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Informist, Friday, Jan. 17, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended down against the dollar Friday as banks persistently purchased the greenback on behalf of importers and foreign portfolio investors, dealers said. However, they said the Reserve Bank of India intervened in the foreign exchange market by selling dollars, limiting a further fall in the Indian currency.

The rupee ended at 86.6100 a dollar, only slightly above the lifetime low of 86.6475 it hit on Tuesday. The rupee moved in a range of 12 paise, falling to the day's low of 86.6225 a dollar. 

"The rupee still seems to be on a path of depreciation as there is buying pressure. Every dip in the dollar/rupee is bought into," a dealer at a brokerage firm said. A strengthening in the dollar index during the European trade further weighed on the rupee, dealers said. A slight rise in the offshore Chinese yuan lent some support to the local unit.

The rupee opened slightly down at 86.5650 against the greenback on Friday as banks purchased the greenback on behalf of importers, who feared a further depreciation in the domestic currency after President-elect Donald Trump assumes office on Monday. Since the US market will be shut on Monday on account of the US Presidential Inauguration day, dealers noted that some importers also stocked up on the greenback, which put the rupee under more pressure. 

Soon after the market opened, banks bought the greenback on behalf of overseas investors, who continued to exit the Indian stock market. It weighed on the rupee, dealers said. So far in January, overseas investors have withdrawn over $4 billion from domestic equities, on a net basis. On Friday, both the benchmark indices, the Nifty 50 and the BSE Sensex ended in the red. "The FPI outflows are continuing and a daily phenomenon now. This doesn't seem to stop until the rupee finds some stability," a dealer at a state-owned bank said. 

The rupee was further weighed down as the dollar index rose slightly in European trade after declining on Thursday. The dollar index fell on Thursday after data released in the US the same day showed an increase in the number of Americans filing new applications for unemployment benefits during the week ended Jan. 11. The total claims for unemployment benefits climbed 14,000 to a seasonally adjusted 217,000 for the week ended Jan. 11. Economists had forecast 210,000 claims for the same week in a Reuters poll.

Further, on Thursday, comments by the Fed Governor Christopher Waller pushed back on the expectation of a shallow rate-cut cycle and reinforced the view that the Fed may not limit the rate outlook to just two cuts as anticipated before. The next meeting of the Federal Open Market Committee is scheduled for Jan. 28-29. Traders have currently priced in a 97.3% probability of the Fed maintaining the status quo, as per 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 109.06, compared with its previous close of 108.96 on Thursday and 109.08 on Wednesday. 

However, some banks stepped in with its dollar sales, likely on behalf of the Reserve Bank of India, which prevented the rupee from hitting another record low, dealers said. Dealers noted that the nature of the central bank's intervention in the foreign exchange market continues to be comparatively mild.

FORWARDS 

Premiums on the dollar/rupee forward contract ended down as the Reserve Bank of India is likely to have sold dollars for forward delivery in maturities spanning one month to six months, dealers said. They said the central bank's forward dollar sales were to offset the effect of its spot intervention on banking system liquidity.

On Thursday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--rose to INR 2.36 trillion from INR 2.22 trillion on Wednesday, as per data from RBI. 

The central bank's intervention in the foreign exchange market to limit the fall in the rupee tends to negatively affect the liquidity deficit. The RBI has been intervening in the spot market to prevent the rupee from falling sharply, putting the already tight liquidity under pressure, dealers said.

The fall in premiums, however, was limited due to a fall in the benchmark 10-year US Treasury yield. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. The yield fell after data released in the US showed that the number of Americans filing for unemployment benefits in the week ended Jan. 11 was more than what analysts had expected.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 204.50 paise, against 207.00 paise on Thursday. On an annualised basis, the premium was at 2.36%, against Thursday's close of 2.39%.

OUTLOOK

Markets are shut on Saturday. On Monday, the Indian currency market is expected to be lacklustre as the US financial markets are shut on account of US Presidential inauguration day. "Monday volatility may be expected since volumes are low. From Tuesday, it's the statements (from Trump) which will move the market," a dealer at a public sector bank said. "We can see 87 (a dollar) or 88 (a dollar) in a while," he added.

