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Informist, Monday, Jan. 20, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended slightly higher against the dollar on Monday due to easing of the dollar index amid lacklustre trade volumes, dealers said. Trade volumes were down as the US financial markets were shut on account of Martin Luther King Jr. Day, they said. However, banks' dollar purchases, likely for some importers, limited the gains in the local unit, dealers said. 

"There was no significant pressure on the rupee, especially since the US (markets) were shut. Whatever buying (of dollar) pressure was there it came from the usual importers," a dealer at a public-sector bank said.

After moving in a relatively wide range of a little over 10 paise throughout the day, the rupee ended at 86.5675 against the greenback, compared to its previous close of 86.6100 on Friday.

A rise in the offshore Chinese yuan and other Asian currencies aided the local unit. Other Asian currencies rose between 0.1%-0.5% against the US unit, with the South Korean won being the best performer.

The rupee opened higher against the greenback Monday as the dollar index eased, tracking a rise in the Japanese yen, dealers said. The yen rose on rising expectations of an interest rate hike by the Bank of Japan, which is scheduled to announce its monetary policy decision on Friday. The dollar index further eased in European trade, following a rise in the euro. 

At 1530 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 109.09, compared to its previous close of 109.41 on Friday and 108.96 on Thursday.

A rise in domestic equities also aided the rupee, dealers said. Both the benchmark indices, the Nifty 50 and the BSE Sensex, ended in the green on Monday.

Dealers said traders remained cautious before placing any large bets ahead of US President-elect Donald Trump assuming office later in the day. Further, as the US markets were closed, even a slight rise in demand for dollars weighed on the rupee, dealers said. 

Banks purchased the greenback on behalf of some importers, who bought the US unit, noting relatively lower dollar/rupee levels. Some importers also bought dollars to stock up on their holdings, fearing a further fall in the rupee as investors assessed the possibility of a higher tariff imposition under the Trump administration, thus weighing on the Indian unit, dealers said.

Dealers said oil marketing companies also purchased the greenback, taking advantage of easing of oil prices after Israeli and Palestinian officials entered into a truce, bringing some stability in West Asia. Investors also assessed the possibilities of Trump relaxing curbs on Russia's energy sector in exchange for a conflict resolution in the Russia-Ukraine war, which is likely to offset the harsher sanctions imposed on Moscow by the Joe Biden administration.

At 1530 IST, the March Brent crude contract on the Intercontinental Exchange was at $80.69 per barrel, compared to its previous close of $80.75 on Friday and $81.29 on Thursday. Brent crude prices hit $82.53 last week, the highest level since Jul. 8.

FORWARDS 

Premiums on the dollar/rupee forward contract ended higher across tenures as some banks purchased dollars for forward delivery, taking advantage of the arbitrage opportunity between the onshore and the offshore dollar/rupee non-deliverable forward market, dealers said.

While some banks' forward dollar purchases pushed premiums higher, dealers speculated that the Reserve Bank of India sold the greenback for forward delivery, limiting its rise. The central bank has been continuously selling forward dollars for the last few days, bringing premiums down.

A fall in the liquidity deficit also eased pressure on forward premiums, dealers said. On Friday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--fell to INR 1.96 trillion against INR 2.36 trillion on Thursday, as per data from RBI.

The overall volume in the forwards market was relatively low on Monday as traders refrained from placing large bets ahead of the US presidential inauguration. The yield on the benchmark 10-year US Treasury note was unchanged. 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 207.00 paise, against 204.50 paise on Friday. On an annualised basis, the premium was at 2.39%, against Friday's close of 2.36%. 

OUTLOOK

On Tuesday, the rupee will take cues from the movement in the dollar index after Donald Trump's swearing-in ceremony due later Monday, dealers said. "The markets, in all likelihood, will be volatile tomorrow (Tuesday), but the pace of rupee towards 87 (a dollar) will not be fast or soon," a dealer at a state-owned bank said.

Dealers said the rupee may also take cues from the movement in crude oil prices and the offshore Chinese yuan. Dealers expect banks to continue purchasing dollars for importers, who are wary of a further fall in the rupee. 

