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Informist, Tuesday, Jan. 7, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended higher against the dollar on Tuesday, putting a halt to the 10-consecutive streak of record-closing lows, after foreign banks sold the greenback on behalf of foreign investors looking to invest in the domestic debt and equities market, dealers said. The dollar index also hovered near the one-week low it hit on Monday, which supported the rupee, they said.

After rising to 85.6475 a dollar, the highest level since Jan. 1, the rupee settled at 85.7125 a dollar, against the close of 85.8275 a dollar on Monday. The rupee moved in a relatively wider range of 15 paise throughout the day. 

A rise in other Asian currencies also aided the rupee. Other Asian currencies rose 0.1-0.9%, with the South Korean won being the best performer. A slight rise in domestic equities also supported the domestic currency.

The rupee opened higher against the greenback at 85.7800 a dollar as the dollar index declined and continued to hover near 107.75, a near one-week low that it had hit on Monday. The US currency weakened after The Washington Post reported that Trump's aides were exploring plans that would apply tariffs only on sectors seen as critical to US national or economic security. 

However, Trump denied the report in a post on his social media, paring some of the losses in the US unit. Investors pondered over the gravity of tariff plans and other policies after President-elect Donald Trump assumes the Oval Office on Jan. 20.
 

Further, the dollar index also came under pressure as the US December services purchasing manager's index was revised downward to 56.8 from the flash reading of 58.5. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 107.95, compared with its previous close of 108.28 on Monday and 108.92 on Friday.

Market participants now await multiple economic data from the US, including the US Job Opening and Labor Turnover Survey on Tuesday, the ADP Employment Change report, minutes of the December meeting of the Federal Reserve on Wednesday, and the non-farm payrolls report on Friday.

Soon after the domestic spot market opened, the rupee picked up momentum and moved upwards, as some foreign banks sold the greenback on behalf of overseas investors looking to invest in initial public offerings of domestic companies, dealers said. "There is a line-up of IPOs for this, which could protect the rupee through inflows in a way, at least the pace and gravity with which rupee falls before Trump comes can be limited," a dealer at a private bank said. "But the fall in rupee and the breaching of big figure (86 a dollar) is guaranteed," he added. 

The IPOs of Quadrant Future Tek Ltd., BR Goyal Infrastructure Ltd., and Avax Apparels and Ornaments Ltd., opened for subscription on Tuesday and will close on Thursday. The Indobell Insulations Ltd. offering opened for subscription on Monday and will close Wednesday.

Further, dealers said some foreign fund inflows in the Indian debt market also supported the rupee. Most traders were cautious and did not place large bets in the run-up to Trump assuming office in the US and the Indian Budget in February, to limit the volatility caused by the uncertainty pertaining to these events. They said traders were also purchasing dollars for forward delivery but largely in near-term contracts due to such uncertainties.

Importers were active throughout the day, who purchased the greenback, pulling the rupee back to 85.70 levels from the day's high of 85.6475 a dollar, dealers said. However, unlike previous trading days, exporters were almost completely absent in the market during the day. "Exporters can be expected only when the rupee falls to 85.85 a dollar now. It is given that the rupee will fall, the Trump dilemma and the panic it causes is very high. Trump tweets are going to strike back at the EM (emerging markets) currencies," a dealer at a foreign bank said.

FORWARDS 

The premium on the one-year dollar/rupee forward contract closed lower after having risen to the highest level in nearly 27 months, as some banks sold dollars, taking advantage of higher forward premiums. The forward premium rose to 2.66% on an annualised basis, the highest level since Oct. 13, 2022, as banks purchased dollars for forward delivery on behalf of importers, noting a sharp fall in the rupee in the spot market, dealers said.

Some banks also purchased dollars for forward delivery to take advantage of the arbitrage opportunity between the dollar/rupee onshore forward and offshore non-deliverable forward levels, which drove premiums higher.

