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Informist, Tuesday, Dec. 31, 2024

By Gowri Lakshmi

MUMBAI – The rupee ended calendar year 2024 at a record closing low against the dollar as banks persistently purchased the greenback on behalf of importers, dealers said. However, some foreign banks' greenback sales for foreign fund inflows and a fall in the dollar index gave some comfort to the local unit. The Indian currency depreciated 2.9% against the dollar in 2024.

"We are seeing demand (for dollars) from importers throughout. The depreciating bias for the rupee is going to stay for some time, that's for sure," said a dealer at a private bank. After falling almost 0.1% against the dollar, the rupee ended at a record closing low of 85.6150 a dollar Tuesday. The Indian unit moved in a range of 8 paise during the day and settled at a lifetime closing low for the sixth consecutive session.

Overall trade volume remained lacklustre owing to the holiday season and because multiple global markets were shut or closed earlier for New Year's Eve, dealers said.

The rupee opened slightly weak at 85.5900 a dollar and came under further pressure as banks rushed to buy the greenback on behalf of importers, dealers said. Importers continued to stock up on dollars, especially after seeing the volatility and sharp drop in the rupee Friday. The rupee had fallen to a lifetime low of 85.8075 a dollar Friday, posting its biggest intraday fall since February 2023. Banks also bought the greenback on behalf of importers to meet their month-end payment obligations, dealers said.

The volume in the currency market was dull as most traders were on leave for the holiday season, dealers said. Further, some banks also purchased the greenback on behalf of foreign portfolio investors looking to withdraw funds from the domestic equity markets, which pulled the rupee to its day's low of 85.6400 a dollar.

The domestic unit was also weighed down by a fall in other Asian currencies, particularly the offshore Chinese yuan, dealers said. The yuan weakened after data released Tuesday showed China's manufacturing activity expanded for a third straight month in December, but at a slower pace. Other Asian currencies declined 0.1-0.4% against the dollar.

Meanwhile, the Dollar Index eased slightly, falling below the 108-mark during the day, after US Treasury yields fell following the latest economic data, which showed business activity in the US Midwest contracted more than expected in December. Other data Monday showed US pending home sales rose more than expected in November, registering a fourth consecutive month of gains. This gave some support to the Indian unit, according to dealers.

At 1530 IST, the Dollar Index, which measures the strength of the dollar against six major currencies, was at 107.92 compared to 108.08 Monday and 108.01 Friday.

The rupee also found comfort in some foreign banks' dollar sales for foreign fund inflows related to Foreign Currency Non-Resident (Banks) accounts. Some foreign banks also sold the greenback for exporters who wanted to meet their year-end payment obligations. However, most exporters are "calmly waiting" for the rupee to fall below its lifetime low of 85.80 a dollar before letting go of their dollar holdings, dealers said.

"I think the market is a bit confused after Friday's movement (in the rupee). There is buying pressure (for dollars), but that too with some caution, because after the way the RBI (Reserve Bank of India) showed its heavy-handed approach in selling dollars later in the day, nobody knows when they may do that again. At the same time, exporters now think that 85.80 has happened once, so it can happen again," said a dealer at a private bank.

FORWARDS

The premium on the one-year dollar/rupee forward contract erased earlier losses and ended at its highest level in over two years as banks bought dollars on behalf of importers and due to an overnight fall in US Treasury yields, dealers said.

The yield on the 10-year US Treasury note fell 6 basis points overnight to 4.54%, as business activity in the Chicago region in December was lower than forecast. Housing data for November in the US also showed that pending house sales were the highest since early 2023. Premiums on the forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Banks bought dollars for forward delivery on behalf of importers who expect the Indian unit to depreciate further in the near term, which aided premiums. Earlier in the day, the premium on dollar/rupee forward contracts fell across tenures, including the very near-dated dollar/rupee swap rates, as state-owned banks sold dollars for forward delivery, noting relatively high levels, dealers said. "Actually, a lot of receiving was there initially in near terms, so forwards came down, but then paying came in, and it all corrected," said a dealer at a state-owned bank.

Premiums across tenures jumped Monday, with the very near-dated dollar-rupee swap rates rising sharply owing to corporations deploying excess dollars through overnight foreign exchange swaps amid the year-end and due to tight rupee liquidity in the banking system. Some dealers speculated that the RBI is likely to have sold dollars for forward delivery in near tenures to neutralise its spot interventions and avoid draining rupee liquidity, which weighed on forward premiums.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 216.54 paise, against 211.02 paise Monday. On an annualised basis, the premium was at 2.53%, against Monday's close of 2.47%. The premium fell to a low of 2.38% earlier in the day.

OUTLOOK

The rupee may start calendar 2025 on a steady note against the dollar as major financial markets across the globe, including the US, will remain shut on New Year's Day, dealers said.

