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Informist, Wednesday, Jan. 15, 2025

MUMBAI – The rupee ended sharply higher against the dollar, posting the biggest single day gains since Jun. 3. The rupee rose sharply after banks sold the greenback, on behalf of exporters and foreign portfolio investors, dealers said. An ease in the dollar index ahead of the US consumer price index data also aided the rupee, they said.

"After two days of chaos, the market is finally settling and correcting itself. There was (FPI) sell-offs (of dollars), active exporters and a further push from the central bank," a dealer at a private bank said. "Though we feared a sharp fall to the next big number (87 a dollar), the pace now seems much slower, RBI likely won't let the rupee fall that much," he added.

After rising by 27 paise, the rupee settled at 86.3625 a dollar, against the record closing low of 86.6300 on Tuesday. The rupee rose 0.3% against the US unit, emerging as the top performing Asian currency among its other peers. Some banks also sold the greenback, likely on behalf of the Reserve Bank of India to prevent the rupee from falling, which pushed the rupee back to 'safer levels', dealers said.

On Wednesday, the rupee opened higher as some dealers speculated that the RBI sold the greenback in the offshore non-deliverable forwards markets, dealers said. "The rupee was trading around 86.57-86.59 levels earlier (in the morning), some supply (of dollars) definitely helped it (rupee) open at this level," a dealer at a state-owned bank said. The Indian currency opened at 86.4900 a dollar.

The rupee also found support due to an ease in the dollar index ahead of the US CPI data, scheduled for release later in the day. A Dow Jones poll estimated the CPI to rise 0.5% on month. On an annual basis, inflation in December is estimated at 2.6%.

The US inflation data will provide market participants with more cues on the rate outlook of the US Federal Reserve, ahead of the Federal Open Market Committee's meeting on Jan. 28-29. Currently, traders price in a 97.3% probability that the US Fed will hold the benchmark rates steady this month, according to the CME FedWatch tool.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 109.08, compared to its previous close of 109.19 on Tuesday and 109.50 on Monday. 

However, shortly after opening, the rupee came under pressure as banks purchased the greenback on behalf of importers, dealers said. Importers rushed to purchase the greenback, who were wary of a further fall in the rupee. They feared the rupee may continue to fall, after some media reports on Tuesday said the RBI Governor Sanjay Malhotra indicated an openness to keep the rupee flexible. This triggered fears among importers, coupled with the possibility of a strong dollar index in the run-up to the President-elect Donald Trump assuming office on Jan. 20.

As the rupee came under pressure, some banks sold the greenback, likely on behalf of the RBI, preventing the rupee from falling further and curbing excess market volatility, dealers said. They said that the RBI intervention in the spot market was mild compared with its previous instances of dollar sales. 

Meanwhile, the dollar index continued to decline during the day, which prompted traders to sell the greenback to cut existing long dollar bets, which aided the Indian currency, dealers said. The rupee also found support as banks sold the greenback on behalf of overseas investors looking to invest in the domestic financial markets, dealers said. On Wednesday, both the Nifty 50 and the BSE Sensex ended in the black.

Further, noting the sharp rise in the rupee, banks sold the greenback on behalf of exporters who wanted to take advantage of relatively higher dollar/rupee levels, dealers said. Exporters' dollar sales also triggered several stop losses, at 86.40 a dollar and above levels.

"Exporters were not expected at all today (Wednesday) but you see, the rupee may not be falling to 87 (a dollar) as soon as we thought it would," a dealer at a private bank said. "Even if it falls to 87 in the near term, the market will correct itself and bring the levels back at a comfortable position," he added. 

Back home, data showed that India's trade deficit narrowed sharply to $21.94 billion in December, compared to November's revised deficit of $31.82 billion. This also supported the rupee, dealers said. 

FORWARDS 

The premium on the one-year dollar/rupee forward contract closed near three-week low as the Reserve Bank of India likely sold dollars for forward delivery for maturity in June and December, dealers said. Premiums fell across tenures. Dealers said the central bank sold forward dollars, probably to offset its spot intervention and avoid a further widening of the rupee liquidity deficit.

The central bank sold forward dollars for maturity in June and December on Tuesday as well, dealers said. "While the spot intervention (by the RBI) has come down, they are doing these swaps mostly keeping in account the liquidity deficit," a dealer at a brokerage firm said. 

The fall in premiums, however, was limited due to importers' continued forward dollar purchases as the rupee has fallen sharply in spot in recent weeks, dealers said. So far this month, the rupee has fallen nearly 90 paise in the spot. Due to a fear of the fall continuing, importers, along with other corporates, have been purchasing dollars for forward delivery, driving forward premiums higher in the past few weeks.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 212.00 paise, against 222.74 paise Tuesday. On an annualised basis, the premium was at 2.43%, against Tuesday's close of 2.57%.

OUTLOOK

On Thursday, the rupee will take cues from the movement in the dollar index after the US CPI data. The rupee may also take cues from the movement in crude oil prices and the offshore Chinese yuan. Dealers expect importers to purchase the greenback should the rupee fall again. 