Further, liquidity deficit in the banking system also kept forward premiums higher, dealers said. The net liquidity injected by the RBI on Monday rose to INR 978.26 billion from over a three-week low of INR 289.58 billion on Sunday.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 221.64 paise, against 227.61 paise on Monday. On an annualised basis, the premium was at 2.59%, against Monday's close of 2.65%.

OUTLOOK

On Wednesday, the rupee will take cues from the movement in the dollar index and Chinese yuan. Dealers expect banks to sell greenback on behalf of overseas investors looking to invest in the IPOs of domestic companies, which may aid the rupee. However, they also expect importers to buy dollars, keeping the rupee under pressure. 

Market participants would cautiously wait for the release of the US jobs report for November. Should the data suggest a strong labour market in the US, it could drive the dollar index higher, putting downward pressure on the Indian currency, dealers said. 

Dealers expect the Reserve Bank of India to intervene in the foreign exchange market with its dollar sales to prevent the rupee from falling sharply and curb sudden market volatility. During the day, the rupee is seen in a range of 85.60-85.90 a dollar, with strong technical resistance pegged at 85.60 a dollar.

India Rupee - World FX: Euro up on rise in consumer inflation expectations

MUMBAI – The euro was up 0.4% against the US dollar after the latest survey conducted by the European Central Bank showed an increase in inflation expectations of consumers of the euro area. The results released Tuesday showed that respondents in November increased their expectations of eurozone inflation to rise by 2.6% in the next one year, up from 2.5% in October. 

Further, the euro also received support after Germany, the eurozone's largest economy, posted a rise in its inflation print in December. Data on Monday showed that the annual consumer price index rose 2.9%, higher than the analysts' estimate of 2.6% in a Reuters poll.

The New Zealand dollar edged 0.7% higher against the US dollar after the dollar index fell to a one-week low as traders pondered over the gravity of tariff policies by US President-elect Donald Trump when he assumes office on Jan. 20. Tracking a rise in the New Zealand currency, the Australian dollar was up 0.4%.

The dollar index fell following a report by the Washington Post which said that Trump's aides were exploring plans to apply tariffs only on sectors seen as critical to US national or economic security, and not a blanket ban on imports. However, Trump denied the report, which pared some losses for the US unit.  

The dollar index also came under pressure after the US December services purchasing manager's index came in at 56.8, from market forecast of 58.5. However, the December PMI edged up from 56.1 in November and marked an over-two-and-a-half-year high. Market participants now await the JOLTS Job Opening report on Tuesday, the ADP Employment Change report on Wednesday, and the non-farm payrolls report on Friday.

At 1446 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, hovered near its one-week low and was at 107.86, compared to its previous close of 108.28 on Monday and 108.92 on Friday. The index fell to 107.75 on Monday, its lowest level since Dec. 30.

The Japanese yen was up 0.1% against the greenback after Japan's services activity expanded for the second consecutive month in December. The final Au Jibun Bank service PMI rose to 50.9 in December from 50.5 in November.

The Canadian dollar was up 0.1% against the greenback on reports of political continuity after Canadian Prime Minister Justin Trudeau announced that he will continue to be in charge until the next leader is chosen. He had resigned on Monday. "This country deserves a real choice in the next election, and it has become clear to me that if I'm having to fight internal battles, I cannot be the best option in that election," Trudeau said. He also said that Parliament would be suspended until Mar. 24. 

Gains in the Canadian dollar were limited after the country's service sector declined for the first time in three months in December, the Canada services PMI showed on Monday. The headline business activity fell to 48.2 in December, from 51.2 in the previous month. A PMI reading below 50 indicates a contraction in the sector.

The pound sterling was up 0.1% against the dollar after data on Tuesday showed that the country's retail sales climbed 3.2% on year after falling 3.3% in November. 

