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Informist, Thursday, Jan. 2, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended at a record closing low against the dollar for the eighth consecutive trading session on Thursday as banks persistently bought dollars on behalf of importers, dealers said. The rupee fell against the greenback despite dollar sales by some banks on behalf of the Reserve Bank of India, they said.

The rupee against the greenback fell despite intervention by the Reserve Bank of India, by selling dollars in the spot market, they said.

"The strength in the dollar is definitely dragging on the rupee. Now, the US markets have opened after the holiday, the hawkishness about the Fed (US Federal Reserve) rate cut and dollar bullishness is back today (Thursday)," a dealer at a foreign bank said.

After moving in a wide range of over 12 paise during the day, the rupee settled at a record closing low of 85.7525 against the dollar, compared with the previous close of 85.6450 a dollar. The local unit fell to a low of 85.7950 during the day, just shy of the lifetime low of 85.8075 hit on Friday.

The rupee started the day lower against the greenback at 85.7025 as the dollar index hovered around the over 2-year high it hit on Tuesday, dealers said. The dollar index rose to an over 2-year high of 108.58 on Tuesday on expectations of a shallow rate-cut cycle by the US Federal Reserve. The index also got a boost as investors were confident of the growth in the US economy and expected price pressures from the policies of President-elect Donald Trump.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 108.58, against the previous close of 108.48 on Tuesday and 108.08 on Monday. 

The rupee also came under pressure as banks rushed to purchase dollars on behalf of importers, fearing a sharper fall in the domestic currency, dealers said. "With the Trump administration coming in a few days, we can definitely see the dollar strengthening and the rupee falling. Importers have once again entered into a panic mode," a dealer at a foreign bank said. 

However, the fall in the rupee was limited as some banks sold the greenback, likely on behalf of the RBI, throughout the day. The intervention was also aimed at curbing excessive volatility, dealers said. Some exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, also sold the greenback, dealers said. However, most exporters are waiting for the rupee to fall past the 85.80-per-dollar level before placing large bets, they said. 

"There is RBI intervention, but they are not able to bring the levels down. They (RBI) have to take into account export valuation as well, so after a while they will have to leave too," a dealer at a foreign bank said. "Importers are panicking, oilers are hedging, and exporters are just enjoying the moment," he added.

A rise in the domestic stock market also provided some cushion to the rupee, some dealers said. On Thursday, the Nifty 50 and the Sensex ended 1.9% and 1.8% higher, respectively.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at the highest level since Oct. 13, 2022 as banks purchased the US currency for forward delivery, taking advantage of the arbitrage opportunity between the dollar/rupee onshore forward and offshore non-deliverable forward levels, dealers said.

The one-year forward premium, which rose to a near 27-month high of 2.64% during the day, retracted slightly after touching the high. Some market players attributed this slight easing in forward premiums to the Reserve Bank of India's dollar/rupee buy/sell operations. They said the central bank has been intermittently selling dollars for forward delivery for the past few weeks, likely to nullify its spot interventions and avoid pushing out rupee liquidity, dealers said. Dealers also said some banks also sold dollars for forward delivery to take advantage of relatively higher premiums. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 222.09 paise, against 217.08 paise on Wednesday. On an annualised basis, the premium was at 2.59%, against Wednesday's close of 2.52%.

OUTLOOK

On Friday, the rupee will take cues from movement in the dollar index, dealers said. Dealers expect importers to continue purchasing the greenback, wary of a sharper fall in the rupee. However, they also expect exporters to sell their dollars to take advantage of the relatively higher dollar/rupee levels.

Dealers expect the RBI to step in with dollar sales to prevent the rupee from falling sharply, and to curb excessive volatility in the market. Market participants said despite the intervention by the RBI, the rupee is continuing to fall due to a strong dollar index.

The rupee is seen in a range of 85.60-85.90 a dollar, with strong technical support pegged at 85.85 a dollar.

India Rupee: Premium near 27-month high on onshore-offshore arbitrage play

MUMBAI – The premium on the one-year dollar/rupee forward contract on Thursday rose to 2.64%, the highest since Oct. 13, 2022, as banks purchased the US currency for forward delivery, taking advantage of the arbitrage opportunity between the dollar/rupee onshore forward and offshore non-deliverable forward levels, dealers said.

"(Forward premiums on) Longer tenures are up, and this rise is primarily because of the onshore-offshore difference," a dealer with a private bank said. "But shorter tenures are down, and it can broadly be because of the (dollar/rupee) buy/sell (swaps) that the central bank has been conducting for some time now."

While the one-year forward premium rose to a near 27-month high of 2.64%, on an annualised basis, the premiums on shorter tenures, including on the one-month and two-month contracts, fell. The one-year forward premium retracted slightly after touching a high. Some market players attributed this slight reversal in forward premiums to the Reserve Bank of India's dollar/rupee buy/sell operations.

They said the central bank has been intermittently selling dollars for forward delivery for the past few weeks, likely to nullify its spot interventions and avoid pushing out rupee liquidity, dealers said. On Thursday, the rupee fell close to its record low of 85.8075 a dollar that it had hit on Dec. 27. So far Thursday, the rupee has fallen to a low of 85.7950 a dollar.

Some dealers also cited the easing of gains in the one-year forward premium to dollar sales for forward delivery by some banks, who wanted to take advantage of relatively higher premiums. With premiums hitting highs continuously, another section of traders, however, refrained from selling large amounts of dollars for forward delivery, in the hope that premiums would rise further, dealers said.

