India Rupee Review
Ends at record closing low on dlr purchases by importers
This story was originally published at 16:48 IST on 24 December 2024
Register to read our real-time news.Informist, Tuesday, Dec. 24, 2024
By Sourabh Kumar
MUMBAI – The rupee settled at a record closing low on Tuesday after coming under pressure from dollar purchases by importers, dealers said. Though the Reserve Bank of India intervened in the currency market by way of dollar sales, it was not aggressive, they said.
"The rupee was under pressure as importers have been buying for a few days now," a dealer with a state-owned bank said. "And today, overall volumes were also less, so the downward effect on the rupee was much more."
After moving in a range of 10 paise, the Indian currency ended the day at 85.2000 a dollar against Tuesday's close of 85.1175 a dollar. The rupee, which opened at 85.1100 a dollar on Tuesday, fell further during the day to hit a lifetime low of 85.2100 a dollar.
Shortly after opening, importers started purchasing the greenback, putting downward pressure on the Indian unit, dealers said. In addition to meeting the month-end payment obligations, importers, including oil marketing companies, purchased the greenback fearing a sharp fall in the rupee, dealers said.
The rupee was also under pressure as the dollar index remained firm, dealers said. The index, which measures the strength of the greenback against a basket of six major currencies, was 108.21 at 1530 IST against 108.08 on Monday and 107.82 on Friday.
In the past one week, the dollar index has strengthened around 1.1%. During the same time, the rupee has fallen 30 paise or about 0.4% against the dollar. In the past one week, the offshore Chinese yuan has fallen by about 0.2% against the greenback, putting downward pressure on the Indian currency, dealers said.
With the rupee under pressure, the RBI intervened to prevent the domestic currency from falling sharply, dealers said. "They did intervene, but they were not aggressive," a dealer with a state-owned bank said. "I think it (RBI's less aggressive intervention) is also because of how the yuan has moved recently."
Some exporters also sold the greenback, which prevented the rupee from falling further, dealers said. However, most exporters haven't placed large bets as they expect the rupee to fall further in coming days, dealers said. The volume in the market was low on Tuesday as many traders were on leave ahead of Christmas and New Year.
With low overall volumes, dealers said some foreign fund outflows from the domestic equities market also weighed on the rupee. Both the Nifty 50 and the BSE Sensex ended down 0.1?ch on Friday.
| AT 1530 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.2000 | 85.1100 | 85.1100 | 85.2100 | 85.1175 |
| 1-year dlr/rupee fwd (paise) | 192.50 | 191.00 | 192.50 | 189.00 | 191.00 |
FORWARDS
The premium on the dollar/rupee forward contract ended slightly higher due to a large deficit in banking system liquidity, dealers said. A rise in the benchmark 10-year US Treasury yield limited the rise, they said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
The banking system liquidity deficit widened to INR 2.43 trillion on Monday, the highest level since May 21, from INR 1.76 trillion on Friday, according to Reserve Bank of India data. Some banks also sold dollars for forward delivery, noting relatively higher premiums, weighing on forward premiums, dealers said.
At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 192.50 paise, against 191.00 paise on Monday. On an annualised basis, the premium was at 2.26%, against Monday's close of 2.24%.
OUTLOOK
Financial markets are closed on Wednesday for Christmas. On Thursday, 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.
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 85.00-85.30 a dollar, with strong technical support pegged at 85.30 a dollar.
India Rupee: Premium steady as rise in US yld offset rupee liquidity deficit
| AT 1435 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.1950 | 85.1100 | 85.1100 | 85.2100 | 85.1175 |
| 1-year dlr/rupee fwd (paise) | 192.00 | 191.00 | 192.50 | 189.00 | 191.00 |
MUMBAI – The premium on the dollar/rupee forward contract was steady across tenures as the rise in the benchmark 10-year US Treasury yield offset the effect of the large deficit in banking system liquidity, dealers said.
"It has not moved much in the last few days," a dealer with a private bank said. "The liquidity is in a large deficit and that is keeping the premiums higher, even though it comes a bit lower in early trade."
The banking system liquidity deficit widened to INR 2.43 trillion on Monday, the highest level since May 21, from INR 1.76 trillion on Friday, according to Reserve Bank of India data.
Volumes in the forward market were lower on Tuesday ahead of Christmas and New Year, as many traders were on holiday. Financial markets are closed on Wednesday for Christmas. Earlier, the forward premium came under downward pressure as the yield on the 10-year US Treasury note rose seven basis points to 4.59% on Monday. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
Some banks also sold dollars for forward delivery, noting relatively higher premiums pushing forward premiums down, dealers said. Market participants await economic data from the US to assess the quantum of rate cuts by the US Federal Reserve, after Fed officials projected only 50 bps of rate cuts in 2025, against the previous projection of 100 bps.
At 1434 IST, the premium on the one-year exact-period dollar/rupee forward contract was 192.00 paise, against 191.00 paise on Monday. On an annualised basis, the premium was at 2.25%, against Monday's close of 2.24%. (Sourabh Kumar)
India Rupee: Hits record low on importers' dollar purchases amid low volumes
MUMBAI – The rupee hit a record low against the dollar due to demand for the greenback from importers amid low volumes in the currency market, dealers said. The Indian unit hit a record low of 85.2050 a dollar, with further fall prevented by the Reserve Bank of India's intervention by way of dollar sales, dealers said.
