More Stories

Informist, Wednesday, Jan. 1, 2025

 

By Gowri Lakshmi

 

MUMBAI – Even though the Indian unit erased a significant portion of its losses, it ended at a record closing low against the dollar for the seventh consecutive trading session due to a strong dollar index and greenback purchases by importers, dealers said. Volume in the currency market remained lacklustre on the first day of the new calendar year.  

 

"Importers have been waiting to hedge on dips (in dollar/rupee) since 84.00 levels, but when they did not find the chance, they started hedging at whatever dips they got. That is what is happening now," said a dealer at a brokerage firm.

 

Dealers said some banks' greenback sales on behalf of exporters, supported the Indian unit. Some dealers speculated that the Reserve Bank of India may have intervened "mildly" through dollar sales to prevent the rupee from falling sharply.

 

After falling to a low of 85.7100 a dollar during the day, the rupee settled at 85.6450 against the greenback, against its previous close of 85.6150.

 

Despite opening steady at 85.6200 a dollar, the rupee soon came under pressure as banks rushed to purchase the greenback on behalf of importers, dealers said. They said the excessive demand for dollars from importers was due to fears of a sharp depreciation in the Indian currency.

 

The rupee was also weighed down by strength in the dollar. The dollar index rose to an over-two-year high on Tuesday as investor sentiment continued to be driven by expectations of a slower pace of the monetary policy easing cycle by the US Federal Reserve this year, and as the Oval Office gets ready for a Donald Trump administration on Jan. 20. "20 more days for Trump, market movement will then be determined whatever he tweets on X," a dealer at a state-owned bank said.  

 

The dollar index, which measures the strength of the dollar against a basket of six major currencies, rose to a high of 108.58 on Tuesday, the highest level since November 2022, before closing at 108.48 against 108.08 on Monday.

 

Dealers said overall trade volumes in the currency market remained lacklustre as most traders were on leave and as major financial markets, including the US, the UK and Japan, were shut on account of New Year's Day.

 

However, as the rupee fell to the day's low of 85.7100 a dollar, some banks sold the greenback on behalf of exporters, dealers said. While some took advantage of the relatively lower rupee level, most others were still in 'wait and watch' mode as the rupee had already tested 85.80 a dollar, dealers said. 

 

Dealers said a slight rise in domestic equities also aided the rupee. Both benchmark indices, the Nifty 50 and the BSE Sensex, ended higher Wednesday, with the former closing 0.4% up and the latter ending 0.5% higher. Some dealers also speculated that the RBI might have stepped in with dollar sales at around 85.70 a dollar to prevent the rupee from falling sharply and to curb excessive market volatility.

 

Market participants noted a change in the RBI's intervention strategy in the currency market lately. They said now the central bank might be trying to restrain itself from intervening aggressively, allowing the domestic currency to fall gradually. They said the reason for a change in the central bank's intervention strategy could be an over-valued Indian rupee. The latest data suggest that the rupee is over-valued by around 8% against its peers. The real-effective exchange of the rupee, which is measured against a basket of 40 currencies, in terms of trade-based weights, rose to a record 108.14 in November.

 

	AT 1530 IST	AT 0900 IST	HIGH	LOW	PREVIOUS(AT 1530 IST)
Spot rupee per $1	85.6450	85.6200	85.6200	85.7100	85.6150
1-year dlr/rupee fwd (paise)	217.08	218.50	218.50	213.50	216.54

 

FORWARDS 

After hitting a near-21-month high of 2.54% during the day, the premium on the one-year dollar/rupee forward contract retreated, and ended steady on Wednesday. Some banks sold dollars for forward delivery, taking advantage of a higher premium, which offset the upward pressure of forward dollar purchases by importers and corporates, dealers said.

 

"I think importers and corporates have been buying in forwards, hence the rise in premiums," a dealer with a state-owned bank said. "I think near-term (forward levels) came down more today (Wednesday) because of such a good level." As the rupee has been moving in a relatively wider range for the last month or so, the fear of a sharper fall in the domestic unit has started growing amongst market participants, dealers said. 

 

Importers purchased dollars for forward delivery, fearing a sharp fall in the rupee in the upcoming week, dealers said. Apart from forward dollar purchases by importers and corporates, premiums also received an upward push from a "high liquidity deficit". "While the deficit has come down, it is still quite high," a dealer with a private bank said. The liquidity deficit narrowed to INR 1.32 trillion on Tuesday from INR 2.06 trillion on Monday, as per the RBI website. The deficit narrowed on the back of inflows for the government's month-end spending, according to market participants.