At 1421 IST, the premium on the one-year exact-period dollar/rupee forward contract was 222.09 paise, against 217.08 paise on Wednesday. On an annualised basis, the premium was at 2.59%, against Wednesday's close of 2.52%.  (Sourabh Kumar)

India Rupee: Remains down; RBI's likely intervention prevents record low

MUMBAI – The rupee remained lower against the dollar, hovering near its lifetime low of 85.8075 a dollar hit last week, as banks persistently 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 the local unit from hitting a record low.

Dealers said importers purchased the greenback, fearing a further fall in the rupee. The Indian currency has depreciated 0.3% so far this week. "The rupee will continue to depreciate with a strengthening dollar. Trump coming in another 2 weeks and a likely rate cut in February by RBI, all this is acting against the rupee," a dealer at a state-owned bank said. 

The dollar index kicked off the New Year on a strong note and hovered near its highest level in over two years, hit on Tuesday, on expectation of a slower pace of interest-rate cuts by the US Federal Reserve this year, dealers said. At 1221 IST, the dollar index, which measures the strength in the dollar against a basket of six currencies, was at 108.35, compared with 108.48 on Tuesday and 108.08 on Monday. 

Some banks sold the greenback, likely on behalf of the RBI, at around the 85.79-a-dollar level, which prevented the rupee from falling further and curbed excessive volatility in the exchange rate, dealers said. The rupee fell to a low of 85.7950 a dollar during the day, just shy of its record low. "I think there will be some resistance at 85.80 for some time. They (RBI) are trying to protect that level, but the question is for how long?" said a dealer at a private bank.

For the rest of the day, the rupee is likely to move in a range of 85.65-85.85 against the dollar. Dealers see immediate technical support for the Indian unit at 85.80 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Jan 2

MUMBAI – At 1153 IST, the rupee was at 85.7825 per dollar. At 0900 IST, the rupee was at 85.7025 a dollar against its previous close of 85.6450. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha, Sourabh Kumar and Gowri Lakshmi)

India Rupee: Down as importers buy dlrs, dlr index index near over 2-yr high

MUMBAI – The rupee fell against the dollar as banks purchased the greenback on behalf of importers and as the dollar index continued to hover near its over two-year high, dealers said. 

Dealers said banks purchased the greenback on behalf of importers, wary of a further fall in the rupee. "There is general buying pressure (of dollars) from importers. The trend in USD/INR (dollar/rupee) is on the upside...importers have come to peace with the fact that the level (of dollar/rupee) is not going to come down (appreciate)," a dealer at a state-owned bank said.

Further, the dollar index remained strong due to expectations of a slower pace of monetary policy easing by the US Federal Reserve and ahead of incoming president-elect Donald Trump's administration and its policies that are widely expected to boost growth and add to price pressures. At 0944 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.31, compared to 108.48 on Tuesday and 108.08 on Monday. Market participants are now waiting for the key US manufacturing PMI and weekly jobless claims data later in the day for further cues on the US interest rate path. 

However, a rise in domestic equities aided the local currency, according to dealers. At 0946 IST, the benchmark indices, the Nifty 50 and the Sensex, were up 0.4% each.

Dealers also said that the trade volume in the currency market remained lacklustre as traders had just returned to trading desks from the New Year holidays. During 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 85.80 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Mixed ahead of US econ data; South Korean won up 0.8%

NEW DELHI – Asian currencies moved on a mixed note as market participants awaited key economic data from the US for cues on 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 comments by Federal Reserve officials.

Trading volumes in regional markets were still lower than usual, as major markets such as Japan remained closed for the New Year holidays. The South Korean won rose 0.8% against the dollar after South Korea's central bank governor said on Thursday that the pace of monetary policy easing would need to be flexible this year due to rising political and economic uncertainty. "Monetary policy needs to be operated with flexibility and agility, as political and economic uncertainty is unprecedentedly high," Bank of Korea Governor Rhee Chang-yong said in a New Year's address. 

However, gains in the currency were limited as data released on Thursday showed the purchasing managers index for manufacturers in South Korea, compiled by S&P Global, fell to 49.0 last month from 50.6 in November, falling below the 50-mark that separates expansion from contraction for the third time since August.

The Indonesian rupiah fell 0.6% against the greenback even after Finance Minister Sri Mulyani Indrawati said on Thursday that Indonesia's budget deficit for the 2024 fiscal year was below the government's most recent estimate of 2.7% of GDP. The deficit was almost as narrow as the government's original plan to keep the fiscal gap at 2.29% of GDP, she said.

The Chinese yuan was flat against the greenback. The People's Bank of China supported the currency through the official daily reference rate after it slipped to the weakest level since 2022 at the year-end in offshore trading. Market participants are closely monitoring China's economic recovery in 2025 after government officials pledged a slew of support measures to promote growth in the economy.

The Philippine peso rose 0.5% against the dollar, while the Malaysian ringgit fell 0.1% against the dollar. The Thai baht was up 0.3% against the dollar even after minutes of the Bank of Thailand's December monetary policy meeting showed on Thursday that uncertainty around the economy had considerably increased, primarily due to uncertainty around the impact of possible US economic policies. (Pratiksha)

India Rupee: Expected range for rupee - Jan 2

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

(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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