The Swiss franc was flat against the dollar. Switzerland's inflation print edged down in December, data on Tuesday showed, further strengthening the Swiss National Bank's decision to lower its interest rates last month. This offset the upward push received from a fall in the dollar index. Consumer prices rose only 0.6% in December, down from the 0.7% rise in annual inflation in November.  (Gowri Lakshmi)

India Rupee: Premium eases from near 27-mo high; importers' fwd dlr buys aid

MUMBAI – The premium on the one-year dollar/rupee forward contract retracted after rising to 2.66% on Tuesday, the highest level in nearly 27 months, as some banks sold dollars, taking advantage of higher forward premiums. The forward premium rose to the highest level since Oct. 13, 2022, as banks purchased dollars for forward delivery on behalf of importers, noting a sharp fall in the rupee in the spot market, dealers said.

"Importers are present, and they have been in the market for a while now, after seeing the sharp and sudden movements in the spot market," a dealer with a private bank said. Some banks also purchased dollars for forward delivery to take advantage of the arbitrage opportunity between the dollar/rupee onshore forward and offshore non-deliverable forward levels, which drove premiums higher.

In the spot market, the rupee fell to a lifetime low of 85.84 a dollar on Monday, driven by a weakening Chinese yuan, according to market participants. Lately, the spot dollar/rupee market has become relatively volatile, with the rupee hitting multiple lows in the last two weeks or so, dealers said. 

Further, liquidity deficit in the banking system also kept forward premiums higher, dealers said. The net liquidity injected by the RBI on Monday rose to INR 978.26 billion from over a three-week low of INR 289.58 billion on Sunday.

After rising to a near 27-month high, the one-year dollar/rupee forward premium came down slightly due to some banks' dollar sales for forward delivery, who wanted to take advantage of higher premiums. A slight rise in the benchmark 10-year US Treasury yield also kept the rise in forward premiums in check, dealers said. 

However, market participants said broadly, premiums are likely to remain higher, given the volatile spot dollar/rupee market and a quicker fall in the rupee in the last few weeks. "I think, given the movement of the rupee in the spot market, it will remain higher, and is likely to reach somewhere around 2.8-2.9%," a dealer with another private bank said. 

At 1333 IST, the premium on the one-year exact-period dollar/rupee forward contract was 223.14 paise, against 227.61 paise on Monday. On an annualised basis, the premium was at 2.60%, against Monday's close of 2.65%.  (Sourabh Kumar)

India Rupee: Sharply up as equity, debt mkts see FPI flows, dlr index eases

MUMBAI – The rupee rose sharply against the dollar Tuesday as banks sold the greenback on behalf of foreign portfolio investors looking to invest in the domestic equity and debt markets, dealers said. The dollar index eased, which also pushed the rupee higher, they said. 

The rupee has erased its losses from Monday and has moved up sharply to 85.6475 against the dollar, the highest level since Jan. 1. The rupee has moved in a relatively wider range of about 15 paise so far during the day.

"There are inflows, some of them are in the debt market and some for equity," a dealer at a foreign bank said. Some banks sold the greenback on behalf of foreign investors looking to invest in domestic government securities, and others in the initial public offerings that are currently open. The IPOs of Quadrant Future Tek Ltd., BR Goyal Infrastructure Ltd., and Avax Apparels and Ornaments Ltd., opened for subscription on Tuesday and will close on Thursday. The Indobell Insulations Ltd. offering opened for subscription on Monday and will close Wednesday.

Further, dealers said the dollar index eased, which also provided support to the Indian currency. The index dropped to 107.75 on Monday, the lowest level in a week, after a report by The Washington Post said US presidnet-elect Donald Trump might not be as aggressive in imposing tariffs as earlier thought.

At 1302 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.03, compared with the previous close of 108.28 on Monday and 108.92 on Friday. 

Ahead of Trump assuming office on Jan. 20 and the presentation of India's Budget in February, most traders were cautious about placing large bets. "Traders are doing short-term trades now as they (traders) don't want to go for longer tenures to limit the impact of the budget, and Trump," a dealer at a foreign bank said.