 

Moreover, the benchmark 10-year US Treasury yield rose, which put a downward pressure on forward premiums, dealers said. The 10-year US Treasury yield was up on fears of higher inflation and fiscal deficit under the incoming Donald Trump administration. 

 

Similar to the spot market, market participants said overall volumes in the forward market were also low, as most of the dealers were on leave for New Year's Day. Market participants now wait for further data-points from the US to analyse the US rate trajectory, dealers said. 

 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 217.08 paise, against 216.54 paise on Tuesday. On an annualised basis, the premium was at 2.52%, against Tuesday's close of 2.53%.

 

OUTLOOK

On Thursday, 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 sharp fall in the rupee, which may weigh on the domestic unit. They also expect the RBI to intervene in the market with dollar sales, albeit less aggressively, to prevent the rupee from falling sharply and curb any sudden volatility. 

 

Market participants said the rupee will primarily have two challenges in January -- Trump-led US policies, and the risk of yuan depreciation. The uncertainty surrounding Trump's policies is expected to largely determine the market movement, coupled with a strengthening dollar index.

 

The rupee is seen in a range of 85.50-85.90 a dollar, with strong technical support pegged at 85.75 a dollar.

---

India Rupee - World FX: Major currency markets shut for New Year
 

	AT 1604 IST	HIGH	LOW	PREVIOUS
GBP/USD	1.2515	1.2569	1.2506	1.2515
EUR/USD	1.0350	1.0425	1.0344	1.0350
NZD/USD	0.5593	0.5646	0.5588	0.5593
AUD/USD	0.6184	0.6232	0.6179	0.6184
USD/JPY	157.3340	157.5510	156.0270	157.3340
USD/CAD	1.4391	1.4410	1.4338	1.4391
EUR/JPY	162.8580	163.4260	162.4432	162.8580
CHF/USD	1.1016	1.1083	1.1011	1.1016
EUR/CHF	0.9394	0.9429	0.9378	0.9394

 

MUMBAI – Major financial markets across the world, including the US, the UK and Japan, were shut on Wednesday on account of New Year's Day. This led to trade volumes being lacklustre in currency markets across the world. 

 

The dollar index surged to an over two-year high on Tuesday as investors prepared for fewer rate cuts in the US and the policies of President-elect Donald Trump in 2025. The dollar index, which measures the strength of the greenback against a basket of six major currencies, closed at 108.48 on Tuesday, as against 108.08 on Monday.  (Gowri Lakshmi)

---

India Rupee: Slightly down as importers purchase dollars amid low volume

 

	AT 1244 IST	AT 0900 IST	HIGH	LOW	PREVIOUS(AT 1530 IST)
Spot rupee per $1	85.7025	85.6200	85.6200	85.7100	85.6150

 

MUMBAI – The rupee was slightly down against the dollar under pressure from importers' purchases of the US currency, on a day of very low volume, dealers said. They said the fall was limited as some banks sold dollars on behalf of exporters. Trade volume continued to be lacklustre as many traders were on leave on the first day of the new year.

 

"Importers are active but other major players are largely absent, so the buying pressure is from them," a dealer at a state-owned bank said. 

 

Banks purchased the greenback on behalf of importers, as they wanted to stock up dollars, wary of a further fall in the rupee, dealers said. They said the overall volume in the market is likely to pick up only in the next week.

 

A strength in the dollar index also pushed the dollar/rupee higher, dealers said. The index, which measures the strength in the greenback against a basket of six major currencies, was 108.48 on Tuesday against 108.08 on Monday. It had hit over a two-year high of 108.58 on Tuesday.

 

Some exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, sold the greenback, limiting further fall in the domestic currency, dealers said. Meanwhile, most exporters were waiting for the rupee to breach the 85.80 a dollar before placing large bets. Further, a rise in domestic equities also provided some cushion to the domestic currency, dealers said. At 1312 IST, the Nifty 50 and the Sensex were up 0.3% and 0.4%, respectively.

