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By Gowri Lakshmi

MUMBAI – The rupee came off lows as banks sold dollars, likely on behalf of the Reserve Bank of India, to prevent the rupee from hitting a record low, dealers said. A rise in the dollar index weighed on the rupee, dealers said.

After moving in a range of nearly 13 paise throughout the day, the rupee ended steady at 86.5400 a dollar, against the previous close of 86.5225 on Tuesday. 

They said some banks also sold the greenback for foreign portfolio investors, who were looking to invest in the domestic equities market, which supported the local unit. Banks' dollar purchases on behalf of importers weighed on the rupee during the day, dealers said.

The rupee opened slightly lower at 86.5775 against a dollar due to a strong dollar index. The Indian currency came under more pressure as banks purchased the greenback on behalf of importers, who demanded dollars to meet their month-end payment obligations, dealers said. Banks also purchased the greenback ahead of the FX futures expiry. Such demand for the greenback in early trade pulled the rupee to the day's low of 86.6100 against the dollar within 10 minutes of opening. 

However, dealers said most of the traders refrained from placing large bets ahead of the US Federal Open Market Committee's policy outcome due early Thursday. The US central bank is widely expected to hold rates steady. Though market participants have factored in a status quo for the US benchmark rates, any commentary on the future rate outlook from the policymakers will be closely assessed for cues, dealers said.

"The market will move only after the FOMC results. Mostly, the market has factored in a status quo, and it is unlikely that they will lower their rates further given its first meeting after US President Donald Trump assumes office. This time it's not the decision which is crucial, rather it's the comments from the policymakers," a dealer at a state-owned bank said.

However, as soon as the rupee hit the day's low, banks stepped in with dollar sales, likely on behalf of the RBI, around 86.61 a dollar, preventing the rupee from hitting a record low. The rupee had posted a lifetime low of 86.6475 a dollar on Jan. 14. Dealers said that the nature of intervention by the central bank continued to be 'mild'.

"Today, RBI was present, and then there were some dollar sales for FPIs, which brought the (dollar/rupee) levels down," a dealer with the foreign bank said.

For a brief period during the day, the rupee rose as high as 86.4900 a dollar as some banks sold the greenback on behalf of overseas investors who wanted to invest in the domestic stock market, dealers said. The Nifty 50 and the BSE Sensex ended 0.9% and 0.8% higher, respectively, on Wednesday.

However, the local unit could not sustain the gains as the dollar index strengthened in the European trading hours. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.01, compared with its previous close of 107.92 on Tuesday and 107.43 on Monday. 

FORWARDS

Premiums on the dollar/rupee forward contract ended down across tenures Wednesday ahead of the Reserve Bank of India's buy/sell swap auction of $5 billion for a tenor of six months Friday, dealers said. The central bank announced the buy/sell swap auction, taking stock of the current liquidity conditions, which have remained in deficit for a while now.

The swap was part of a total of three measures announced by the RBI Monday to combat the liquidity deficit. The other two measures announced by the central bank were to buy government bonds worth INR 600 billion through open market operation auctions in three tranches and to conduct a 56-day variable rate repo auction for INR 500 billion on Feb. 7.

On Tuesday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--was INR 2.51 trillion, against INR 3.10 trillion Monday. The narrowing of the deficit was likely due to inflows from the government's month-end spending, dealers said. 

Dealers, however, said the forward premium may recover after the auction, with the one-year dollar/rupee forward premium seen rising to almost 2.20% on an annualised basis. But on a medium-term basis, forward premiums are expected to remain low, should the RBI cut the repo rate next week. 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 188.01 paise, against 188.45 paise Tuesday. On an annualised basis, the premium was 2.16%, against Tuesday's close of 2.18%.

OUTLOOK

On Thursday, the rupee will take cues from the movement in the dollar index post US FOMC policy announcement, dealers said. The rupee will also take cues from the movement in crude oil prices, they said. 

Dealers expect banks to purchase the greenback on behalf of importers, wanting to meet their month-end payment obligations. However, they also expect the RBI to step in with dollar sales if the rupee comes under immense pressure and to curb excessive market volatility.

During the day, the rupee is seen in a range of 86.40-86.70 a dollar, with strong technical support pegged at 86.65 a dollar.

