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Informist, Friday, Jan. 31, 2025

By Gowri Lakshmi

MUMBAI – The rupee erased all earlier losses and ended largely steady against the dollar Friday due to dollar sales by state-owned banks, likely on behalf of the Reserve Bank of India, dealers said. Dollar sales by some banks, likely on behalf of foreign portfolio investors, also aided the local unit, they said. 

"It was a dollar aligned move (in the rupee) mostly," said a dealer at a state-owned bank. "But 86.65 broadly kept holding because they (the RBI) were on offer."

The rupee was weighed by a rise in the dollar index after fresh tariff threats by US President Donald Trump and a 25 basis point rate cut by the European Central Bank on Thursday. 

After hitting a record low of 86.6550 a dollar during the day, the Indian currency settled at 86.6050 a dollar, compared to the previous close of 86.6250 on Thursday.

The rupee opened largely steady against the dollar but hit a lifetime low shortly afterwards, due to a strengthening dollar index. Trump on Thursday said the US will impose a 25% tariff on imports from Mexico and Canada, repeating his warning to the two countries which are leading trade partners of the US.

Further, the euro fell against the dollar after the European Central Bank cut interest rates on Thursday amid sluggish economic growth. Market participants also assessed data from the US, which showed that GDP for the quarter ended December grew 2.3% on year against 3.1% in the Jul-Sept quarter. A Reuters poll had projected the US GDP growing at 2.6% in Oct-Dec. Inflation also came higher, with the personal consumption expenditure price index rising 2.5% in December. 

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.25, against its previous close of 108.18 on Thursday and 107.94 on Wednesday. The index touched a high of 108.37 earlier in the day. 

The rupee also came under pressure as some banks purchased the greenback on behalf of importers, who wanted to meet their month-end payment obligations, dealers said. Some importers also bought the US unit in fear of further depreciation in the Indian currency, dealers said. The Indian unit declined 1.2% against the dollar in January.  

Meanwhile, some state-owned banks stepped in with dollar sales, likely on behalf of the RBI at around 86.65 a dollar, which prevented the rupee from falling sharply and curbed excessive volatility, dealers said. The rupee moved in a range of just 6 paise during the day.

However, dealers said the RBI's intervention was not very aggressive in nature. "RBI is back at protecting particular levels now. But at this point depreciation of the currency is given, and protecting level by level is a little pointless," a dealer at a private bank said.

In the last leg of the trade, the rupee also got some support from dollar sales by banks, on behalf of FPIs, looking to invest in the domestic stock market, dealers said. The benchmark indices, the Nifty 50 and the BSE Sensex, ended 1.1% and 1.0% higher, respectively. 

According to dealers, volume in the currency market remained relatively subdued as traders refrained from placing large bets ahead of the Budget due Saturday and as financial markets in China were closed on account of Lunar New Year.

FORWARDS 

Premiums on the dollar/rupee forward contract ended sharply higher after the RBI's $5 billion dollar/rupee buy/sell swap auction in the six-month tenor saw strong demand by participants, dealers said. "There were a lot of bids for the auction. It looks like a big corporate may have swept most of it," said a dealer at another state-owned bank. 

The RBI set a cut-off premium of 96.81 paise at the auction of its buy/sell swap on Friday. Under the buy/sell swap, the RBI bought dollars for immediate delivery and sold them for delivery after six months. The median of an Informist poll of 15 foreign exchange dealers saw the cut-off premium at 94.50 paise.

At 1530 IST, the six-month exact-period dollar/rupee forward contract was at 100.50 paise against 94.93 paise on Thursday. On an annualised basis, the premium was 2.34%, against its previous close of 2.20%. The premium on the one-year exact-period dollar/rupee forward contract was at 195.29 paise at 1530 IST, against 188.52 paise on Thursday. On an annualised basis, the premium was 2.26%, against Thursday's close of 2.18%.

OUTLOOK 

On Monday, the rupee will take cues from the Budget for FY26, dealers said. The local currency will also take cues from movement in the dollar index. Market participants will be watchful for more comments from Trump on his tariff policies. 

Dealers expect banks to continue purchasing dollars on behalf of importers, who are wary of a further fall in the Indian unit. However, they expect the central bank to intervene in the foreign exchange market with dollar sales, to prevent the rupee from falling sharply.

During the day, the rupee is seen in a range of 86.50-86.80 a dollar, with strong technical support pegged at 86.70 a dollar.

India Rupee: Premiums up on strong demand at FX swap auction; results eyed

India Rupee: Premiums up on strong demand at FX swap auction; results eyed

NEW DELHI – Premiums on the dollar/rupee forward contract were up across tenures due to strong demand at the $5 billion dollar/rupee buy/sell swap auction held by the Reserve Bank of India earlier in the day, dealers said. Banks also sold the greenback for forward delivery on behalf of some corporates, which pushed premiums higher, dealers added.

"There is strong paying in the market, and a corporate was seen bidding aggressively in swap auction," a dealer with a brokerage firm said. The RBI conducted a $5 billion six-month dollar/rupee buy/sell auction on Friday, bids for which were submitted from 1030 IST to 1130 IST. Market participants were eagerly waiting for the result of the buy/sell swap auction.

