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Informist, Monday, Jan. 6, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended at a record closing low against the dollar for the tenth consecutive session owing to weakness in the Chinese yuan and continued dollar purchases on behalf of foreign portfolio investors and importers, dealers said. This was despite persistent dollar sales, likely on behalf of the Reserve Bank of India, they said.

"They (RBI) allowed some fall (in the rupee) today (Monday). There were heavy bids (dollar buying) in the market, but they also balanced out most of them (RBI)," said a dealer at a private bank. 

After falling to a lifetime low of 85.8400 during the day, the rupee ended at 85.8275 a dollar, compared to its previous close of 85.7700 on Friday. The rupee moved in a range of 7 paise throughout the day.

The rupee opened slightly down against the greenback, tracking a fall in the Chinese yuan, dealers said. China's yuan fell to its lowest level in 16 months against the dollar on Monday, pressured by trade concerns and falling yields. The yuan shrugged off the central bank's persistently stronger guidance and assurances that it will keep the currency stable.

Shortly after opening, the rupee came under further pressure and broke past the key technical support level of 85.80 a dollar, as banks rushed to purchase dollars on behalf of importers, wary of a further fall in the rupee, dealers said. "The Trump inauguration is what's driving importers' panic now. The uncertainty pertaining to Trump and his policies is worrisome. His tweets are what's going to move the financial markets soon. He is a man led by impulse," a dealer at a private bank said. US President-elect Donald Trump is set to return to the White House on Jan. 20.

The RBI, which in the past few sessions tried to protect the support level of 85.80 a dollar, likely tried to prevent the key level from breaching initially, but let it go thereafter, dealers said. However, state-owned banks continued to sell dollars, likely on behalf of the central bank, which limited the rupee from falling sharply and curbed excessive volatility. Dealers said the RBI likely initially sold dollars at around 85.79 a dollar and at 85.84 after that, which prevented further fall in the domestic unit. 

Further, banks purchased the greenback on behalf of foreign portfolio investors looking to withdraw funds from the domestic stock market, following which the rupee hit a record low of 85.8400 against the dollar, dealers said. On Monday, both the benchmark indices, the Nifty 50 and the Sensex, ended 1.6% lower each. Dealers said they expect overseas investors to continue exiting the Indian equity market due to ongoing geopolitical tensions in West Asia and uncertainty around a Trump-led US administration.

Some banks also sold the greenback on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, which provided some support to the rupee, dealers said. However, most exporters avoided selling dollars around the current level and expected the rupee to depreciate further going ahead. 

An ease in the dollar index also lent some support to the rupee, according to dealers. The dollar index came off the over-two-year high it hit last week as investors await multiple economic data from the US to get more cues on the US Federal Reserve's rate outlook. The US services PMI is due later in the day, while the minutes of the Fed's December meeting are due early Thursday. Market participants will also closely assess the non-farm payrolls data due Friday.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.62, compared to its previous close of 108.92 on Friday and 109.25 on Thursday.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at its highest level in nearly 27 months as banks bought dollars for forward delivery on behalf of importers after the rupee fell to a record low Monday, dealers said. 

The rupee has depreciated 0.2% so far in 2025. Dealers expect importers to continue buying the greenback for forward delivery in the coming days as they expect the rupee to depreciate more going ahead.

Premiums on dollar/rupee forwards also gained because some banks executed sell/buy swaps--sell for immediate delivery and buy for delivery later--in the onshore forwards market, noting a rise in premiums in the offshore non-deliverable forwards market, dealers said. "There is huge arbitrage between onshore and offshore, so we are seeing paying for that, mostly in the near term tenures," said a dealer at a foreign bank. 

However, an overnight rise in US Treasury yields limited gains for the premiums, according to dealers. US Treasury yields rose due to higher-than-expected purchasing managers' index data. Premiums on the forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 227.61 paise, against 217.11 paise on Friday. On an annualised basis, the premium was at 2.65%, against Friday's close of 2.53%.

