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Informist, Wednesday, Jan. 8, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended at a record closing low against the dollar Wednesday as the Dollar Index strengthened and banks persistently purchased dollars on behalf of importers and foreign portfolio investors, dealers said. This was despite likely continuous dollar sales on behalf of the Reserve Bank of India, they said.

"They (the RBI) are letting it (the rupee) go slowly and at the same time ensuring there are no jerky moves as well," said a dealer at a private bank. "If this goes on, the next big figure (86.00 a dollar) is not far from here."

After depreciating 0.2% against the dollar, the rupee settled at 85.8450 a dollar, compared to 85.7125 Tuesday. The Indian currency fell to a lifetime low of 85.8550 a dollar earlier in the day. Other Asian currencies fell 0.1-0.6% against the dollar, with the Taiwan dollar being the worst performer.

The rupee opened lower against the greenback as the Dollar Index rose after the US Job Openings and Labour Turnover showed that job openings in the US increased unexpectedly in December. Job openings rose by 259,000 to 8.098 million, indicating a resilient labour market and reinforcing market participants' expectations that the US Federal Reserve will proceed with a slower pace of monetary policy easing this year. Other data showed that the ISM non-manufacturing Purchasing Managers' Index rose to 54.1 in December, compared with 52.1 in November. A purchasing managers' index reading above 50 indicates an expansion of economic activities.

At 1530 IST, the Dollar Index, which measures the strength of the dollar against a basket of six major currencies, was at 108.91, compared with its close of 108.68 Tuesday and 108.28 Monday. The Dollar Index hit a one-week low of 107.75 Monday.

As soon as the market opened, the rupee came under further pressure due to dollar demand from oil marketing companies and other importers, dealers said. Banks purchased the greenback on behalf of importers, who feared a further fall in the rupee in the run-up to President-elect Donald Trump assuming office on Jan. 20.

"There is other data from the US this week and Trump's inauguration is also nearing. The big figure (86 a dollar) is not so far, but the transition will be in a phased manner rather than a sudden fall," a dealer at a private bank said. "Market participants have already factored in the 86 (per dollar) after Trump's arrival, so there won't be any knee-jerk reaction."

Some dealers said oil marketing companies also purchased the greenback, noting the jump in crude oil prices. Crude oil prices rose Wednesday in the backdrop of a resilient US labour market and on tighter supplies from Russia and the Organisation of the Petroleum Exporting Countries and its allies. Oil output from OPEC and its allies fell in the previous month after two months of increase, according to reports.

Brent Crude prices have jumped over 3% so far this month. At 1530 IST, the March Brent Crude contract on the Intercontinental Exchange was at $77.63 per barrel, compared to its previous close of $77.05 Tuesday and $76.30 Monday.

Further, dealers said banks purchased the greenback on behalf of foreign portfolio investors who continued to exit the Indian stock market, which also exerted pressure on the rupee. So far this month, FPIs have net withdrawn $762.6 million from the domestic market.

However, right after the market opened, state-owned banks stepped in to sell the greenback, possibly on behalf of the central bank, which prevented the rupee from falling sharply and curbed excessive volatility, dealers said. Despite the RBI's continuous intervention, the rupee hit a fresh lifetime low of 85.8550 against the dollar as the central bank did not intervene aggressively, indicating that it is letting the rupee depreciate gradually without causing excessive volatility, dealers said. 

They further said most exporters refrained from selling dollars at the current levels as they expect the rupee to depreciate further. They said exporters are likely to sell dollars in relatively larger amounts once the rupee falls to its next psychologically-important level of 86-a-dollar.

Meanwhile, the central government released the revised merchandise trade data for November on Wednesday, where it lowered the gold import figure for the month by $5 billion. According to the revised figures, India imported $9.84 billion worth of gold in November, against $14.86 billion estimated earlier. Despite the downward revision, the country's trade deficit remains at a record high in November.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at its highest level in nearly 27 months Wednesday as a fall in the rupee prompted banks to buy dollars for forward delivery on behalf of importers, dealers said. They expect importers to continue buying the greenback for forward delivery in the coming days as the rupee is expected to depreciate further.

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.

A deficit in banking system liquidity also pushed forward premiums higher, dealers said. However, the upward movement in the dollar/rupee forward premium was limited by a rise in the 10-year benchmark US Treasury yield, dealers said. The 10-year US Treasury yield rose as robust US economic data indicated resilience in the world's largest economy. Premiums on 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 231.86 paise, against 221.64 paise Tuesday. On an annualised basis, the premium was at 2.69%, against Tuesday's close of 2.59%.

OUTLOOK

On Thursday, the rupee will take cues from the movement in the Dollar Index after the release of the minutes of the December meeting of the US Federal Open Market Committee, dealers said. The minutes are due to be released past midnight India time. The local unit will also track movement in the Chinese yuan and crude oil prices, they said.