They said the trade volume will be lacklustre due to the ongoing holiday season and the market will only pick up momentum by Thursday or even only by next week. Financial markets in Japan, Australia, the UK, and the US will be shut on New Year's Day.

"The rupee will continue to depreciate. We can expect the rupee market to pick up pace by Thursday or by next week. Depreciation of the rupee is likely, not instantly, but gradually in a month we can expect the rupee to fall significantly," a dealer at a state-owned bank said.

The rupee will take cues from movement in the Dollar Index and offshore Chinese yuan, dealers said. They expect importers to continue purchasing the greenback, fearing a further fall in the rupee, which may weigh on the domestic unit. They also expect the RBI to intervene in the market with dollar sales to prevent the rupee from falling sharply and curb any sudden volatility. 

The rupee is seen in a range of 85.50-85.80 a dollar, with strong technical support pegged at 85.65 a dollar.

India Rupee - World FX: Dollar index falls on weak US economic data; yen up 0.4%

MUMBAI – The dollar index fell, in line with the US Treasury yields, and remained below the 108-mark on Tuesday after recent economic data indicated sluggishness in the world's largest economy. Data on Monday showed business activity in the US Midwest contracted more than expected in December. Housing data for November in the US also showed that pending house sales were the highest since early 2023.

At 1610 IST, the dollar index, which measures the strength in the dollar against six major currencies, was at 107.92 compared with 108.08 on Monday and 108.01 on Friday. Market participants now await the release of the key US manufacturing PMI and weekly jobless claims data, due Thursday. 

The Japanese yen rose 0.4% against the greenback Tuesday, hitting a two-week high, on expectation of a possible interest rate hike by the Bank of Japan in January after the December policy meeting's minutes and recent comments from central bank policymakers hinted at the same. 

Tracking a fall in the dollar index, both the euro and the pound sterling rose 0.1% against the US unit in a thin trade volume due to the ongoing holiday season. The London Stock Exchange will close earlier Tuesday on account of New Year's Eve and financial markets in the UK will remain shut on Wednesday on account of the New Year. Market participants now await the eurozone manufacturing purchasing manager's index and the UK PMI, both due Thursday.

The Australian dollar was down 0.1% against the greenback after data released on Tuesday showed China's manufacturing activity expanded for a third straight month in December, but at a slower pace. China's purchasing managers' index for manufacturing slowed to 50.1 in December from 50.3 in November, remaining above the 50-mark separating growth from contraction but missing a median forecast of 50.3 in a Reuters poll. The New Zealand dollar was down 0.3% against the US unit. Any change in the Chinese economy influences the Australian and New Zealand dollar due to their close bi-lateral trade relations.  (Gowri Lakshmi)

India Rupee: Premium pares losses as importers buy fwd dollars, US yields fall

NEW DELHI – The premium on the one-year dollar/rupee forward contract erased earlier losses and rose slightly as banks bought dollars on behalf of importers and due to an overnight fall in US Treasury yields, dealers said.

The yield on the 10-year US Treasury note fell 6 basis points overnight to 4.54%, as business activity in the Chicago region in December was lower than forecast. Housing data for November in the US also showed that pending house sales were the highest since early 2023. Premiums on the forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Banks bought dollars for forward delivery on behalf of importers, who expect the Indian currency to depreciate further in the near term, which aided premiums. The rupee fell to a lifetime low of 85.8075 a dollar on Friday. "Once the receiving ended, paying had to come in. That sentiment is going to stay after what happened in spot," said a dealer at a state-owned bank. "But forwards have become pretty volatile, it's tough to gauge a direction from here."

Earlier in the day, the premium on dollar/rupee forward contracts fell across tenures, including the very-near dollar/rupee swap rates, as state-owned banks sold dollars for forward delivery, noting relatively high levels, dealers said. "We saw heavy receiving earlier in the day from nats (nationalised banks). Levels had shot up quite a bit the other day, some correction had to happen," said a dealer at a private bank.

Premiums across tenures jumped on Monday, with the very near-dated dollar-rupee swap rates rising sharply owing to corporates deploying excess dollars through overnight foreign exchange swaps amid the year-end and due to tight rupee liquidity in the banking system. The premium on the one-year dollar/rupee forward contract ended near a 21-month high on Monday.

Some dealers speculated that the Reserve Bank of India is likely to have sold dollars for forward delivery in near tenures in order to neutralise its spot interventions and avoid draining rupee liquidity, which weighed on forward premiums.  

At 1350 IST, the premium on the one-year exact-period dollar/rupee forward contract was 213.54 paise, against 211.02 paise on Monday. On an annualised basis, the premium was at 2.49%, against Monday's close of 2.47%. The premium fell to a low of 2.38% earlier in the day.  (Pratiksha)

India Rupee: Remains down on importers' dollar buys; FX inflows limit fall

MUMBAI – The rupee remained down against the greenback as banks bought dollars on behalf of importers, looking to meet their month-end and year-end payment requirements, dealers said. However, some foreign banks sold the greenback, likely for foreign fund inflows and on behalf of exporters, which limited losses in the Indian unit, they said. 