"The overall volume in the market is less due to holiday tomorrow (Wednesday)," a dealer with a state-owned bank said. "Therefore, even some decent buying from importers led the rupee to fall." Financial markets will be closed on Wednesday on account of Christmas.
In addition to demand for dollars to meet month-end payment requirements, importers, including oil marketing companies, also purchased the greenback fearing a sharp fall in the rupee, dealers said.
In the past one week, the rupee has fallen nearly 30 paise or around 0.4% against the dollar. Much of this fall was attributed to strength in the dollar index. In the same week, the dollar index has strengthened around 1.1%. On Tuesday, however, the dollar index was largely steady. The index, which measures the strength in the greenback against a basket of six major currencies, was 108.13 at 1308 IST, against 108.08 on Tuesday and 107.82 on Friday.
With the rupee coming under pressure, the RBI intervened in the foreign exchange market by selling dollars, albeit "not as aggressively as they used to sell before". Due to mild intervention by the central bank, according to dealers, the Indian currency fell gradually so far Tuesday.
The fall in the rupee was also limited by dollar sales by some exporters, who took advantage of the higher dollar/rupee levels, dealers said. However, they did not place large bets on dollars, waiting for the dollar/rupee to rise further, dealers said.
During the day, the rupee is likely to move in a range of 85.00-85.30 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.30 a dollar. (Sourabh Kumar)
India Rupee: Technical Levels for rupee - Dec 24
MUMBAI – At 1110 IST, the rupee was at 85.1775 per dollar. At 0900 IST, the rupee was at 85.1100 a dollar against its previous close of 85.1175. 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 | 85.50 | 85.25 | 85.00 | 84.85 |
| Private bank | 85.30 | 85.20 | 85.05 | 84.90 |
| Foreign bank | 85.50 | 85.25 | 85.00 | 84.85 |
| Brokerage firm | 85.25 | 85.20 | 85.10 | 85.05 |
(Pratiksha and Sourabh)
India Rupee - Asia FX: Most units steady on largely unchanged dollar index
MUMBAI – Most Asian currencies were steady against the dollar on account of a largely unchanged dollar index. At 1003 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 108.14 compared to 108.08 on Monday and 107.82 on Friday.
The dollar index, which gained strength in the European session on Monday, could not retain the gains following a decline in the consumer confidence index in the US. The December consumer confidence declined to 104.7. The index dropped by 8.1 points in December compared to the previous month.
The Malaysian ringgit, Taiwan dollar, Indonesian rupiah, and the Philippines peso were all largely unchanged against the US dollar. The Thai baht was up 0.2% against the greenback, tracking gains in the domestic stock market. At 0945 IST, the benchmark index, Thai Set Index, was up 0.5%.
The Chinese yuan was down 0.1% against the dollar. The South Korean won was slightly down against the greenback as traders assessed the chances of a fall in the country's economic growth in 2025. On Monday, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok stated that the economic growth for 2025 is "likely to fall below the potential growth rate." The Bank of Korea had earlier projected the growth outlook for next year as 2.0%. The government has now acknowledged the possibility of just 1.0% growth. (Gowri Lakshmi)
India Rupee: Hits record low on importers' dlr buys despite RBI's dlr sales
| AT 0931 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.1600 | 85.1100 | 85.1100 | 85.1900 | 85.1175 |
MUMBAI – The rupee fell to a lifetime low of 85.1900 against the dollar as banks purchased the greenback on behalf of importers, dealers said. However, they added that the fall in the domestic unit was limited due to some banks' dollar sales, likely on behalf of the Reserve Bank of India.
"It's mostly oil marketing companies and other importers, generally the buying pressure is for month-end payment obligations. Since volumes are low too, slight movement is heavily reflected," a dealer at a state-owned bank said. "Whatever movement needs to take place will likely only happen in morning hours. Since its holidays, market activity is only expected for half the day," he added.
Importers also bought dollars due to fear of a sharper fall in the rupee, dealers said. Strength in the dollar index weighed on the domestic currency, they said. The index, which measures the strength of the greenback against a basket of six major currencies, was 108.17 at 0953 IST, against 108.08 on Monday and 107.82 on Friday.
Due to pressure on the rupee, the RBI intervened in the foreign exchange market, though not aggressively, to prevent the rupee from falling sharply, dealers said. "There is central bank, but the selling is very mild," a dealer with another state-owned bank said.
Some exporters also sold the greenback, which limited the fall in the rupee, dealers said. However, exporters did not sell in large volumes due to anticipation of further fall in the rupee, dealers said.
During the day, the rupee is likely to move in a range of 85.00-85.30 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.20 a dollar. (Gowri Lakshmi)
India Rupee: Expected range for rupee - Dec 24
MUMBAI – Following are the expected support and resistance levels for the rupee on Tuesday, as forecast by leading banks and brokerages in an Informist poll:
| PARTICIPANT | SUPPORT | RESISTANCE |
| State-owned bank | 85.15 | 85.01 |
| Private bank | 85.30 | 84.90 |
| Foreign bank | 85.20 | 85.00 |
| Brokerage firm | 85.15 | 85.05 |
| Brokerage firm | 85.18 | 84.97 |
| Brokerage firm | 85.15 | 85.04 |
(Pratiksha 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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