India Rupee Review
At record closing low; logs biggest 1-day fall in 7-mos
This story was originally published at 18:04 IST on 27 December 2024
Register to read our real-time news.Informist, Friday, Dec. 27, 2024
By Gowri Lakshmi and Pratiksha
MUMBAI – After an extremely volatile session, the rupee ended at a record closing low against the dollar, logging its biggest single-day fall in nearly seven months, on the back of dollar purchases on behalf of importers and ahead of the expiry of the front-month currency futures contract, dealers said. This was despite likely aggressive dollar sales on behalf of the Reserve Bank of India during the last few hours of the trade, they said.
"If you keep something under artificial protection, this is what happens," said a dealer at a foreign bank. "The more you try to curtail volatility, the more intense it can become later. That is what happened today."
After falling to a lifetime low of 85.8075 a dollar during the day, the local currency settled at 85.5325, against the previous close of 85.2625. Barring the Thai baht and the Philippines peso, other Asian currencies fell between 0.1%-0.6% against the greenback, with the South Korean won being the worst performer. The Indian currency emerged as the second-worst performer amongst its peers on Friday.
The rupee started the day slightly lower against the dollar due to strong dollar demand in the offshore non-deliverable forwards market. However, the central bank stepped in to sell dollars at around 85.40 a dollar, which limited losses for the Indian unit, according to dealers.
Further, banks persistently purchased the greenback on behalf of importers, who were looking to meet their month-end payment obligations, they said. Banks also bought the greenback to cover their existing short dollar bets ahead of the expiry of the front-month currency futures contract, which weighed on the Indian unit, as per dealers.
As bets started stacking up against the Indian unit, the rupee fell below the technical support of 85.50 a dollar, leading to stop losses being triggered on short dollar bets around the level. Moreover, the central bank remained absent and did not intervene through dollar sales in the spot market, which also exacerbated the fall in the Indian unit, they said.
"Mostly it was the dollar demand for month-end future contract expiry," a dealer with a private bank said. "Even last month, the rupee fell during the end of the month, but today the fall was much more because the central bank was practically absent," he added.
Further, RBI's maturing short positions in the NDF market also weighed on the rupee, some dealers said. Importers also rushed to buy dollars in fear of a further fall in the rupee, which also weighed on the rupee, they said. As banks stepped up their dollar purchases, multiple stop losses on short dollar bets were triggered, causing the rupee to fall to its record low of 85.8075 a dollar.
"The volatility caused by it (the rupee's fall) was big enough to create a furore amongst importers and exporters equally. Uncovered importers panicked on the ferocity of the move, while exporters who were covered were also surprised," said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP.
However, some public-sector banks stepped in to sell the greenback, likely on behalf of the RBI, in the last few hours of the trade, which stopped a further downward movement in the local currency, dealers said. The RBI likely aggressively sold dollars around 85.80-85.75 a dollar, they said. Some dealers said the central bank may have sold almost $1.5-$2.0 billion in the domestic spot market on Friday.
Noting the central bank's intervention, banks rushed to sell dollars on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, according to dealers. This, combined with the RBI's intervention, led to the rupee trimming almost 27 paise of losses, dealers said.
"Exporters began booking profits from 85.50 levels itself. If the stop losses weren't triggered they would have waited a few more days, but today they actively and aggressively sold the greenback, which put the rupee back in a safe spot," a dealer at another private bank said.
Dealers said since the volume in the currency market was lower than usual due to many traders being on holiday for Christmas-New Year, the downward movement in the rupee was more pronounced. "RBI is everywhere, but I think liquidity in the market is thin, which is why the volatility was higher today even if buying was less," said a dealer at a state-owned bank.