OUTLOOK 

On Tuesday, the rupee will take cues from the movement in the dollar index after the release of the US December services PMI, due later in the day, dealers said. The local unit will also take cues from movement in the Chinese yuan, they said. 

Dealers expect importers to continue purchasing the greenback, fearing a further fall in the rupee, which may exert pressure on the local currency. They also expect FPIs to continue withdrawing funds from the domestic equity market, which may weigh on the rupee. 

However, they expect the central bank to continue intervening through dollar sales to prevent the rupee from falling sharply and to curb excessive market volatility. However, looking at the sharp depreciation in the rupee in the recent past, they don't expect the intervention to be aggressive in nature.  

"They (RBI) have to let the rupee fall gradually. At this point, when other currencies are depreciating, it's a costly affair for them to keep it stable, which is very well reflected through the depleting foreign exchange reserves. So the pace of fall for the rupee will be much faster from now on, just like its transition from 84.00 a dollar to 85.00 a dollar," a dealer at a private bank said. India's foreign exchange reserves fell to an over-eight-month low of $640.28 billion in the week ended Dec. 27. 

During the day, the rupee is seen in a range of 85.70-85.90 a dollar, with strong technical support pegged at 85.85 a dollar.

India Rupee - World FX: Euro up on upbeat eurozone PMI print; yen down 0.3%

India Rupee: Premiums jump; importers buy fwd dlrs as rupee hits record low

MUMBAI – The euro traded 0.4% higher against the greenback Monday after an upbeat Eurozone services and manufacturing purchasing managers' index for December. Data released Monday showed the Eurozone services PMI for December was 51.6, an improvement from November's 49.5, and the PMI composite edged higher to 49.6 from November's 48.3, though still indicating a slight contraction in overall activity. A PMI reading above 50 indicates expansion in economic activities, and below it shows contraction. Traders now await the consumer price index of Germany, the bloc's largest economy, due later in the day.

The dollar index eased from its over 2-year high hit last week ahead of multiple economic data releases in the US due this week. The US services PMI is due later in the day, while the minutes of the December Federal Reserve's meeting are due Wednesday. Market participants also await the key non-farm payroll data due Friday for further cues on the Fed's rate outlook. On Friday, data showed that the US manufacturing PMI rose to a nine-month high of 49.3 in December. At 1616 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.66, compared to 108.92 on Friday and 109.25 on Thursday. 

The pound sterling was up 0.4% against the dollar even after data released on Monday showed the UK S&P composite PMI fell to 50.4 last month from 50.5 in November - its lowest since October 2023.  

The Australian dollar was up 0.3% against the US unit after the Judo Bank Australia services PMI business activity index was revised higher to 50.8 in December, up from preliminary estimates of 50.4 and after a final reading of 50.5 in November. Further, data released on Monday showed China's services activity hit a 7-month high of 52.2 in December. Any change in the Chinese economy directly influences the Australian currency due to their close bi-lateral trade relations. The New Zealand dollar traded 0.3% higher, tracking gains in the Australian dollar. 

The Japanese yen fell 0.3% against the US dollar even after Bank of Japan Governor Kazuo Ueda said on Monday that the central bank will raise interest rates further if the economy continues to improve. "The timing for adjusting the degree of monetary support will depend on economic, financial and price developments in the future. We also must be vigilant to various risks," Ueda said at an event. Further, on Monday, Prime Minister Shigeru Ishiba pledged to take steps to spur consumption growth and boost Japan's minimum wage.

The Swiss franc traded 0.2% higher against the greenback even after data showed that Swiss retail sales increased 0.8% on year in November, against expectations of a 1.2% rise. The Canadian dollar was up 0.1% against the greenback. However, the Canadian dollar is expected to record losses in the near term as several media reports suggest that Canadian Prime Minister Justin Trudeau will likely announce his resignation after nine years in office. Reuters reported that Trudeau is expected to make the announcement before the caucus meeting on Wednesday.  (Gowri Lakshmi)

India Rupee: Premiums jump; importers buy fwd dlrs as rupee hits record low

NEW DELHI – The premium on the one-year dollar/rupee forward contract rose sharply as banks bought dollars for forward delivery on behalf of importers after the rupee fell to a record low Monday, dealers said. The rupee fell to a lifetime low of 85.8400 a dollar earlier in the day, primarily due to weakness in the Chinese yuan, dealers said.