However, they expect the central bank to step in with its dollar sales to prevent the rupee from falling sharply and curb excessive market volatility. Exporters are likely to sell dollars should the Indian currency rise further, dealers said. 

During the day, the rupee is seen in a range of 86.20-86.60 a dollar, with strong technical resistance pegged at 86.25 a dollar.

India Rupee - World FX: Yen up 0.7% as BoJ Governor Ueda hints at rate hike

MUMBAI – The yen was up 0.7% against the dollar on Wednesday after Bank of Japan Governor Kazuo Ueda indicated the possibility of an interest rate hike at its monetary policy meeting concluding Jan. 24. His remarks also hinted at his confidence over wage increases. He said the central bank is doing its best to boost its currency and prevent market volatility.

The dollar index eased ahead of the US Consumer Price Index, scheduled to be released later in the day. A Dow Jones poll estimated CPI to rise 0.5% on month. On an annual basis, inflation in December is estimated at 2.6%. The data will provide market participants with more cues on future course of rate cuts by the US Federal Reserve. The Federal Open Market Committee will meet on Jan. 28-29 to decide on the benchmark rate. 

Currently, traders price in a 97.3% probability of the benchmark rates remaining unchanged at the next Fed meeting, according to the CME FedWatch tool. Data released on Tuesday showed the Producer Price Index rose less-than-expected. The December PPI rose 0.2% on month, against the 0.3% increase estimated by analysts in a Reuters poll.

At 1510 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 109.01, compared to its previous close of 109.19 on Tuesday and 109.50 on Monday.

The euro was down 0.1% against the greenback after data released Wednesday showed that eurozone industrial production in November rose less than what analysts had expected. Industrial production in November rose 0.2% on a monthly basis against the expectation of a 0.3% rise in a Dow Jones poll. On an annual basis, industrial production fell 1.9%, more than the expectation of a 1.8% fall in the same poll.

The pound sterling was up 0.1% against the greenback. The rise in the currency was limited as data showed that the headline inflation in the UK was up 2.5% on year in December, against the forecast of a 2.7% rise. The softer-than-expected data is anticipated to give the Bank of England some room for an interest rate cut at its policy meeting in February. 

The Canadian dollar and the Swiss franc were flat against the greenback, while the New Zealand dollar was up 0.2%. The Australian dollar traded 0.1% higher against the US unit.  (Gowri Lakshmi)

India Rupee: Rises sharply as dlr index declines more; stop-losses triggered

NEW DELHI – The rupee rose sharply against the dollar as the Dollar Index fell further during European trade and as banks sold dollars for exporters and foreign fund inflows, leading to stop-losses being triggered on long dollar bets around 86.40 a dollar, dealers said. The Indian currency touched a high of 86.3050 a dollar during the day.

"The DXY (Dollar Index) has come off. The rupee has been on the higher side for most of the day, so some long cutting has also happened," said a dealer at a private bank. "But I feel 86.30 is the top (for the rupee)."

The Dollar Index declined more during European trade ahead of the release of US inflation data, due after market hours. Market participants keenly await the data to see if they support the US Federal Reserve's cautious stance on interest rates. The US headline CPI is likely to have risen by 0.3% on month in December, and the core gauge by 0.2%, per a poll by Reuters. Headline CPI likely rose 3% on year.

Weakness in the Dollar Index prompted traders to sell the greenback to cut existing long dollar bets, which aided the Indian currency, dealers said. At 1405 IST, the Dollar Index, which measures the strength of the dollar against a basket of six major currencies, was at 109.05, compared to its close of 109.19 Tuesday and 109.50 Monday. The index fell to a low of 108.97 during the day.

Noting the appreciation in the rupee against the dollar, some banks stepped in to sell dollars on behalf of exporters, wary of a further rise in the rupee, which also aided the Indian unit, according to dealers. The rupee was also supported by some banks' dollar sales for foreign fund inflows into corporations, they said.

Meanwhile, some banks rushed to buy dollars on behalf of importers who wanted to make the most of the relatively lower dollar/rupee levels. The Indian unit pared some of its gains due to this, dealers said.

For the rest of the day, the rupee is likely to move in a range of 86.25-86.55 against the dollar. Dealers see immediate technical resistance for the Indian unit at 86.30 a dollar.  (Pratiksha)

India Rupee: Premiums fall across tenures as RBI likely sells fwd dollars

MUMBAI – The premiums on the dollar/rupee forward contracts fell across tenures as the Reserve Bank of India likely sold dollars for forward delivery for maturity in June and December, dealers said. They said the central bank sold forward dollars, probably to offset its spot intervention and avoid a further widening of the rupee liquidity deficit.

"The central bank has been there in forwards, and now recently they seem to have increased their forward intervention," said a dealer at a private bank. Premiums fell across tenures on Wednesday, with the one-year dollar/rupee forward premium falling to over a two-week low of 2.45%, on an annualised basis.