Market participants were caught offguard by the sharp movement in the currency, but said the same was inevitable given the RBI's tight grip on the currency since last year. They also pointed out that the RBI may have allowed the sharp depreciation in the domestic unit, given the rupee's real effective exchange rate against a basket of 40 currencies, rose to a record 108.14 in November, indicating an overvaluation of around 8%. "I think after today's movement. We may be back to the old days of trading. But, I don't want to become too happy too soon," said a dealer at a state-owned bank.
| AT 1530 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.5325 | 85.3100 | 85.3100 | 85.8075 | 85.2625 |
| 1-year dlr/rupee fwd (paise) | 205.50 | 183.00 | 205.50 | 183.00 | 199.00 |
FORWARDS
The dollar/rupee forward premiums on most tenures rose slightly as importers purchased dollars for forward delivery, noting a sharp fall in the Indian rupee in the spot market, dealers said. At 1530 IST, the one-year dollar/rupee forward premium was at 2.40% on an annualised basis, against Thursday's close of 2.33%. It was at 205.50 paise, against 199.00 paise on Thursday.
Premium also gained as the yield on the benchmark 10-year US Treasury note fell marginally on Thursday. Premiums on the forward of a currency pair are reflective of the interest rate differential between the two countries.
Further, a large deficit in the banking system liquidity also kept forward premiums largely higher, dealers said. Some banks also sold dollars for forward delivery, taking advantage of relatively higher dollar/rupee forward levels, which limited a rise in forward premiums, they said.
OUTLOOK
On Monday, the rupee will take cues from movement in the dollar index and offshore Chinese yuan, dealers said.
Dealers expect importers to continue purchasing dollars, fearing a further fall in the local unit, which may put pressure on the Indian currency. However, they expect the RBI to step in to sell dollars, which may prevent the rupee from breaching the 86.00-a-dollar.
They also expect exporters to sell dollars to take advantage of the higher dollar/rupee, as market participants say the central bank may protect the rupee sharply.
"The rupee volatility seems to be back, and we should see bigger movements in the currency pair as we move forward," Bhansali said.
After the sharp movement in the Indian currency on Friday, some dealers expect the rupee to fall below the psychologically-important level of 86-per-dollar next week.
The rupee is seen in a range of 85.50-85.90 a dollar, with strong technical support pegged at 85.85 a dollar.
India Rupee - World FX: Yen up on hopes of Jan rate hike post Tokyo Dec CPI
| AT 1625 IST | HIGH | LOW | PREVIOUS | |
| GBP/USD | 1.2530 | 1.2538 | 1.2505 | 1.2525 |
| EUR/USD | 1.0417 | 1.0427 | 1.0405 | 1.0419 |
| NZD/USD | 0.5629 | 0.5638 | 0.5614 | 0.5621 |
| AUD/USD | 0.6210 | 0.6233 | 0.6205 | 0.6215 |
| USD/JPY | 157.7340 | 157.9920 | 157.5110 | 157.9580 |
| USD/CAD | 1.4402 | 1.4422 | 1.4396 | 1.4406 |
| EUR/JPY | 164.3770 | 164.7980 | 163.8150 | 164.6590 |
| CHF/USD | 1.1103 | 1.1136 | 1.1093 | 1.1125 |
| EUR/CHF | 0.9381 | 0.9388 | 0.9357 | 0.9366 |
MUMBAI – The Japanese yen edged up 0.1% against the US dollar on Friday after data showed Tokyo inflation accelerated in December, rekindling hope of an interest rate hike by the Bank of Japan at its January monetary policy meeting. The core consumer price index in Japan's capital was up 2.4% on year in December, up from November's 2.2% rise.
Meanwhile, the minutes of the Bank of Japan's December meeting, released Friday, showed some policymakers calling for a rate hike "in the near future", while others remained cautious of such views. For the next rate decision, the central bank is scheduled to meet on Jan. 23.
The pound sterling and the euro were both down 0.1% against the greenback. The pound sterling has been under pressure due to a sluggish economy, which failed to grow last month, aiding the view that the Bank of England may cut rates further in 2025.
The dollar index has remained firm, hovering near 2-year highs, after the release of the US jobless claims data. Data showed initial jobless claims fell by 1,000 to a seasonally adjusted 219,000, against a Reuters forecast of 224,000.
The Australian dollar was down 0.1% against the US unit as market participants continued to assess the chances of a rate cut by the Reserve Bank of Australia, after the central bank appeared more confident about inflation moving towards its target of 2-3%.
Tracking a fall in the Australian currency, the New Zealand dollar was also down 0.1% against the US dollar. Any change in the Australian economy influences the currency of New Zealand due to their close bilateral trade relations.