India Rupee - World FX: Yen up as BoJ minutes hint at more rate hikes

MUMBAI – The Japanese yen was up 0.2% against the US dollar after minutes of the Bank of Japan's last monetary policy committee meeting showed that the policymakers were keen on continuing pushing interest rates higher in upcoming meetings. "At this point, however, the policy rate was still far from neutral. It's therefore desirable to raise rates in a timely manner," a member of the monetary policy committee of the Bank of Japan was quoted in the minutes released on Wednesday. At the latest policy meeting last week, the Bank of Japan raised its benchmark rates to 0.50%, the highest levels since the global financial crisis of 2008. 

The Canadian dollar was down 0.2% against the greenback ahead of the monetary policy outcome of the Bank of Canada's policy meeting due later in the day. The central bank of Canada is widely expected to lower its interest rates by 25 basis points and is also expected to give insights on the impact of potential US tariffs, Reuters said. Canada's monetary policy comes just days after US President Donald Trump threatened to impose 25% tariff on the country as early as Feb. 1. 

The euro was down 0.2% against the greenback, following a rise in the dollar index, as investors shifted their focus to the US Federal Open Market Committee meeting's policy outcome due early Thursday. The central bank is widely expected to hold rates steady. Investors will closely assess any comments or remarks by the Fed policymakers to get cues on the future rate outlook.

At 1537 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 108.01, compared to 107.92 on Tuesday and 107.43 on Monday. The pound sterling and the Swiss franc were down 0.1% against the US unit. 

The Australian dollar was down 0.4% against the US unit after data showed that the country's consumer prices rose at the slowest pace in four years in December. Core inflation slowed to 3.2%, near the central bank's target band of 2-3%. It raised investors' expectation that the Reserve Bank of Australia will cut its benchmark rate at its policy announcement on Feb. 18.

Tracking a fall in the Australian unit, the New Zealand dollar was down 0.3% against the greenback. Any change in the Australian economy directly impacts the currency of New Zealand due to their close bilateral trade relations.  (Gowri Lakshmi)

India Rupee: Premiums dn across tenors before RBI buy/sell swap auction Fri

MUMBAI – Premiums on the dollar/rupee forward contract were down across tenures Wednesday ahead of the Reserve Bank of India's buy/sell swap auction of $5 billion for a tenor of six months Friday, dealers said. "Forward premiums are down due to the (buy/sell) auction," a dealer with a private bank said. "I think premiums would fall more. I expect the one-year premium to go down to 2.10% or about 167 paise before the auction."

Dealers, however, said the forward premium may recover after the auction, with the one-year dollar/rupee forward premium seen rising to almost 2.20% on an annualised basis. But on a medium-term basis, forward premiums are expected to remain low, should the RBI cut the repo rate next week. Forwards of a currency pair are reflective of the interest rate differential between the two countries.

The central bank announced the buy/sell swap auction, taking stock of the current liquidity conditions, which have remained in deficit for a while now. The swap was part of a total of three measures announced by the RBI Monday to combat the liquidity deficit. The other two measures announced by the central bank were to buy government bonds worth INR 600 billion via open market operation auctions in three tranches and to conduct a 56-day variable rate repo auction for INR 500 billion on Feb. 7.

On Tuesday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--was INR 2.51 trillion, against INR 3.10 trillion Monday. The narrowing of the deficit was likely due to inflows from the government's month-end spending, dealers said. 

The forward premiums fell Tuesday to a near seven-week low of 2.12%, before recovering slightly. Similarly, on Wednesday, the downward movement in premiums was limited as some banks purchased the greenback for forward delivery on behalf of importers. Further, a slight rise in the benchmark 10-year US Treasury yield dragged forward premiums down.

At 1433 IST, the premium on the one-year exact-period dollar/rupee forward contract was 186.26 paise, against 188.45 paise Tuesday. On an annualised basis, the premium was 2.14%, against Tuesday's close of 2.18%.  (Sourabh Kumar)

India Rupee: Erases all losses on RBI's dollar sales, FPI flows in equities

MUMBAI – The rupee erased all losses against the dollar after the Reserve Bank of India intervened in the foreign exchange market by selling the greenback to avert a record low, dealers said. They said some banks also sold dollars on behalf of overseas investors, for their investment in domestic equities, which supported the rupee.

The rupee came under pressure earlier in the day as banks purchased the greenback on behalf of importers to meet their month-end payment obligations and ahead of FX futures expiry, dealers said.

"We saw the central bank selling, dragging it (dollar/rupee) down till about 86.56 a dollar, but some FPIs (foreign portfolio investors) have also sold, which further brought dollar/rupee down," a dealer at a private bank said. The central bank sold the greenback near the day's low of 86.61 a dollar, which prevented the rupee from hitting a lifetime low. The rupee had posted a record low of 86.6475 a dollar on Jan. 14.