Dealers expect banks to continue purchasing the greenback on behalf of importers, keeping the rupee under pressure. However, they expect the RBI to continue intervening through dollar sales to prevent the rupee from falling sharply and curb high volatility. 

"It really is tough to bet on where it (the rupee) will go tomorrow," said a dealer at a broking firm. "There is a lot of uncertainty. What is for sure is that it (the rupee) is going to fall more, but not sure by how much."

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: Dollar Index up post strong US econ data; euro dn 0.2%

MUMBAI – The dollar index recovered from the one-week low it hit on Monday after economic data on Tuesday indicated resilience in the US labour market, further reinforcing the view that the Federal Reserve may proceed with a shallow rate cut cycle this year.

The US Job Openings and Labour Turnover Survey showed US job openings unexpectedly increased in November. Job openings rose by 259,000 to 8.098 million. The dollar also got a boost after data showed that the ISM non-manufacturing purchasing managers index rose to 54.1 in December, compared with 52.1 in November. A PMI reading above 50 indicates an expansion of economic activities.

At 1600 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 108.90, compared with its previous close of 108.68 on Tuesday and 108.28 on Monday. The index fell to a low of 107.75 on Monday. Market participants are now waiting for the minutes of the December policy meeting of the US Fed, due later in the day. The pound sterling was down 0.2% against the US unit, tracking a rise in the dollar index.

The euro was down 0.2% after Germany, the largest economy in the bloc, reported an unexpected fall in retail sales in November. Retail sales declined by 0.6% compared with the previous month, against a forecast of a 0.5% rise in a Reuters poll. 

The Australian dollar fell 0.2% against the greenback even though data showed that the country's consumer price inflation rose more than expected in November to 2.3%, up from 2.1% the previous month and just above market forecasts of 2.2%. The New Zealand dollar and the Swiss franc were also down 0.2% against the US unit.

The Japanese yen was down 0.1% against the US dollar after a government survey showed that Japan's consumer sentiment worsened in December, dampening expectations that the Bank of Japan will hike interest rates at its next monetary policy meeting scheduled for Jan. 23. The consumer sentiment index fell to 36.2 in December, against 36.4 in the previous month.  (Gowri Lakshmi)

India Rupee: Hits record low despite RBI intervention as importers buy dlrs

MUMBAI – The rupee hit a lifetime low of 85.8550 against the dollar so far during the day despite dollar sales by the Reserve Bank of India, as banks persistently bought the greenback on behalf of importers, dealers said. The recovery in the dollar index after falling to a one-week low also weighed on the Indian unit, they said.

"Importers are back in their panic-buy situation since the dollar index strengthened after yesterday's data (US jobs data) and the Trump inauguration is around the corner. RBI is supporting the rupee, but we could see a further fall today itself, if not tomorrow," a dealer at a state-owned bank said.

Banks persistently purchased dollars on behalf of importers, who fear the rupee may fall further after the dollar index recovered from the one-week low it hit on Monday. The dollar index recovered after data showed a rise in US job openings, suggesting a resilient labour market, thus reinforcing market participants' view that the US Federal Reserve may opt for a slower pace of rate cuts this year.

Data also showed that US non-manufacturing purchasing managers' index rose to 54.1 in December, from 52.1 in November. A PMI reading above 50 indicates an expansion. At 1319 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.77, compared with its previous close of 108.68 on Tuesday and 108.28 on Monday.

Some dealers said banks also purchased the greenback on behalf of foreign portfolio investors, who continue to sell Indian equities. At 1325 IST, the benchmark indices, the Nifty 50 and BSE Sensex, were down 0.6% each.

However, some banks sold the greenback on behalf of the RBI, which limited the fall of the rupee, curbing excessive market volatility. Though the central bank intervened in the currency market, it was not selling dollars as aggressively as before, leading to fresh record lows for the rupee, dealers said.

Exporters did not place large bets as they expect the rupee to depreciate further in the run-up to Donald Trump assuming office as president of the US on Jan. 20 and the Indian Budget scheduled on Feb. 1, dealers said. They said exporters will likely sell dollars in relatively larger amounts once when the rupee falls to about 85.86 a dollar. So far during the day, the rupee has moved in a tight range of just over 4 paise.

For the rest of the day, the rupee is likely to move in a range of 85.70-85.90 against the dollar. Dealers see immediate technical support for the Indian unit at 85.86 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Jan. 8

MUMBAI – At 1122 IST, the rupee was at 85.8275 per dollar. At 0900 IST, the rupee was at 85.8225 a dollar against its previous close of 85.7125. 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 - Asia FX: Most fall as Dollar Index up on robust US econ data

MUMBAI – Most Asian currencies were down against the greenback Wednesday as the dollar index recovered from the one-week low it hit on Monday after robust economic data indicated a resilient labour market and supported investors' belief that the US Federal Reserve may opt for a slower pace of rate cut cycle. 