The Canadian dollar was up 0.1% on a slight rise in crude oil prices Thursday as market participants assessed China's stimulus plans, raising expectations of demand growth from the world's largest oil importer. (Gowri Lakshmi)
India Rupee: Trims some losses; RBI, exporters likely sell dlrs aggressively
| AT 1425 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.5375 | 85.3100 | 85.3100 | 85.8075 | 85.2625 |
NEW DELHI – The rupee erased a significant portion of its losses against the dollar as banks persistently sold the greenback, likely on behalf of the Reserve Bank of India and exporters, dealers said.
The RBI likely sold dollars around 85.80 a dollar aggressively, following which the Indian unit pared almost 25 paise of losses, dealers said. "They (RBI) were pretty aggressive (in dollar selling) above 85.80. I don't think anyone was expecting such a fall (in the rupee)," said a dealer at a private bank.
The rupee hit a lifetime low of 85.8075 a dollar earlier in the day owing to dollar buys on behalf of importers and ahead of the expiry of the front-month currency futures and options contract, dealers said.
Noting the central bank's intervention, banks rushed to sell dollars on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, according to dealers. This also provided support to the Indian currency. "Most exporters sold (dollars) around 85.80-85.75 (a dollar), after that they may have stopped," said a dealer at a state-owned bank.
During the day, the rupee is likely to move in a range of 85.50-85.90 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.85 a dollar. (Pratiksha)
India Rupee: Hits lifetime low; posts biggest 1-day fall in over 22 months
| AT 1230 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.7300 | 85.3100 | 85.3100 | 85.7350 | 85.2625 |
| 1-year dlr/rupee fwd (paise) | 200.00 | 183.00 | 201.00 | 183.00 | 199.00 |
MUMBAI – The rupee slumped against the dollar due to persistent demand for the greenback from importers, leading to stop losses being triggered on short dollar bets, dealers said. The rupee fell to a lifetime low of 85.7350 a dollar. Most of the dealers noted that the Reserve Bank of India did not intervene in the market aggressively to stop the rupee's fall.
"We did not expect it (rupee) to go beyond 85.50," a dealer with a state-owned bank said. "As soon as it hit 50 (85.50 a dollar), a lot of buying (for dollars) came in."
The rupee fell almost 47 paise during the day, posting its biggest one-day fall since February 2023, before recovering some of the losses.
Importers rushed to purchase the greenback amid fears of a further fall in the rupee, dealers said. Banks also persistently bought the dollar on behalf of importers and corporates to meet their month-end payment obligations.
Further, banks bought dollars to cover their existing short dollar bets ahead of the expiry of front-month currency futures and options contract, which weighed on the Indian unit, dealers said.
Most dealers said the RBI notably did not intervene aggressively in the foreign exchange market, which further exerted pressure on the rupee. Meanwhile, some exporters sold dollars, noting the relatively high dollar/rupee levels, which helped the rupee erase some of its losses, dealers said.
During the day, the rupee is likely to move in a range of 85.40-85.90 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.80 a dollar. (Sourabh Kumar and Gowri Lakshmi)
India Rupee: Premiums calm amid mayhem in spot mkt; all tenures slightly up
| AT 1505 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.5100 | 85.3100 | 85.3100 | 85.8075 | 85.2625 |
| 1-year dlr/rupee fwd (paise) | 201.00 | 183.00 | 201.00 | 183.00 | 199.00 |
MUMBAI – While there was mayhem in the spot market, the dollar/rupee forward market remained relatively calm, with premiums on most tenures rising slightly as some importers purchased dollars for forward delivery, dealers said. The one-year dollar/rupee forward premium was up by just one basis point at 2.34% on an annualised basis at 1502 IST, against Thursday's close of 2.33%. It was at 201.00 paise, against 199.00 paise on Thursday. In the spot market, however, the dollar/rupee has moved higher by about 54 paise, with rupee hitting a record low of 85.8075 a dollar.
"Fortunately there was nothing of that sort happening in forwards today (Friday)," a dealer with a private bank said. Premium on the one-year dollar/rupee forward contract was slightly up as the yield on the benchmark 10-year US Treasury note fell marginally on Thursday. Premiums on the forward of a currency pair are reflective of the interest rate differential between the two countries.