However, they also expect the Reserve Bank of India to step in with its dollar sales if the local unit comes under immense pressure and to curb any excessive volatility in the market. 

During the day, the rupee is seen in a range of 86.40-87.00 a dollar, with strong technical resistance pegged at 86.60 a dollar.

India Rupee - World FX: Euro up 0.7%; lower rise in German PPI limits gains

MUMBAI – The Euro was up 0.7% against the dollar on Monday as European Central Bank governing council member Robert Holzmann said the ECB risks hurting its credibility if it cuts rates when inflation is rising faster than anticipated. Germany, the largest economy in the bloc, posted a weaker-than-expected producer prices index, which limited the rise in the euro. The PPI rose 0.8% on year in December, as against the estimate of a 1.1% rise in a Reuters poll. 

The Japanese yen was down 0.1% against the greenback. However, losses in the currency were limited on expectations that the Bank of Japan will proceed with an interest rate hike at its monetary policy meeting beginning Thursday. The central bank will announce the policy decision on Friday. The view was strengthened after Japan posted an increase in its core machinery orders. Data on Monday showed that Japan's core machinery orders rose 3.4% in November.

The pound sterling was up 0.3% against the US dollar ahead of the UK consumer sentiment index due later in the day. Traders also await the monthly unemployment data for December due Tuesday. 

A strengthening of the euro and the uncertainty ahead of President-elect Donald Trump's inauguration later in the day, weighed on the dollar index. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 109.09, compared to its previous close of 109.41 on Friday and 108.96 on Thursday. The Canadian dollar was up 0.2% against the US unit.

The Australian dollar was up 0.4% against the greenback, tracking a rise in the Chinese yuan. Any change in the Chinese economy will directly influence the currencies of Australia and New Zealand due to their close bilateral trade relations. The New Zealand dollar was up 0.5% against the greenback. 

Media reports said a weakening yuan may have prompted Chinese authorities to leave its benchmark lending rates unchanged, as expected, on Monday. This is the third straight month that rates have been kept unchanged, with the one-year loan prime rate kept at 3.1% and the five-year loan prime rate at 3.6%.  (Gowri Lakshmi)

India Rupee: Premiums up as banks buy fwd dlrs on onshore-offshore arbitrage

MUMBAI – Premiums on the dollar/rupee forward contract rose across tenures as some banks purchased dollars for forward delivery, taking advantage of the arbitrage opportunity between the onshore and the offshore dollar/rupee non-deliverable forward market, dealers said.

"There is some paying that we are seeing, and it is probably the arbitrage paying," a dealer with a private bank said. "But, we saw some buy/sells too, which is why probably it (forward premiums) is not rising that much."

While some banks' forward dollar purchases pushed premiums higher, dealers speculated that the Reserve Bank of India sold the greenback for forward delivery, limiting its rise. The central bank has been continuously selling forward dollars for the last few days, bringing premiums down.

A fall in the liquidity deficit also eased pressure on forward premiums, dealers said. On Friday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--fell to INR 1.96 trillion against INR 2.36 trillion on Thursday, as per data from RBI.

The overall volume in the forward market was relatively low on Monday as traders refrained from placing large bets ahead of the US Presidential inauguration. The yield on the benchmark 10-year US Treasury note was unchanged. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

At 1356 IST, the premium on the one-year exact-period dollar/rupee forward contract was 206.17 paise, against 204.50 paise on Friday. On an annualised basis, the premium was at 2.38%, against Friday's close of 2.36%.  (Sourabh Kumar)

India Rupee: Erases gains on importers' dlr buys amid subdued trade volume

MUMBAI – The rupee erased some gains as banks bought dollars on behalf of importers, noting relatively lower dollar/rupee levels, dealers said. Overall trade volumes were lower-than-usual ahead of the US Presidential inauguration later in the day.

"General importer buys (of dollars) are there, the usual buy on dips," a dealer at a state-owned bank said. "Oil (prices) have also cooled down, (so) oil marketing companies are active too." Some importers purchased the greenback fearing a further fall in the rupee after President-elect Donald Trump assumes office on Monday. 