On Tuesday, the Job Openings and Labour Turnover Survey showed that job openings in the US unexpectedly rose by 259,000 to 8.098 million, while hiring slowed and fell by 125,000 to 5.27 million in November. Another data point, the ISM non-manufacturing purchasing manager's index, rose to 54.1 in December from 52.1 in November. A reading above 50 indicates an expansion in economic activities. 

At 1012 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 108.62, compared with its previous close of 108.68 on Tuesday and 108.28 on Monday. The index had fallen to a low of 107.75 on Monday. Market participants are now waiting for the minutes of the US Fed's December meeting later in the day to get more cues on the central bank's rate outlook.  

The Taiwan dollar was down 0.5% against the dollar, the worst hit among its peers. However, losses in the currency were limited as data released on Tuesday showed Taiwan's consumer price index rose 2.1% in December, surpassing the central bank's 2% target. The inflation print rose for the second consecutive month due to a spike in food prices. 

Both the Indonesian rupiah and the Philippine peso were 0.4% down against the dollar. Data on Tuesday showed that the country's gross international reserves were $106.84 billion as of December-end, down from $108.49 in November and falling short of the Bangko Sentral ng Pilipinas' target of $109 billion, data from the central bank showed. However, other data showed that unemployment in the Philippines declined to 3.2% on year in November, and the employment rate rose to 96.8% from 96.4% in November 2023, which provided support to the currency.

The Thai baht was down 0.3% against the US unit. The Thai central bank has pledged to maintain a strong monetary policy framework against the backdrop of rising global uncertainties, particularly as Donald Trump is set to assume the Oval Office on Jan. 20.

The Chinese yuan was down 0.1% against the dollar. However, losses were limited as China's central bank on Wednesday maintained a tight grip on the yuan with its daily reference rate, according to reports.
 

The South Korean won was down 0.2% against the dollar. South Korea's acting President Choi Sang-mok on Wednesday said the government will work with the central bank and regulators to respond swiftly to any volatility in the financial market and focus on communicating with the incoming US administration, reports said.

The Malyasian ringgit was down 0.3% against the greenback. Malaysia on Wednesday unveiled multiple tax incentives to attract investors to its joint special economic zone with Singapore that seeks to add $26 billion every year to the Malaysian economy by 2030, reports said.  (Gowri Lakshmi and Pratiksha)

India Rupee: Down as Dollar Index rises; RBI likely dlr sales avert record low

MUMBAI – The rupee was down against the greenback, hovering near its lifetime low of 85.8400, as the dollar index recovered from the one-week low it hit on Monday after the US Job Openings and Labour Turnover Survey showed a resilient labour market in the US, dealers said. However, banks sold the greenback, likely on behalf of the Reserve Bank of India, which prevented the Indian currency from hitting a record low, they said.

"The strong dollar is weighing on all Asian currencies, and it is going to continue up until (US President-elect) Trump's inauguration. Even with all the IPOs (initial public offerings) lined up, foreign fund inflows are unlikely to save the rupee. The rupee can hit multiple new lows today (Wednesday) if the RBI lets it (rupee) go," a dealer at a private bank said.

The dollar index rose after data showed an unexpected increase in job openings in the US, reinforcing investors' view that the Federal Reserve will likely proceed with a shallow rate cut this year. The dollar also got a boost as the ISM non-manufacturing purchasing managers' index rose to 54.1 in December from 52.1 in November. At 1005 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 108.64, compared with its previous close of 108.68 on Tuesday and 108.28 on Monday. The index had fallen to a low of 107.75 on Monday.

The rupee also came under pressure as banks rushed to purchase the greenback on behalf of oil marketing companies and other importers, fearing a further fall in the rupee, dealers said. "There is buying (of dollars) pressure for the rupee from importers. Buy (dollars) on dips (in dollar/rupee) mantra is what they are going for today," a dealer at a private bank said.

However, shortly after the market opened, some banks stepped in with dollar sales, at around 85.83 a dollar, likely on behalf of the central bank, which prevented the rupee from falling to a fresh lifetime low and curbed excessive market volatility. However, the intervention was not aggressive in nature, they said. Dealers expect the central bank to continue intervening through dollar sales in the spot market for the rest of the day, and keep the rupee well-supported.  

A fall in other Asian currencies, particularly the Chinese yuan, also weighed on the Indian unit, dealers said. Other Asian currencies fell 0.1-0.5% against the dollar.

During the day, the rupee is likely to move in a range of 85.70-85.90 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. 8

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:

(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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