Forward premiums across tenures have risen significantly in recent weeks, with some importers' dollar purchases for forward delivery on Friday supporting it, dealers said. Importers purchased forward dollars, noting a drastic downward movement in the rupee in the spot market, dealers said. The one-year dollar/rupee forward premium has risen over 30 basis points since banks started taking advantage of the arbitrage opportunity between the onshore forward and offshore non-deliverable forward dollar/rupee levels, dealers said. Premiums started rising due to arbitrage trade in early December.
Further, a large deficit in the banking system liquidity also kept forward premiums largely higher, dealers said. While the liquidity deficit narrowed on Thursday, it was considerably high at INR 1.89 trillion, as per data from the RBI. "I do not see the forward premium going down for now for simple reasons – one is that liquidity is so tight and then this arbitrage trade is continuously going on," a dealer with another private bank said.
This week, the one-year forward premium has risen about 10 bps, largely on account of such arbitrage trade, and some importers' forward dollar purchases, dealers said. The rise, however, was limited as a few dealers said the Reserve Bank of India has been intermittently selling dollars for forward delivery, likely to nullify its spot interventions and avoid pushing out rupee liquidity, dealers said.
Some banks also sold dollars for forward delivery, taking advantage of relatively higher dollar/rupee forward levels, dealers said. This limited the rise in forward premiums, they said.
India Rupee: Trims some losses; RBI, exporters likely sell dlrs aggressively
| AT 1425 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.5375 | 85.3100 | 85.3100 | 85.8075 | 85.2625 |
NEW DELHI – The rupee erased a significant portion of its losses against the dollar as banks persistently sold the greenback, likely on behalf of the Reserve Bank of India and exporters, dealers said.
The RBI likely sold dollars around 85.80 a dollar aggressively, following which the Indian unit pared almost 25 paise of losses, dealers said. "They (RBI) were pretty aggressive (in dollar selling) above 85.80. I don't think anyone was expecting such a fall (in the rupee)," said a dealer at a private bank.
The rupee hit a lifetime low of 85.8075 a dollar earlier in the day owing to dollar buys on behalf of importers and ahead of the expiry of the front-month currency futures and options contract, dealers said.
Noting the central bank's intervention, banks rushed to sell dollars on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, according to dealers. This also provided support to the Indian currency. "Most exporters sold (dollars) around 85.80-85.75 (a dollar), after that they may have stopped," said a dealer at a state-owned bank.
During the day, the rupee is likely to move in a range of 85.50-85.90 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.85 a dollar. (Pratiksha)
India Rupee: Hits lifetime low; posts biggest 1-day fall in over 22 months
| AT 1230 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.7300 | 85.3100 | 85.3100 | 85.7350 | 85.2625 |
| 1-year dlr/rupee fwd (paise) | 200.00 | 183.00 | 201.00 | 183.00 | 199.00 |
MUMBAI – The rupee slumped against the dollar due to persistent demand for the greenback from importers, leading to stop losses being triggered on short dollar bets, dealers said. The rupee fell to a lifetime low of 85.7350 a dollar. Most of the dealers noted that the Reserve Bank of India did not intervene in the market aggressively to stop the rupee's fall.
"We did not expect it (rupee) to go beyond 85.50," a dealer with a state-owned bank said. "As soon as it hit 50 (85.50 a dollar), a lot of buying (for dollars) came in."
The rupee fell almost 47 paise during the day, posting its biggest one-day fall since February 2023, before recovering some of the losses.
Importers rushed to purchase the greenback amid fears of a further fall in the rupee, dealers said. Banks also persistently bought the dollar on behalf of importers and corporates to meet their month-end payment obligations.
Further, banks bought dollars to cover their existing short dollar bets ahead of the expiry of front-month currency futures and options contract, which weighed on the Indian unit, dealers said.
Most dealers said the RBI notably did not intervene aggressively in the foreign exchange market, which further exerted pressure on the rupee. Meanwhile, some exporters sold dollars, noting the relatively high dollar/rupee levels, which helped the rupee erase some of its losses, dealers said.