As per the poll conducted by Informist, the cut-off for the auction was seen at 94.50 paise. A few dealers speculated that some large corporates may have swept the auction, driving premiums higher.

The 6-month forward premium, the tenor for which the auction was conducted, was 98.43 paise at 1320 IST against 94.93 paise on Thursday and 93.25 paise on Wednesday. The one-year dollar/rupee forward premium rose almost 5 basis points on Friday, to 2.23% on an annualised basis. It was 192.77 paise at 1321 IST against 188.52 on Thursday and 188.01 on Wednesday.

A fall in the benchmark 10-year US Treasury yield also pushed premiums higher across tenures, dealers said. The 10-year US Treasury yield fell 3 bps on Thursday. The forwards of a currency pair are reflective of the interest rate differential between the two countries.  (Sourabh Kumar)

India Rupee: Steady; RBI dlr sales aid recovery, offsets strong dollar index

MUMBAI – The rupee was trading steady after the rupee fell to a record low against the dollar in early trade as banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset a broadly strong dollar index, dealers said. The rupee hit a record low of 86.6550 earlier in the day.

"The rupee is technically trading flat against the dollar today, there isn't even much buying (of dollars) pressure. If the levels have touched a record low and have come down, then some RBI intervention must have happened," a dealer at a private bank said. "But it looks more like the RBI is trying to protect a particular level, it does not make sense to sell dollars at this level," he added. 

The dollar index had strengthened after the European Central Bank cut rates by a quarter percentage point on Thursday. The dollar index remained strong also because US President Donald Trump on Thursday repeated his warning of a 25% tariff on Canada and Mexico. 

At 1244 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.13 compared to 108.00 at the time of the Indian market close on Thursday. 

A rise in domestic equities also aided the rupee, dealers said. At 1246 IST, the benchmark indices, the Nifty 50 and the BSE Sensex were up 0.8% and 0.9%, respectively. 

For the rest of the day, the rupee is seen moving in a range of 86.50-86.70 against the dollar. Dealers see immediate technical support for the Indian unit at 86.70 a dollar.  (Gowri Lakshmi) 

India Rupee: Technical Levels for rupee - Jan 31

MUMBAI – At 1153 IST, the rupee was at 86.6075 per dollar. At 0900 IST, the rupee was at 86.6300 a dollar against its previous close of 86.6250. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Pratiksha)

India Rupee: Hits record low on strong dlr index; RBI dlr sales limit fall

MUMBAI – The rupee hit a record low of 86.6500 against the dollar Friday as the dollar index extended its gains from Thursday and advanced after the European Central Bank cut rates by 25 basis points, dealers said. The dollar index also got a boost after US President Donald Trump again warned of a 25% tariff on Canada and Mexico, dealers added.

At 0955 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.22, compared to 108.18 on Thursday and 107.94 on Wednesday. 

The rupee came under pressure as banks purchased the greenback on behalf of importers, who wanted to meet their month-end payment obligations, according to some dealers. A few others said that some foreign banks purchased dollars on behalf of foreign portfolio investors who wanted to withdraw funds from the Indian stock market. It weighed on the rupee, dealers said. So far in January, overseas investors have net sold $8.2 billion from the domestic equities market.

However, some public sector banks stepped in with dollar sales around 86.64 a dollar, likely on behalf of the Reserve Bank of India, to prevent the rupee from falling sharply and to curb market volatility, dealers said. They said the nature of the central bank's intervention remained mild. 

During 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: Down as dollar index rises; South Korean won dn 0.9%

MUMBAI – Most Asian currencies were down against the dollar Friday due to a rise in the dollar index. The dollar index rose, tracking a decline in the euro after the European Central Bank on Thursday cut its benchmark rates by 25 basis points. The central bank also kept the door open for further monetary policy easing in March amid lacklustre economic growth and the risk of persistent inflation. 

The dollar index also got a boost after US President Donald Trump reiterated his intentions to impose a 25% tariff on exports from Canada and Mexico. At 0902 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.15, compared to its previous close of 108.18 on Thursday and 107.94 on Wednesday. 

Market participants also assessed data from the US, which showed that GDP for the quarter ended December grew 2.3% amid weak business spending. Inflation also came in higher, with the personal consumption expenditure price index rising 2.5% in December.

The Malaysian ringgit was down 0.6% against the dollar, while the Indonesian rupiah fell 0.3%. South Korean financial markets resumed trading Friday after being shut for the Chinese Lunar New Year. The South Korean won slumped 0.9% against the dollar, the worst hit amongst its peers, after the Bank of Korea on Friday said that growing US stock market volatility calls for close monitoring of its potential impact on South Korea's economy. "The (US) Fed's decision did not have a major impact on the market as it had been largely anticipated, but volatility has grown in the US stock market, centering on tech shares. We need to closely monitor its possible repercussions on the domestic market," Bank of Korea Deputy Governor Ryoo Sang-dai said early Friday.

The Philippines peso was down 0.1% against the dollar. However, gains in the domestic stock market limited the currency's fall. At 0909 IST, the benchmark index, PSEi, was up 0.8%. The Thai baht also fell 0.1% against the greenback.

The financial markets in Taiwan will open Monday. Markets in China are closed till Tuesday on account of the Lunar New Year.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Jan 31

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:

(Pratiksha)

End

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

Edited by Saji George Titus

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