Dealers also said most of the traders refrained from placing any large bets ahead of the US Federal Open Market Committee's policy outcome due early Thursday, when the central bank is widely expected to hold rates steady. Though the market participants have factored in a status quo for the US benchmark rates, any commentary from the policymakers will be closely assessed to get cues for future rate outlook, dealers said. 

The dollar index strengthened further in the European trade, which put some pressure on the local unit, dealers said. The dollar index rose following a decline in the euro. At 1328 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.98, compared to the previous close of 107.92 on Tuesday and 107.43 on Monday.

For the rest of the day, the rupee is seen moving in a range of 86.45-86.65 against the dollar. Dealers see immediate technical resistance for the Indian unit at 86.45 a dollar.  (Gowri Lakshmi) 

India Rupee: Technical Levels for rupee - Jan 29

MUMBAI – At 1129 IST, the rupee was at 86.5800 per dollar. At 0900 IST, the rupee was at 86.5775 a dollar against its previous close of 86.5225. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi, Sourabh Kumar, and Pratiksha)

India Rupee: Tad down on importers' dollar buys; traders await FOMC outcome

MUMBAI – The rupee was slightly lower against the dollar on Wednesday as banks purchased dollars on behalf of importers who wanted to meet their payment obligations for month-end futures expiry, dealers said. They said market participants are awaiting the US Federal Open Market Committee's policy outcome, due early Thursday. 

"There is only buying (of dollars) happening now, there is general buying from importers and oil marketing companies and there are buying for month-end payments as well. So today, we can expect some pressure on the rupee. It could fall to 68 (86.68 a dollar), but there will be some support before that level," a dealer at a state-owned bank said. 

A broadly strong dollar index also weighed on the local unit, dealers said. At 0939 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 107.84, compared to its previous close of 107.92 on Tuesday and 107.43 on Monday. 

A rise in domestic stock indices supported the rupee, dealers said. At 0940 IST, the benchmark Nifty 50 and the BSE Sensex were up 0.4% and 0.3%, respectively. "It's too early to comment on FPI behaviour, but mostly the market should be on the upside, whatever panic surrounding the Chinese AI was there, the market corrected itself yesterday (Tuesday) and the inflows were absorbed," a dealer at a public sector bank said. 

For the rest of the day, the rupee is seen moving in a range of 86.40-86.70 against the dollar. Dealers see technical support for the Indian unit at 86.65 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Mixed; Taiwan, South Korea mkts shut for Lunar New Year

MUMBAI – Asian currencies were mixed against the dollar ahead of the US Federal Open Market Committee's decision on interest rates early Thursday. While market participants widely expect rates to remain unchanged, they await any further guidance on the rate trajectory. 

A few markets in Asia were closed on account of Lunar New Year. The South Korean market is shut till Thursday, while the market in Taiwan will open only on Monday. The market in China is closed till Tuesday. 

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 107.88 at 0845 IST, against 107.92 on Tuesday and 107.43 on Monday. 

A survey by the Conference Board in the US showed US consumer confidence weakened for the second consecutive month in January, largely due to concerns around the labour market and inflation. The confidence index fell to 104.1 in January from an upwardly revised 109.5 last month. The data for the current month came lower than economists' forecast of 105.6 in a Reuters poll.

However, the dollar index remained strong due to concerns among investors about tariff announcements by US President Donald Trump. Investors fear that Trump might impose tariffs on Canada and Mexico as he had already threatened them with 25% tariff on all imports from as early as Feb. 1. later, he also indicated imposition of specific tariffs on automobiles from Canada and Mexico.

The Thai baht was up 0.5% after the country's government attempted to revive the economy by transferring nearly $890 million to its senior citizens. The Indonesian rupiah was down 0.4% against the greenback due to a strong dollar index. A fall in the country's benchmark stock index, the Jakarta Stock Exchange Composite Index, which was down 0.9%, also weighed on the Indonesian currency.

The Malaysian ringgit and the Philippines peso were both steady against the greenback. Apart from the US FOMC, investors look forward to a rate decision by the European Central Bank on Thursday, where it is expected to cut the benchmark rate by 25 basis points.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Jan 29

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:

(Sourabh Kumar and Pratiksha)

End

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

Edited by Akul Nishant Akhoury

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