The rupee may take cues from the movement in offshore Chinese yuan and crude oil prices. Dealers expect banks to purchase the greenback on behalf of importers, which may weigh on the rupee. 

However, they also expect the central bank to step in with its dollar sales to prevent the rupee from falling sharply and curb excessive market volatility.

During the day, the rupee is seen in a range of 86.60-87.00 a dollar, with strong technical support pegged at 86.80 a dollar.

India Rupee - World FX: Sterling down on surprise fall in UK retail sales

MUMBAI – The pound sterling was down 0.4% against the dollar after data on Friday showed that UK retail sales declined unexpectedly in December, raising concerns about the health of the economy. Retail sales fell by 0.3% on month, against analyst estimates of a 0.4% rise in a Reuters poll. 

The Euro was down 0.1% against the greenback after data showed that the eurozone's industrial output fell 1.9% on year in November. However, on a monthly basis, industrial production rose by 0.2%, similar to in October. Further, the European Central Bank governing council member, Yannis Stournaras, said on Thursday that there should be more rate cuts in further meetings.

The dollar index eased slightly in early European trade. The index had declined after the US data showed a cooling-off in the labour market. The index was at 109.06 at 1549 IST against 108.96 on Thursday and 109.08 on Wednesday.

Data released Thursday showed a more-than-expected increase in the number of Americans filing new applications for unemployment benefits for the week ended Jan. 11. The unemployment benefits climbed 14,000 to a seasonally adjusted 217,000 for the week ended Jan. 11. Economists had projected 210,000 claims for the week according to a Reuters poll.

Comments by US Federal Reserve Governor Christopher Waller, pushing back on expectations of a shallow rate-cut cycle, also weighed on the dollar index. The next meeting of the Federal Open Market Committee is scheduled for Jan. 28-29. Traders have currently priced in a 97.3% probability of the Fed maintaining the status quo, as per CME FedWatch tool.

The Canadian dollar was down 0.1% against the greenback. The Japanese yen traded 0.4% lower against the greenback, coming under pressure after the government estimate on Friday showed that the country may have pushed back its aim for a budget surplus by a year. The fall in the currencies was limited after reports suggested that the Bank of Japan is expected to raise rates at its next meeting on Jan. 23-24.

Earlier on Friday, Japan's Finance Minister Katsunobu Kato said he expects the Bank of Japan to "conduct monetary policy appropriately to achieve the 2% inflation target."

The New Zealand dollar and the Australian dollar were both down 0.1% against the greenback. However, losses in the currencies were limited after China showed upbeat economic data. China's GDP grew 5.4% in the quarter ended December, against the forecast of 5.0% in a Reuters poll. Any change in the Chinese economy directly influences the currencies of Australia and New Zealand due to their close bilateral trade relations. The Swiss Franc traded 0.1% higher against the US currency.  (Gowri Lakshmi)

India Rupee - Technical Levels for rupee - Jan 17

MUMBAI – At 1202 IST, the rupee was at 86.5850 per dollar. At 0900 IST, the rupee was at 86.5650 a dollar against its previous close of 86.5500. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Gowri Lakshmi)

India Rupee:Remains down on importers' dollar buys; RBI dlr sales limit fall

MUMBAI – The rupee remained down against the dollar Friday as banks purchased the greenback on behalf of importers, dealers said. However, banks' dollar sales, likely on behalf of the Reserve Bank of India, limited the rupee's fall, they said. The Indian currency has moved in a tight range of just 4 paisa so far in the day.

Banks continuously bought the greenback on behalf of importers who feared a further fall in the rupee after US President-elect Donald Trump assumes office on Monday. "Importers are covering aggressively since the last one week in anticipation of further rupee depreciation," a dealer at a brokerage firm said.

The US market will be shut on Monday on account of the US Presidential Inauguration day. Consequently, some importers also stocked up on the greenback, putting the rupee under pressure. Foreign portfolio investors, who wanted to withdraw funds from the domestic stock market, demanded dollars, too, which weighed on the Indian currency. At 1120 IST, the benchmark indices, Nifty 50 and BSE Sensex, were down 0.8% each. 

