India Rupee Review
At record closing low on persistent dollar buys by FPIs
This story was originally published at 17:18 IST on 5 February 2025
Register to read our real-time news.Informist, Wednesday, Feb. 5, 2025
By Gowri Lakshmi
MUMBAI – The rupee slumped 0.4% against the dollar to end at a record closing low as banks persistently bought dollars on behalf of foreign portfolio investors and importers, dealers said. This was despite likely intervention by the Reserve Bank of India through dollar sales to support the Indian unit, according to dealers.
"The panic-buying (of dollars) has set in again among investors. There are corporate outflows mostly reacting to the global tension of a possible trade war between the US and China, which pulled the rupee to hit continued record lows," a dealer at a private bank said. The Indian currency was also weighed down by weakness in the onshore Chinese yuan, dealers said.
After hitting a lifetime low of 87.4900 during the day, the rupee ended at a record closing low of 87.4650 a dollar, against its previous close of 87.0675. The rupee moved in a range of 38 paise during the day.
Barring the yuan, other emerging market currencies gained 0.3-0.5% against the greenback, tracking a fall in the dollar. The rupee was the worst performer amongst its Asian peers on Wednesday.
The rupee opened slightly lower at 87.1150 a dollar as investors' risk sentiment took a hit owing to worries of a potential trade war between the US and China.
Beijing announced retaliatory tariff measures against Washington after US President Donald Trump's additional tariff on imports from China came into effect on Tuesday. On Tuesday, Chinese authorities announced a 15% tariff on coal and liquefied natural gas imports from the US. It also imposed a 10?ditional tariff on oil and agricultural equipment imports from the US. China further said it would probe the technology giant Google for alleged antitrust violations.
Further, traders' expectations of an interest rate cut of 25 basis points by the RBI's Monetary Policy Committee on Friday, also weighed on the Indian unit, dealers said. The rate-setting panel is expected to lower interest rates for the first time in nearly five years later this week, according to an Informist poll.
While most currency market players are expecting a rate cut on Friday, some are of the view that the central bank's rate-setting panel may hold rates steady and will likely start cutting rates from April. "Given the previous attempts at improving liquidity like the 50 bps cut on CRR, VRR auctions, various open market operations and the buy/sell swap last month, the RBI will likely go for a dovish stance," a dealer at a private bank said. "The question lately has been – is a rate cut really required?"
The rupee did not find any support from a fall in the dollar index, dealers said. The dollar index declined after China announced retaliatory tariff measures against the US on Tuesday. While Trump agreed to pause imposition of tariffs on Canada and Mexico, tariffs on China came into effect on Tuesday. The dollar index also fell after data on Tuesday showed US job openings fell to a 14-month low in December.
At 1530 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 107.51, compared with 108.00 on Tuesday and 108.43 on Monday.
The onshore Chinese yuan weakened against the dollar by 0.5% amid the ongoing China-US tariff war, exerting pressure on the domestic unit. The Chinese markets resumed on Wednesday after a week-long holiday for the Lunar New Year. However, the central bank likely intervened through dollar sales in early trade at around 87.24 a dollar, which provided support to the Indian currency, according to dealers.
Further, banks persistently bought the greenback on behalf of foreign portfolio investors, who continued to withdraw funds from the Indian domestic market, dealers said. Overseas investors net sold $8.8 billion worth of shares from the Indian equities market so far this year. The benchmark indices, the Nifty 50 and the BSE Sensex ended in the red, down 0.2% and 0.4%, respectively.
Importers continuously bought dollars in fear of a further fall in the Indian currency, as per dealers. The Indian currency has depreciated almost 2.2% against the dollar so far this calendar year.
As importers and FPIs stepped up their dollar buys, banks' stop-losses were triggered on short dollar bets around the 87.30-a-dollar level, further aggravating the fall in the rupee during the second half of the trade, dealers said. Following this, the Indian unit hit multiple record lows.
As the rupee hit a lifetime low of 87.4900 a dollar, the RBI likely intervened through dollar sales, dealers said. They said the rupee may have fallen swiftly because the intervention from the central bank continued to be 'mild' in nature.
| AT 1530 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 87.4650 | 87.1150 | 87.1150 | 87.4900 | 87.0675 |
| 1-year dlr/rupee fwd (paise) | 191.25 | 192.33 | 192.33 | 188.00 | 190.73 |
FORWARDS
The premiums on the dollar/rupee forward contract ended lower across most tenors on Wednesday due to an ease in the rupee liquidity deficit, dealers said. However, some importers purchased the greenback for forward delivery, noting a sharp fall in the rupee, which limited losses for premiums, they said.
On Tuesday, the net liquidity injected by the RBI fell to the lowest level since Jan. 5. Net liquidity injected--a proxy for systemic liquidity deficit--was at INR 382.16 billion on Tuesday against INR 1.08 trillion on Monday. The deficit narrowed due to the settlement of the dollar/rupee buy/sell swap, conducted by the RBI on Friday, dealers said.
Dealers said expectations of a 25-basis-point rate cut by the RBI's Monetary Policy Committee on Friday also weighed on forward premiums. A 25-bps rate cut in India will lead to narrowing of the differential between Indian and US yields, they said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
At 1530 IST, on an annualised basis, the premium on the one-year dollar/rupee forward contract was at 2.17% against 2.19% on Tuesday. The one-year premium had fallen to 2.15?rlier in the day. In absolute terms, the one-year dollar/rupee forward premium was 191.25 against Tuesday's close of 190.73.