"We are seeing rupee depreciating now. Importers have started panicking due to that, so they are hedging now," said a dealer at a big state-owned bank. The rupee has depreciated 0.2% so far in 2025. Dealers expect importers to continue buying the greenback for forward delivery in the coming days as they expect the rupee to depreciate more going ahead.

At 1400 IST, the premium on the one-year exact-period dollar/rupee forward contract was 227.30 paise, against 217.11 paise on Friday. On an annualised basis, the premium was at 2.65%, against Friday's close of 2.53%.

Premiums on dollar/rupee forwards also gained because some banks executed sell/buy swaps--sell for immediate delivery and buy for delivery later--in the onshore forwards market, noting a rise in premiums in the offshore non-deliverable forwards market, dealers said.

However, an overnight rise in US Treasury yields limited gains for the premiums, according to dealers. US Treasury yields rose due to higher-than-expected purchasing managers index data. Data released on Friday showed that US manufacturing PMI increased to 49.3 last month, the highest reading since March, from 48.4 in November. A PMI reading below 50 indicates contraction in the manufacturing sector. Economists polled by Reuters had forecast the PMI would be unchanged at 48.4.

Premiums on the forwards of a currency pair are reflective of the interest rate differential between the two countries (Pratiksha)

India Rupee: Stays tad down on FPI outflows; RBI likely prevents sharp fall

MUMBAI – The rupee remained slightly lower against the dollar, hovering around its record low, as banks purchased the greenback on behalf of foreign portfolio investors and importers, dealers said. However, some state-owned banks' dollar sales, likely on behalf of the Reserve Bank of India, limited further fall in the rupee, they said. The rupee hit a record low of 85.8400 a dollar earlier in the day. 

Dealers said banks purchased the greenback on behalf of FPIs, looking to withdraw funds from Indian equities. At 1325 IST, both the benchmark indices, the Nifty 50 and the Sensex, were down 1.1% each. "FPI selling (of Indian stocks) continues. There isn't any concrete factor which could keep investors here (in India) now, so it will likely continue, which is going to pull the rupee down further and be a big factor in its (rupee's) depreciation," a dealer at a state-owned bank said.

The rupee also came under pressure due to strong dollar demand from importers, who were wary of a further fall in the local unit going ahead, dealers said. The rupee has fallen 0.2% against the dollar so far this calendar year. 

However, the RBI likely intervened through dollar sales, which prevented the rupee from falling sharply and curbed excessive volatility, as per dealers. "The rupee has only moved 6–7 paise. There is intense buying pressure (of dollars) but that seems to be regulated," a dealer at a private bank said.

Some exporters also sold the greenback noting the relative higher dollar/rupee levels, which provided some cushion to the domestic currency, dealers said. However, most exporters showed little enthusiasm and refrained from selling the greenback as they expected a further fall in the local unit in the coming days. 

For the rest of the day, the rupee is likely to move in a range of 85.75-85.90 against the dollar. Dealers see immediate technical support for the Indian unit at 85.85 a dollar.  (Gowri Lakshmi) 

India Rupee: Technical Levels for rupee - Jan 6

MUMBAI – At 1207 IST, the rupee was at 85.8275 per dollar. At 0900 IST, the rupee was at 85.7750 a dollar against its previous close of 85.7700. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Pratiksha)

India Rupee - Asia FX: Mixed ahead of US econ data this week; Yuan down 0.1%

MUMBAI – Asian currencies moved on a mixed note Monday as market participants awaited the release of multiple economic data in the US this week, with the services purchasing managers' index due later in the day.

December's non-farm payrolls report is due on Friday and the minutes of the US Federal Reserve's last meeting due Wednesday. The US job openings and weekly jobless claims, along with surveys on manufacturing, services and consumer sentiment are also due this week. Traders will closely assess the economic data prints to get more cues about the US interest rate path.