However, some banks sold dollars, likely on behalf of the RBI, near the 86.59-a-dollar level, preventing the rupee from falling further. For the rest of the day, the rupee is seen moving in a range of 86.40-86.65 against the dollar. Dealers see immediate technical support for the Indian unit at 86.60 a dollar.  (Gowri Lakshmi)

India Rupee: Slightly down on bks' dlr buys for FPI outflows from equity mkt

MUMBAI – The rupee was slightly lower against the dollar in early trade as some banks purchased the greenback on behalf of foreign portfolio investors who were looking to withdraw funds from the domestic equity market, dealers said. 

"There is buying, I think mostly from FPIs," a dealer with a foreign bank said. "The (stock) index is also down, so the pressure (of foreign fund outflows on rupee) is there." Domestic stock indices were down in early trade. At 0940 IST, the benchmark Nifty 50 and the Sensex were down 0.5% each.

Dealers said most traders refrained from placing large bets ahead of US president-elect Donald Trump assuming office on Monday. Further, the rupee received support as the dollar index retreated on Thursday after the US jobless claims data showed unemployment benefit claims rose more than expected in the US for the week ended Jan. 11. The number of Americans filing for unemployment benefits rose by 14,000 to a seasonally adjusted 217,000 for the week ended Jan. 11, against analysts' estimate of 210,000 claims. 

The dollar also eased following comments by US Federal Reserve Governor Christopher Waller reinforcing the view that if the deflationary trend continued in the US, the central bank might opt for more than the two cuts expected earlier. At 0933 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.98, compared to its previous close of 108.96 on Thursday and 109.08 on Wednesday. 

A rise in the offshore Chinese yuan also aided the rupee after data showed that China's GDP growth beat analysts' estimates. China's GDP grew 5.4% in the quarter ended December, against the forecast of 5% in a Reuters poll. 

During the day, the rupee is seen moving in a range of 86.40-86.65 against the dollar. Dealers see immediate technical support for the Indian unit at 86.60 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Most up tracking ease in dlr index post US econ data

MUMBAI – Tracking easing of the dollar index, most Asian currencies rose against the greenback in early trade, with the Thai baht gaining the most, by 0.2%. The Thai currency received support as Thailand's commerce ministry said the country would sign a free trade agreement with the European Free Trade Association next week at the World Economic Forum. 

The country's commerce minister, Pichai Naripthaphan, said this was expected to provide a boost of more than 3% to GDP, with an increase in overseas foreign investment and exports.

The dollar index eased on Thursday after data showed that the number of people filing for unemployment benefits rose in the US during the week ended Jan. 11. The weekly initial jobless claims data showed that unemployment benefits rose 14,000 to a seasonally adjusted 217,000 in the week ended Jan. 11. Economists had forecast 210,000 claims in a Reuters poll.

The dollar index also eased after US Federal Reserve Governor Christopher Waller said on Thursday that continued easing in inflation might allow the central bank to cut rates faster and more than previously thought. As of today, Fed Fund futures traders see a 97.3% chance of the Fed keeping rates steady at its meeting on Jan. 28-29, with the rest of the odds for a 25-basis-point cut, according to the CME FedWatch Tool.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 108.95 at 0925 IST against Thursday's 108.96 and 109.08 on Wednesday. 

Asian currencies also got a boost after data showed China's GDP in Oct-Dec expanded more than expected. The GDP growth was 5.4% on year, against the expectation of 5.0% in a Reuters poll.

The Taiwan dollar was steady against the greenback. The South Korean won rose 0.1% against the US currency. While it rose as a result of easing of the dollar index, the upside movement in the currency was limited due to the ongoing political turmoil. On Thursday, the impeached president, Yoon Suk Yeol, was arrested. He was impeached after he imposed a brief martial law in December. The Philippines peso and the Thai baht were up 0.1% against the greenback.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Jan 17

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

(Sourabh Kumar)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

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