The central bank sold forward dollars for maturity in June and December on Tuesday as well, dealers said. "While the spot intervention (by the RBI) has come down, they are doing these swaps mostly keeping in account the liquidity deficit," a dealer at a brokerage firm said. On Tuesday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions-- fell to INR 2.09 trillion from INR 2.50 trillion on Monday, as per data from the RBI.

The fall in premiums, however, was limited, due to importers' continued forward dollar purchases as the rupee has fallen sharply in spot in recent weeks, dealers said. So far this month, the rupee has fallen near 90 paise in spot. Due to a fear of the fall continuing, importers, along with other corporates, have been purchasing dollars for forward delivery, driving forward premiums higher in the past few weeks. The one-year forward premium had risen to a near 27-month high of 2.75% on Jan. 9, before coming down.

At 1304 IST, the premium on the one-year exact-period dollar/rupee forward contract was 214.00 paise, against 222.74 paise Tuesday. On an annualised basis, the premium was at 2.45%, against Tuesday's close of 2.57%.

Market participants now await the release of US December inflation figures, later in the day. The benchmark 10-year US Treasury note was largely steady on Tuesday. It has risen over 20 basis points this month, putting forward premiums under downward pressure.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Jan 15

MUMBAI – At 1201 IST, the rupee was at 86.5000 per dollar. At 0900 IST, the rupee was at 86.4900 a dollar against its previous close of 86.6300. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Pratiksha)

India Rupee: Rises as dollar index falls; importers' dollar buys cap gains

MUMBAI – The rupee rose against the greenback Wednesday after the dollar index eased ahead of the US consumer price index later in the day, dealers said. However, banks' dollar purchases on behalf of importers limited the gains for the local unit, they said. 

"Everyone is going long (buying dollars), nobody is selling. The market knows the rupee is going to only go down from here. The RBI comments on the rupee also moved the market and is a major influence now," a dealer at a state-owned bank said. 

According to media reports on Tuesday, Reserve Bank of India Governor Sanjay Malhotra has indicated willingness to keep the domestic currency flexible. Following this, the rupee hit a lifetime low of 86.6500 a dollar on Tuesday. 

The key US inflation data will provide market participants more cues on the rate outlook of the US Federal Reserve, ahead of the Federal Open Market Committee's meeting on Jan. 28-29. A Dow Jones poll estimated the CPI to rise 0.5% on month. On an annual basis, inflation in December is estimated at 2.6%. At 1010 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 109.23, compared to its previous close of 109.19 on Tuesday and 109.50 on Monday.

Some dealers speculated that the RBI possibly sold dollars in the offshore non-deliverable forwards market and the domestic spot market, which also gave a boost to the Indian currency. 

However, banks purchased the greenback on behalf of importers, who feared further fall in the rupee in the run-up to US president-elect Donald Trump assuming office on Jan. 20. Dealers said exporters were largely absent from the market owing to expectations that the rupee would fall sharply in the coming weeks, and they may only be active once the market stabilises. 

For the rest of the day, the rupee is likely to move in a range of 86.40-86.70 against the dollar. Dealers see immediate technical resistance for the Indian unit at 86.45 a dollar. (Gowri Lakshmi)

India Rupee - Asia FX: Most fall ahead of US CPI data; South Korean won flat

MUMBAI – Most Asian currencies traded lower against the dollar ahead of the release of US inflation data later in the day. The key data will provide market participants more cues on the rate outlook of the US Federal Reserve, ahead of the Federal Open Market Committee's meeting on Jan. 28-29. A Dow Jones poll estimated the CPI to rise 0.5% on month. On an annual basis, inflation in December is estimated at 2.6%.

The dollar index fell after data on Tuesday showed the US producer price index for December was cooler than expected. The December PPI rose 0.2% on month, against the 0.3% increase estimated by analysts in a Reuters poll, while the core PPI rose 0.3%. This aided the Asian units. 

At 0948 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 109.25, compared to its previous close of 109.19 on Tuesday and 109.50 on Monday.

Both the Taiwan dollar and the Philippine peso were down 0.1% against the dollar. The South Korean won was flat against the US unit even after data showed that the country's unemployment rate hit a three-and-a-half-year high amid ongoing political uncertainty. The unemployment rate rose to 3.7% in December, the highest since June 2021, against 2.7% in November, according to government data released on Tuesday. However, analysts expect Bank of Korea to lower interest rates by 25 basis points on Thursday due to a softening economy and moderation in inflation.

The Indonesian rupiah was down 0.2% against the dollar even after reports said that Bank Indonesia was expected to hold its benchmark rates at its first policy meeting of the year, which will conclude on Wednesday, to prevent further decline in the currency. 

The Thai baht was also down 0.2% against the greenback even after data on Tuesday showed that consumer confidence in Thailand surged for the third consecutive month in December, driven by optimism about government economic stimulus measures. The consumer confidence index rose to 57.9 last month from 56.9 in November. 

The Malaysian ringgit and the Chinese yuan were flat against the greenback.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Jan 15

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 Akul Nishant Akhoury

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