For the rest of the day, the rupee is likely to move in a range of 85.60-85.85 against the dollar. Dealers see immediate technical resistance for the Indian unit at 85.60 a dollar.  (Gowri Lakshmi) 

India Rupee: Technical Levels for rupee - Jan 7

MUMBAI - At 1135 IST, the rupee was at 85.6825 per dollar. At 0900 IST, the rupee was at 85.7800 a dollar against its previous close of 85.8275. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar, Pratiksha and Gowri Lakshmi)

India Rupee: Rises as dollar index hits 1-week low, most Asian units gain

MUMBAI – The rupee traded higher against the dollar Tuesday as the dollar index declined to a one-week low on Monday after conflicting reports about how aggressive US President-elect Donald Trump's tariff policies could be when he assumes office, dealers said.

The Washington Post reported that Trump's aides were exploring plans to impose tariffs only on sectors which are deemed to be critical to US national and economic security. However, the dollar index pared some of the losses after Trump denied the report in a post on one of his social media handles.

At 1000 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 108.26, compared with the previous close of 108.28 on Monday and 108.92 on Friday. The dollar index fell to 107.75 on Monday, the lowest level since Dec. 30. Market participants are now waiting for the US Job Openings and Labour Turnover Survey, due later in the day. 

Dealers are of the view that once Trump assumes office on Jan. 20, emerging market currencies, including the rupee, may turn highly volatile. "Up until March, the rupee will not see any stability. We will just have to wait and see what Mr. Trump chooses to tweet every day he wakes up," a dealer at a private bank said. 

A rise in other Asian currencies, tracking the decline in the dollar index, also supported the Indian unit, dealers said. Other Asian units gained 0.1-0.6% against the greenback, with the South Korean won being the best performer.

However, the Chinese yuan continued to hover around its lowest level in over 14 months amid growing tariff threats from Trump, which weighed on the Indian currency, dealers said. "The yuan is definitely a downside for the rupee. It is their (the Chinese government) agenda to keep the yuan depreciated... it then becomes our necessity too," a dealer at a state-owned bank said. 

During the day, the rupee is likely to move in a range of 85.60-85.85 against the dollar. Dealers see immediate technical resistance for the Indian unit at 85.60 a dollar.  (Gowri Lakshmi) 

India Rupee - Asia FX: Most rise as dollar index slips to 1-week low Mon

MUMBAI – Most Asian currencies traded higher against the dollar on Tuesday as the dollar index dropped to a one-week low on Monday after conflicting reports led to traders considering whether the tariffs to be imposed by US president-elect Donald Trump would be less aggressive than promised.

On Monday, The Washington Post reported that Trump's aides were exploring plans that would apply tariffs only on sectors seen as critical to US national or economic security. However, Trump denied the report on his social media, which limited the fall in the US unit. 

The dollar index also declined after the US December services purchasing manager's index was revised downward to 56.8, below the estimated 58.5. However, the December PMI edged higher compared to 56.1 in November and marked an over-two-and-a-half-year high. Market participants now await the JOLTS Job Opening report on Tuesday, the ADP Employment Change report on Wednesday, and the non-farm payrolls report on Friday.

At 0933 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 108.26, compared to its previous close of 108.28 on Monday and 108.92 on Friday. The index fell to 107.75 on Monday, its lowest level since Dec. 30.

The Taiwan dollar was up 0.4% against the US unit ahead of the country's consumer price index, due later in the day. Data on Monday showed that Taiwan's foreign exchange reserves declined due to the central bank's intervention in the foreign exchange market. Taiwan's foreign exchange reserves were at $576.67 billion in the previous month, down by $1.28 billion from November. 

The South Korean Won was up 0.3% against the greenback, tracking gains in domestic equities. At 0930 IST, benchmark index KOSPI was up 0.6%. The Philippine peso was also up 0.3% against the dollar after data showed the country's consumer price index rose higher than expected last month. The CPI for December rose 2.9%, higher than the 2.6% forecast in a Reuters poll, and was above the previous month's reading of 2.5%. The Indonesian rupiah was up 0.1% against the greenback.

Both the Thai baht and the Malaysian ringgit were flat against the US dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Jan 7

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 Akul Nishant Akhoury

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