During the day, the rupee is likely to move in a range of 85.40-85.90 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.80 a dollar. (Sourabh Kumar and Gowri Lakshmi)
India Rupee: Hits record low on importers' dollar buys despite RBI dlr sales
| AT 0938 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 85.3925 | 85.3100 | 85.3100 | 85.3975 | 85.2625 |
MUMBAI – The rupee fell to a record low against the dollar Friday as banks continuously purchased the greenback on behalf of importers, dealers said. However, some banks sold the greenback, likely on behalf of the Reserve Bank of India, which prevented a sharp fall in the rupee, they said. So far, the rupee has hit a record low of 85.3975 a dollar.
"There is heavy demand for dollars. There are importers' demand, custodian buying (of dollars)," a dealer at a public sector bank said.
Banks purchased dollars for importers, who bought the greenback, fearing further fall in the rupee, dealers said. Some importers also purchased the greenback to meet their month-end payment obligations, which put the rupee under immense pressure, they said. Banks also purchased the greenback on behalf of investors looking to withdraw funds from Indian financial markets, dealers said.
The dollar index received support as the Japanese yen was near a five-month low against the US currency on Friday after the 'summary of opinions' from the Bank of Japan's December policy meeting, released on Friday, showed some officials remained cautious over raising rates amid global uncertainties, including the incoming administration under US president-elect Donald Trump.
"There are also investors who are taking out money due to increased risk aversion. The dollar is getting that safe haven boost," a dealer at another state-owned bank said.
At 0959 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 108.12, compared to its previous close of 108.08 on Thursday and 108.12 on Tuesday.
However, some banks stepped in with dollar sales, likely on behalf of the RBI, which prevented the rupee from falling sharply and curbed excessive market volatility. "The central bank is offering (dollar sales), the rupee will likely fall past a few key levels today," a dealer at a public sector bank said.
Some banks also sold the greenback on behalf of exporters, who wanted to take advantage of the higher dollar/rupee levels, which provided some cushion to the local unit, dealers said. During the day, the rupee is likely to move in a range of 85.25-85.50 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.45 a dollar. (Gowri Lakshmi)
India Rupee - Asia FX:South Korean won over 15-yr low amid political turmoil
MUMBAI – Most Asian currencies were down against a steady dollar index, with the South Korean won taking the biggest hit and sinking to an over 15-year low. The South Korean currency was down 1.1% against the greenback in early trade amid yet another political crisis brewing in the far-east nation.
Yoon Suk Yeol was impeached and suspended from the Office of President of South Korea due to his declaration of a brief martial law in early December. The opposition in the Parliament has now moved a motion to impeach the prime minister and Acting President Han Duck-soo. The finance minister of South Korea termed the latest impeachment attempt by the opposition as detrimental to the health of the domestic economy. Meanwhile, erstwhile president Yoon Suk Yeol is undergoing a hearing in the constitutional court.
The Taiwan dollar was unchanged against the dollar amid a largely steady dollar index. The index, which measures the strength of the greenback against a basket of six major currencies, moved little after the release of the US unemployment data on Thursday. Data showed initial claims for state unemployment benefits decreased by 1,000 to a seasonally adjusted total of 219,000 for the week ending Saturday. Economists surveyed by Reuters had anticipated 224,000 claims for the aforementioned week.
The Philippines peso rose 0.2%, while the Malaysian ringgit fell 0.2% against the dollar. The Thai baht was down 0.1% against the US currency after the Bank of Thailand forecast inflation to be in the range of 1-3% until 2026. Thailand's inflation remained below the target for the sixth straight month last month at 0.95%. (Sourabh Kumar)
India Rupee: Expected range for rupee - Dec 27
Informist, Friday, Dec. 27, 2024
MUMBAI – Following are the expected support and resistance levels for the rupee on Friday, as forecast by leading banks and brokerages in an Informist poll:
| PARTICIPANT | SUPPORT | RESISTANCE |
| Foreign bank | 85.35 | 85.12 |
| Brokerage firm | 85.38 | 85.18 |
| Brokerage firm | 85.35 | 85.15 |
(Sourabh and Pratiksha)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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