The Chinese yuan was down 0.1% against the dollar, extending its losses from Friday, as the People's Bank of China announced plans to use multiple monetary policy tools, including plans to cut the reserve ratio requirement and interest rates to ensure liquidity and to spur growth in its economy, a statement released by the central bank on Friday said. However, losses in the currency were limited as data released on Monday showed China's services activity hit a 7-month high of 52.2 in December. A PMI reading above 50 indicates expansion in economic activities.

The Philippine peso was down 0.1% against the greenback. Both the Taiwan dollar and the South Korean won were up 0.1% against the greenback tracking gains in domestic equities. At 0930 IST, Taiwan's Taiex was up 2.4%, while South Korea's Kospi was up 1.4%. Data showed South Korea's foreign reserves hit a 5-year low of $415.6 billion in December due to a strengthening dollar.

The dollar index eased from the over 2-year high hit last week, ahead of multiple economic data points due this week. On Friday, data showed that the US manufacturing PMI rose to a nine-month high of 49.3 in December. At 0837 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 108.86, compared to its previous close of 108.92 on Friday and 109.25 on Thursday. 

The Indonesian rupiah was up 0.1% against the US unit after data released on Monday showed Indonesia's unaudited budget deficit for the 2024 fiscal year was 2.29% of GDP, smaller than the finance ministry's earlier estimate but higher than that of 2023.

The Thai baht was down 0.3% against the US unit even after inflation returned to the target range for the first time since May. The consumer price index rose 1.23% on year in December after the previous month's annual increase of 0.95%. The Malaysian ringgit was also down 0.3% against the dollar. (Gowri Lakshmi)

India Rupee: At record low on weak yuan; RBI's likely dlr sales limit fall

MUMBAI – The rupee fell to a lifetime low of 85.8200 against the dollar Monday due to weakness in the Chinese yuan, dealers said. However, banks sold dollars, likely for the Reserve Bank of India, which limited losses for the Indian unit, they said. 

Dealers said the RBI's likely intervention through dollar sales was not aggressive in nature. However, they pointed out that the central bank may have initially tried to protect the 85.80 a dollar.

"The weak Chinese yuan is what is weighing (on the rupee) today. We expect an uptick in USDINR (dollar/rupee) during the day because of this and due to buying pressure (of dollars) too," a dealer at a state-owned bank said.

The onshore Chinese yuan weakened past the psychological level of 7.3 a dollar on Friday, for the first time in 14 months, and extended its losses on Monday. The People's Bank of China in a statement on Friday announced that it would use multiple monetary policy tools, including lowering its benchmark rates and a cut in reserve ratio requirement at an "appropriate time" this year to spur growth in their sluggish economy. 

The rupee also came under pressure as banks purchased the greenback on behalf of importers, who feared a further fall in the rupee, dealers said. "The panic buying (of dollars) started long back. Until Oct-Nov nobody expected a sudden depreciation (in the rupee)," a dealer at a state-owned bank said. "They (the central bank) protected the 84 level heavily, but its fall to 85 has been sharp and as we move closer to Trump's inauguration, the dollar index is only going to strengthen and the rupee is going to depreciate sharply."

However, the rupee took some support from an ease in the dollar index ahead of key economic data due later in the week. The US Services Purchasing Manager's index is due later in the day, while the minutes of the December Federal Reserve committee meeting are due Wednesday and the non-farm payroll is due Friday. Investors will closely assess all the data figures to get more cues on the Fed's rate outlook. At 1005 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 108.88, compared to 108.92 on Friday and 109.25 on Thursday. 

During the day, the rupee is likely to move in a range of 85.75-85.90 against the dollar. Dealers see immediate technical support for the Indian unit at 85.85 a dollar.  (Gowri Lakshmi) 

India Rupee: Expected range for rupee - Jan 6

MUMBAI – Following are the expected support and resistance levels for the rupee on Monday, 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 Tanima Banerjee

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