Volume in the currency market remained subdued as most traders were on leave due to the year-end holiday season. "Market volumes are dull. On Friday, they (Reserve Bank of India) intervened in a way which now shows that there is no particular level at which there are huge volumes. Volumes have been disbursed across levels now," a dealer at a state-owned bank said. "Last Friday, one level after the other began to breach, which led to the panic buys (of dollars). They (RBI) wouldn't want it to happen again." 

Some importers also bought the greenback in fear of further depreciation in the Indian unit, dealers said. However, the rupee found some support from inflows related to the Foreign Currency Non-Resident (Banks) accounts, some dealers said. Some banks also sold the greenback on behalf of exporters who wanted to meet their year-end payment obligations, they said. Meanwhile, most exporters are "calmly waiting" for better dollar/rupee levels to let go of their dollar holdings, now that the rupee touched the lifetime low of 85.8075 a dollar last week, according to dealers.

For the rest of the day, the rupee will likely move in a range of 85.40-85.65 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.65 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Dec. 31

MUMBAI – At 1116 IST, the rupee was at 85.6150 per dollar. At 0900 IST, the rupee was at 85.5900 a dollar against its previous close of 85.5350. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Pratiksha)

India Rupee: Falls as importers buy dollars; volume lacklustre at year-end

MUMBAI – The rupee was slightly lower against the greenback Tuesday as banks purchased dollars on behalf of importers, dealers said. However, they said trade volume in the currency market continued to be lacklustre due to the ongoing holiday season. "Major markets across the world are shut, so there is little volatility and not much liquidity," a dealer at a state-owned bank said. Financial markets in Japan and South Korea are shut on account of New Year's Eve.

Banks rushed to purchase the greenback for importers, fearing a further fall in the local unit, dealers said. Some dealers pointed out that ever since the Reserve Bank of India allowed the Indian currency to fall to its lifetime low of 85.8075 a dollar on Friday, importers have been buying dollars with a sense of panic. Some importers also bought dollars to meet their month-end payment obligations.

Some dealers said banks also bought the US unit on behalf of foreign portfolio investors looking to pull out funds from domestic equities, which also weighed on the Indian unit. At 0927 IST, benchmark indices, the Nifty 50 and Sensex, were down 0.5% and 0.4%, respectively. 

However, a marginal decline in the dollar index provided some cushion to the rupee, dealers said. The dollar index fell below the 108 mark as US Treasury yields retreated after recent data showed business activity in the US Midwest contracted more than expected in December. At 0956 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 107.98 compared to 108.08 on Monday and 108.01 on Friday.

"The market will be range-bound for the day. We can expect it to go up to 85.65 (a dollar), but there shouldn't be much volatility because major players are absent," a dealer at a public sector bank said.

During the day, the rupee is likely to move in a range of 85.40-85.65 against the dollar. Dealers see strong immediate technical support for the Indian unit at 85.65 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Mixed amid holiday-thinned trade; Thai baht down 0.3%

NEW DELHI – Asian currencies moved on a mixed note amid holiday-thinned trade volumes on Tuesday as market participants awaited economic data from the US for clues about the future of US interest rates in 2025. They now await the release of the key US manufacturing PMI and weekly jobless claims data, due on Thursday, in addition to remarks by Fed policymakers.

Asian currencies were supported by a slight decline in the dollar index, tracking a fall in US Treasury yields. US yields retreated after data released on Monday showed business activity in the US Midwest contracted more than expected in December. At 0930 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 107.97 compared to 108.08 on Monday and 108.01 on Friday.

The Thai baht fell 0.3% against the dollar. Bank of Thailand Governor Sethaput Suthiwartnarueput said in an interview on Tuesday that the central bank is okay with movement in the Thai baht if it is based on fundamentals. However, if movements are not underpinned by fundamentals, it will undertake interventions as necessary. 

The Philippine peso was up 0.2% against the greenback after President Ferdinand Marcos Jr signed the 2025 Budget into law on Monday, saying a planned 10% increase in government spending to a record 6.33 trillion pesos would support economic growth and reduce poverty.

The South Korean won, the Indonesian rupiah, and the Malaysian ringgit were flat against the US unit ahead of the new year. The Chinese yuan was also largely steady against the dollar even after data released on Tuesday showed China's manufacturing activity expanded for a third straight month in December, but at a slower pace. China's purchasing managers' index for manufacturing slowed to 50.1 in December from 50.3 in November, remaining above the 50-mark separating growth from contraction but missing a median forecast of 50.3 in a Reuters poll.  (Pratiksha)

India Rupee: Expected range for rupee - Dec. 31

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:

(Gowri Lakshmi)

End

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

Edited by Rajeev Pai

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