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Informist, Thursday, Jan. 23, 2025

By Sourabh Kumar

MUMBAI – The rupee ended lower against the dollar Thursday, as importers bought the greenback throughout the day, dealers said. However, some foreign banks sold dollars, probably on behalf of their foreign clients, which limited the fall of the Indian currency, dealers said.

"After opening, there was just a rush in demand (for dollars), but then some custodian flows were there, which drove it (dollar/rupee) down (during the day)," a dealer with a private bank said.

After moving in a range of 15 paise, the rupee closed at 86.4575 a dollar, against Wednesday's close of 86.3225 a dollar.  Fall in other Asian currencies also weighed on the rupee.

As the rupee opened lower against the dollar, importers rushed in to purchase the greenback, anticipating a further fall in the rupee during the day, dealers said. Such strong demand for dollars pushed the rupee down to the day's low of 86.5175 a dollar.

Apart from importers, a recovery in the dollar index also weighed on the rupee, dealers said. The dollar index recovered late Wednesday, after falling to an over three-week low of 107.75 earlier in the day. The index, which measures the strength of the greenback against a basket of six major currencies, was 108.21 at 1530 IST against 108.28 Wednesday and 108.10 Tuesday.

Market participants have been in a wait-and-watch mode with regard to US President Donald Trump's next steps on tariffs. Trump had said late Tuesday that his administration was weighing options to impose a 10% tariff on Chinese exports to the US from Feb. 1, as per media reports. He had earlier said that Mexico and Canada could face tariffs of nearly 25%. He had also talked about imposing tariffs on Europe. However, investors are waiting for more clarity on such announcements.

Coming back to domestic factors, dealers speculated that the Reserve Bank of India might have also purchased dollars on Thursday, shoring up its reserves at relatively lower dollar/rupee levels. Foreign exchange reserves with the RBI have fallen to an over 10-month low of $625.87 billion as of Jan. 10. Dealers said, apart from valuation losses, the central bank's intervention through dollar sales in the domestic currency market led to a sharp fall in reserves.

About half an hour into the opening, the rupee started rising as some foreign banks sold the greenback, likely on behalf of their overseas clients, dealers said. Banks also sold dollars for some foreign fund inflows into the domestic equities market, which supported the Indian currency, dealers said. 

"There were very strong flows in the morning, and that is why the rupee rose," a dealer with a state-owned bank said. "I think in the coming days, the dollar/rupee might trend lower, at least temporarily, because so many people are long on dollars that they have to sell."

A fall in crude oil prices also supported the Indian rupee, dealers said. Given that crude is a major import commodity for India, a fall in its price reduces the country's import bill, supporting the domestic currency. At 1530 IST, the March Brent crude oil contract on the Intercontinental Exchange was at $78.87 per barrel, compared to its previous close of $79.00 per barrel and $79.29 per barrel on Tuesday.

Oil prices started falling after US President Donald Trump announced a national energy emergency on his first day in office. The emergency was declared to allow faster oil and gas production permits, rolling back environmental protections. These measures are expected to increase crude output of the US at a time when demand for oil is low and supply is already in surplus. Crude prices also fell after the announcement of a truce between Israel and Hamas.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended slightly higher as banks purchased the greenback on behalf of some importers for forward delivery, dealers said. However, most importers refrained from placing large bets, cautious of the RBI's continuous forward dollar sales, dealers said.

Apart from a few importers who purchased the greenback for forward delivery, noting the lower level, most others did not place large bets as they were of the opinion that forward premiums would fall due to RBI's forward dollar sales.

The central bank has been selling dollars for forward delivery to ease the widening liquidity deficit, dealers said. The central bank has been selling dollars in the spot market whenever the rupee falls sharply, and buying dollars when it rises sharply. A few dealers speculated that the RBI sold dollars for forward delivery on Thursday as well.

At 1530 IST, premium on the one-year exact-period dollar/rupee forward contract was 198.50 paise, against 196.30 paise Wednesday. On an annualised basis, the premium was 2.30%, against Wednesday's close of 2.26%.

OUTLOOK

On Friday, the rupee will take cues from the movement of the dollar index and crude oil prices, dealers said. The rupee may also take cues from the movement of the offshore Chinese yuan. Foreign fund inflows are likely to continue supporting the rupee, dealers said.

Dealers said they expect importers to continue buying the greenback, noting the relatively lower dollar/rupee levels. However, they also expect the RBI to step in with dollar sales to curb excessive market volatility or if the local unit comes under immense pressure. 

Investors will also keep an eye on the policy decision of Bank of Japan on Friday. A poll by Reuters expects the Japanese central bank to raise rates by 25 basis points. During the day, the rupee is seen in a range of 86.30-86.70 a dollar, with strong technical support pegged at 86.60 a dollar.

India Rupee - World FX: Yen rises 0.1% ahead Bk of Japan policy outcome Fri

NEW DELHI – The Japanese yen rose 0.1% against the dollar ahead of the Bank of Japan's policy meeting outcome on Friday, where the central bank is widely expected to raise rates for the first time since July.

Bank of Japan Governor Kazuo Ueda said last week that the central bank will raise rates if improvements in the economy and rise in inflation continue. "We are currently analysing data thoroughly and will compile the findings in our quarterly outlook report. Based on that, we will discuss whether to raise interest rates at next week's policy meeting and would like to reach a decision," he said. 

The euro was largely steady against the US unit ahead of the European Central Bank's policy meeting next week, where it is widely seen cutting interest rates. Multiple central bank officials have said this week that they intend to reduce interest rates further as inflation remains primed to hit 2% this year. 

