84.95-85.15 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.10 a dollar. (Gowri Lakshmi)
India Rupee: Expected range for rupee - Dec. 23
MUMBAI – Following are the expected support and resistance levels for the rupee on Monday, as forecast by leading banks and brokerages in an Informist poll:
| PARTICIPANT | SUPPORT | RESISTANCE |
| Private bank | 85.20 | 84.90 |
| Foreign bank | 85.10 | 84.90 |
| Brokerage firm | 85.04 | 84.94 |
| Brokerage firm | 85.10 | 84.90 |
| Brokerage firm | 85.06 | 84.94 |
(Pratiksha, Gowri Lakshmi 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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