 

For the rest of the day, the rupee is likely to move in a range of 85.60-85.80 against the dollar. Dealers see immediate technical support for the Indian unit at 85.75 a dollar. (Gowri Lakshmi)

---

India Rupee: Technical Levels for rupee - Jan 1

 

MUMBAI – At 1157 IST, the rupee was at 85.7025 per dollar. At 0900 IST, the rupee was at 85.6200 a dollar against its previous close of 85.6150. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

 

Participants	S2	S1	R1	R2
Foreign bank	86.00	85.80	85.45	85.30
Private bank	85.80	85.73	85.61	85.56
Brokerage firm	85.98	85.81	85.30	85.20

 

(Sourabh Kumar and Pratiksha)

---

India Rupee - Asia FX: Mixed; South Korean won down amid political turmoil

 

MUMBAI – Asian currencies traded on a mixed note Wednesday ahead of the release of the US Purchasing Managers' Index, due Thursday. Market participants across the globe welcomed a new calendar year. The dollar index surged to over a 2-year high on Tuesday as investor sentiments continued to be driven by expectations of a lower pace of interest-rate cuts from the US Federal Reserve in the new year, and in view of a potential uptick in US inflation under the new Donald Trump regime. 

 

Financial markets in the US were shut on account of New Year's Day. The dollar index, which measures the strength of the greenback against a basket of six major currencies, closed at 108.48 on Tuesday against 108.08 on Monday. The dollar index rose to over a 2-year high of 108.58 on Tuesday.

 

The South Korean won was down 0.4% against the greenback amid the ongoing political turmoil in the country. A court in South Korea approved to detain the erstwhile president Yoon Suk Yeol, who was impeached by the country's legislature after he imposed a brief martial law in the far-east nation in early December. However, losses in the currency were limited as data showed that the country's exports maintained growth momentum in December on the back of rising demand from China. 

 

The Philippines peso was down 0.1% against the US unit, tracking a slight fall in the domestic stock market. At 1008 IST, the benchmark index, the PSEi, was down 0.2%.

 

The Chinese yuan and the Taiwan dollar traded flat against the US currency. The Malaysian ringgit was also flat against the greenback. The currency was supported by data that showed Malaysia's headline inflation declined to 1.8% in November, from 1.9% in the previous month. 

 

The Indonesian rupiah was up 0.1% against the greenback, tracking a rise in the domestic stock market. At 1014 IST, the benchmark index, the Jakarta Composite Index, was up 0.6%. The Thai baht was up 0.2% against the greenback. However, gains in the currency were limited due to a fall in the domestic equity market. At 1015 IST, the benchmark Thai Set Index was down 0.1%.  (Gowri Lakshmi)

---

India Rupee: Slightly down as dlr index hits over 2-yr high; volume subdued

 

	AT 0945 IST	AT 0900 IST	HIGH	LOW	PREVIOUS(AT 1530 IST)
Spot rupee per $1	85.6750	85.6200	85.6200	85.6875	85.6150

 

NEW DELHI – On the first day of the new calendar year, the rupee fell slightly against the dollar as the dollar index surged to an over two-year high on Tuesday as investors prepared for fewer rate cuts in the US and the policies of President-elect Donald Trump in 2025, dealers said. 

 

The dollar index, which measures the strength of the dollar against six major currencies, was at 108.48 on Tuesday compared to 108.08 on Monday and 108.01 on Friday. The index rose to 108.58 on Tuesday, its highest level since Nov. 2022.

 

The volume in the currency remained lacklustre as most traders are on leave due to the holiday season, and as major financial markets across the globe, including the US, the UK and Japan, are closed on account of the New Year. "The market is very shallow right now. Most traders are not active and other markets are closed. So one can't gauge where it (the rupee) will go from here," a dealer at a state-owned bank said. However, some dealers pointed out that since the volume in the currency market was lower than usual, even moderate dollar buying could lead to large fluctuations in the exchange rate. 

 

However, dealers expect the Reserve Bank of India to intervene through dollar sales in case the Indian currency heads for a sharp depreciation to prevent it from testing the psychologically-important level of 86 per dollar. 

 

During the day, the rupee is likely to move in a range of 85.60-85.75 against the dollar. Dealers see immediate technical support for the Indian unit at 85.70 a dollar. (Pratiksha)

---

India Rupee: Expected range for rupee - Jan 1

 

MUMBAI – Following are the expected support and resistance levels for the rupee on Wednesday, as forecast by leading banks and brokerages in an Informist poll:

 

PARTICIPANT	SUPPORT	RESISTANCE
State-owned bank	85.70	85.40
Private bank	85.70	85.55
Foreign bank	85.70	85.40
Brokerage firm	85.59	85.39
Brokerage firm	85.65	85.52

 

 

 

 

 

 

 

 

(Sourabh Kumar, Gowri Lakshmi and Pratiksha)

 

End

 

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

 

Edited by Tanima Banerjee

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000 /+91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.