The pound sterling was also broadly flat against the greenback amid uncertainty over US President Donald Trump's tariff plans. Globally, investors are waiting for concrete announcements on tariffs from Trump. Late Tuesday, his administration discussed imposing a 10% tariff on goods imported from China starting Feb. 1. On Monday, he had said Mexico and Canada could face levies of around 25% by Feb. 1.

Both the Australian dollar and New Zealand dollar were down 0.1% each against the dollar, tracking weakness in the Chinese yuan. Both countries share close bilateral trade relations with the world's second-largest economy. The yuan weakened 0.2% against the dollar on fear Trump may confirm US tariffs on Chinese imports.  

The dollar index recovered from the over three-week low it hit on Wednesday ahead of the release of the US weekly unemployment claims report later in the day. At 1614 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 108.20, against 108.28 on Wednesday. The index had fallen to 107.75 on Wednesday, its lowest level since Dec. 30. (Pratiksha)

India Rupee: Premium slightly up on banks' forward dollar buys for importers

MUMBAI – The premium on the one-year dollar/rupee forward contract was slightly up as banks purchased the greenback on behalf of some importers for forward delivery, dealers said. However, most importers refrained from placing large bets, cautious of the Reserve Bank of India's continuous forward dollar sales, dealers said.

"Right now, not much movement, but some paying is there," a dealer with a state-owned bank said. "But I expect it to fall, given that the RBI has been conducting buy/sells."

Apart from a few importers who purchased the greenback for forward delivery, noting the lower level, most others did not place large bets as they were of the opinion that forward premiums would fall due to RBI's forward dollar sales.

The central bank has been selling dollars for forward delivery to ease the widening liquidity deficit, dealers said. The central bank has been selling dollars in the spot market whenever the rupee falls sharply, and buying dollars when it rises sharply. A few dealers speculated that the RBI sold dollars for forward delivery on Thursday as well.

On Wednesday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--rose to INR 2.88 trillion, its highest since Jan. 24, 2024. RBI data showed the figure was at INR 2.71 trillion on Tuesday.

At 1429 IST, the premium on the one-year exact-period dollar/rupee forward contract was 197.30 paise, against 196.30 paise Wednesday. On an annualised basis, the premium was 2.28%, against Wednesday's close of 2.26%.  (Sourabh Kumar)

India Rupee: Technical Levels for rupee - Jan 23

MUMBAI – At 1109 IST, the rupee was at 86.4275 per dollar. At 0900 IST, the rupee was at 86.4650 a dollar against its previous close of 86.3225. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Pratiksha)

India Rupee: Down in early trade as importers rush to buy dollars

MUMBAI – The rupee was down against the dollar in early trade Thursday as importers rushed to purchase the greenback, dealers said, adding that a recovery in the dollar index also weighed on the rupee.

"Everyone came in the morning to buy, it is madness right now," a dealer with the foreign bank said, pointing to the sudden demand for the greenback from importers. With the dollar index recovering late on Wednesday, it weighed on the Indian currency. As soon as the rupee opened sharply lower, banks started purchasing the greenback on behalf of importers who anticipated further fall in the domestic currency, dealers said. 

The dollar index recovered after falling to a near three-week low of 107.75 on Wednesday. The index, which measures the strength in the greenback against a basket of six major currencies, slightly recovered and was at 108.27 at 0919 IST. On Tuesday, the dollar index was at 108.10.

Should the rupee fall further, dealers expect the Reserve Bank of India to intervene in the foreign exchange market by selling dollars near 86.60 a dollar to prevent runaway depreciation in the Indian currency.

Dealers said a fall in crude oil prices supported the Indian currency. Given that crude is a major import commodity for India, a fall in its prices reduces the country's import bill, supporting the domestic currency. 

Oil prices started falling after US President Donald Trump announced a national energy emergency on his first day in office. The emergency was declared to allow faster oil and gas production permits, rolling back environmental protections. These measures are expected to increase crude output from the US at a time when demand for oil is low amid supply is already surplus.

At 0929 IST, the March Brent crude contract on the Intercontinental Exchange was at $78.73 per barrel, compared to its previous close of $79.00 per barrel and $79.29 per barrel on Tuesday.

For the rest of the day, the rupee is seen moving in a range of 86.30-86.60 against the dollar. Dealers see technical resistance for the Indian unit at 86.30 a dollar.  (Sourabh Kumar)

India Rupee - Asia FX: Most fall as dollar index recovers; Taiwan dollar up

MUMBAI – Most Asian currencies were down against the dollar in early trade Thursday as the dollar index recovered from an over three-week low on Wednesday. 

The South Korean won was down 0.2% against the US dollar as the country's economy expanded at the slowest quarterly pace in Oct-Dec amid a political crisis in December. The GDP expanded 0.1% on quarter in Oct-Dec, against the forecast of 0.2% in a Reuters poll. Consumer spending in the quarter ended December rose 0.2% with corporate investment witnessing growth of 1.6%, weaker than the previous quarter's rise of 0.5% and 6.5%, respectively.

The Philippines peso was down 0.2% against the greenback. A fall in its domestic stock index also weighed on the currency. 

The Indonesian rupiah was steady against the US currency in early trade as the country's central bank governor, Perry Warjiyo, was optimistic about the nation's economic growth. He said the growth this year is likely to be better than in 2024.

The Malaysian ringgit was down 0.2% against the greenback after rising on Wednesday as the country's central bank held the policy rate steady at 3.0%. The Malaysian currency later came under pressure as the dollar index rose. The Thai baht was down 0.2% against the US dollar.

Bucking the trend, the Taiwan dollar up 0.1% against the greenback as the country's jobless rate fell to an over two-decade low. Data released on Wednesday showed that the country's unemployment rate fell 0.1% to 3.38% last year.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Jan 23

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

(Sourabh Kumar and Pratiksha)

End

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

Edited by Ashish Shirke

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