Oil marketing companies purchased the greenback, tracking a fall in crude oil prices on Monday. Investors also assessed the possibilities of Trump relaxing curbs on Russia's energy sector in exchange for a conflict resolution in the Russo-Ukraine war, which is likely to offset the harsher sanctions imposed on Russia by the Joe Biden administration. Oil prices also eased after Israeli and Palestinian officials entered into a truce, bringing some stability in the West Asian region. 

At 1249 IST, the March Brent Crude contract on the Intercontinental Exchange was at $80.69 per barrel, compared to its previous close of $80.79 on Friday and $81.29 on Thursday. Brent crude prices hit $82.53 last week, the highest level since Jul. 8, 2024.

However, a rise in other Asian currencies, coupled with the upward movement in the Indian equities market aided the local unit. At 1254 IST, the benchmark indices, the Nifty 50 and the BSE Sensex were up 0.6% and 0.7%, respectively.

The dollar index eased further in European trade following a strength in the euro and the Japanese yen. At 1256 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 109.09 compared to its previous close of 109.46 on Friday and 108.96 on Thursday. 

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: Technical Levels for rupee - Jan 20

MUMBAI – At 1114 IST, the rupee was at 86.4900 per dollar. At 0900 IST, the rupee was at 86.4800 a dollar against its previous close of 86.6100. 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: Up as dollar index eases; volumes low before Trump inauguration

MUMBAI – The rupee was up against the dollar in early trade as the dollar index eased due to a rise in the Japanese yen on Monday, dealers said. They said traders also refrained from placing large bets ahead of the US Presidential inauguration due later in the day. Dealers also said a rise in the offshore Chinese yuan also supported the domestic unit. However, trade volume in the currency market was lacklustre as US financial markets were shut on Monday on account of Martin Luther King Jr. Day.

"The US market is shut, there is no volume, there are no buyers (of dollars), oilers are almost completely missing," a dealer at a state-owned bank said. "We can expect leftward (appreciation) flow for the rupee tracking the rise in Chinese yuan."  

A slight weakness in the dollar index aided the rupee. The dollar index weakened as the Japanese yen rose slightly on increased expectations of an interest rate hike by the Bank of Japan later in the week. At 0944 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 109.12, compared to its previous close of 109.41 on Friday and 108.96 on Thursday.

A rise in the offshore Chinese yuan also lent support to the domestic unit. The offshore Chinese yuan rose 0.1% against the greenback in the run-up to President-elect Donald Trump's inauguration scheduled later in the day. Further, media reports Monday said that a weakening yuan may have prompted China to leave its benchmark lending rates unchanged as expected, marking the third straight month of status quo in rates. 

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

India Rupee - Asia:Up as dlr index eases before Trump's swearing-in ceremony

MUMBAI – Asian currencies rose against the dollar in early trade due to a slight ease in the dollar index. The dollar index eased ahead of the swearing-in ceremony of President-elect Donald Trump on Monday. The index, which measures the strength in the greenback against a basket of six major currencies, was at 109.15 at 0904 IST against 109.41 on Friday and 108.96 on Thursday.

The South Korean won rose 0.6% against the greenback. The rise in the currency was, however, limited, as the Bank of Korea revised its economic growth projection downward in the range of 1.6-1.7% from its earlier projection of 1.9%. The South Korean central bank cut the growth projection amid political uncertainty.

The Taiwan dollar was down 0.5% against the US currency. The Philippines peso was up 0.2% on optimism shown by the government on its economic growth. The country's Finance Secretary Ralph Recto said he was confident of robust economic growth, with the GDP growth in Oct-Dec likely to surpass the previous quarter's growth of 5.2%, bringing the full-year growth closer to or above 6%, as per reports.

The Indonesian rupiah was up 0.1% against the US dollar. The Malaysian ringgit was up 0.1% against the US currency. Market participants expect the Malaysian central bank to keep the benchmark rate unchanged at 3.0% on Wednesday, as per a Reuters poll.

The Thai baht rose 0.2% against the greenback, receiving support from a rise in the domestic equities market.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Jan 20

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:

(Sourabh Kumar)

End

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

Edited by Vandana Hingorani

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