A few dealers speculated that the Reserve Bank of India might have sold dollars for forward delivery to offset the impact of its spot dollar sales on rupee liquidity, which may have weighed on the premiums.
OUTLOOK
On Thursday, the rupee will take cues from the movement in the dollar index and Chinese yuan, dealers said. They expect the Indian unit to remain under pressure on the expectation that the RBI's Monetary Policy Committee may cut the repo rate 25 bps on Friday.
Banks may continue to purchase the greenback on behalf of importers, who are wary of a further fall in the rupee. They also expect FPIs to continue their exit from the Indian financial markets amid the looming concerns over a potential US-China trade war, which may weigh on the local unit.
Market participants will remain watchful of Trump's further comments on future tariffs. They will also keep an eye on further comments or actions by the Chinese administration in response to US tariffs.
Dealers expect the central bank to continue stepping in with dollar sales, in case of a sharp depreciation in the Indian unit and curb excessive market volatility. However, noting the central bank's recent actions in the spot market, they expect the intervention to be less aggressive in nature.
During the day, the rupee is seen in a range of 87.20-87.70 a dollar, with strong immediate technical support pegged at 87.50 a dollar.
India Rupee - World FX: Yen surges 1% as wages data firms BoJ rate hike view
| AT 1530 IST | HIGH | LOW | PREVIOUS | |
| GBP/USD | 1.2520 | 1.2530 | 1.2464 | 1.2481 |
| EUR/USD | 1.0408 | 1.0417 | 1.0370 | 1.0378 |
| NZD/USD | 0.5685 | 0.5687 | 0.5646 | 0.5650 |
| AUD/USD | 0.6282 | 0.6284 | 0.6240 | 0.6254 |
| USD/JPY | 152.6910 | 154.4560 | 152.6460 | 154.3260 |
| USD/CAD | 1.4285 | 1.4344 | 1.4280 | 1.4314 |
| EUR/JPY | 158.9260 | 160.3037 | 158.8920 | 160.1650 |
| CHF/USD | 1.1084 | 1.1089 | 1.1036 | 1.1045 |
| EUR/CHF | 0.9390 | 0.9410 | 0.9388 | 0.9393 |
MUMBAI – The Japanese yen surged 1% against the dollar on Wednesday after data showed stronger than expected wage growth in the country, boosting the likelihood of more rate hikes by the central bank.
Data released on Wednesday showed nominal cash earnings of workers climbed 4.8% on year in December, up from a revised 3.9% gain in November. The reading exceeded economists' consensus estimate and marked the largest jump since 1997. The strong gain was driven by a jump in bonuses.
Further, a senior Bank of Japan official said earlier in the day that the Japanese central bank will continue to raise rates if underlying inflation accelerates toward its targeted 2%. "Underlying inflation is heading toward 2% but still remains below that level now. As such, we must support economic activity with loose monetary policy," Kazuhiro Masaki, director-general of the central bank's monetary affairs department said.
Data released on Wednesday showed Japan's service purchasing managers' index rose to 53.0 in January from 50.9 in December. This also boosted the Japanese currency.
The dollar index fell further during European trade after China's retaliatory tariffs on the US. While President Donald Trump agreed to pause imposition of tariffs on Canada and Mexico, tariffs on China came into effect on Tuesday.
The index also fell after the US job openings and labour turnover survey declined to a 14-month low in December. At 1520 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.61, compared to the previous close of 108.00 on Tuesday and 108.43 on Monday.
Tracking a weakness in the US unit, the pound sterling rose 0.3% against the dollar, while the Canadian dollar, the euro and Swiss franc were up 0.3% each.
The Australian dollar was up 0.4% against the US unit after data showed that Australia's services activity expanded in January. The composite purchasing manager's index rose to 51.1 in January, while the services sector edged higher to 51.2 in January from 50.8 in December. A PMI reading above 50 indicates expansion in economic activities. Business confidence, too, hit a new 32-month high.
The New Zealand dollar was up 0.6% following the rise in the Australian currency. However, gains in the currency were limited as data showed that the unemployment rate in New Zealand climbed to 5.1% in December, from 4.0 a year ago. (Gowri Lakshmi)
India Rupee: Slumps to record low as FPIs, importers persistently buy dlrs
| AT 1405 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 87.4775 | 87.1150 | 87.1150 | 87.4900 | 87.0675 |
NEW DELHI – The rupee fell further and hit a record low of 87.4900 against the dollar as banks persistently bought the greenback on behalf of importers and foreign portfolio investors, dealers said.
"USDINR (dollar/rupee) made a new high despite a fall in the dollar index and appreciation in Asian currencies as importers, oil companies and FPIs continue to buy dollars to fund their outflows," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
Banks bought dollars on behalf of importers, who are wary of a further fall in the Indian unit going ahead, which weighed on the rupee, dealers said. The Indian currency has depreciated almost 1% against the dollar so far in February.
Further, risk-averse sentiment among investors owing to worries of a potential trade war between the US and China, prompted banks to buy the greenback on behalf of FPIs, which also exerted pressure on the local currency, they said. China imposed targeted tariffs on US imports on Tuesday in a measured response to Trump's tariffs on the world's second-largest economy.
Weakness in the onshore Chinese yuan amid looming concerns over a China-US trade war also weighed on the domestic unit, dealers said. The onshore yuan fell 0.4% against the US unit on Wednesday.
Some dealers said that the strong dollar demand by FPIs and importers led to stop-losses being triggered on short dollar bets around the 87.30-a-dollar level, thus, exacerbating the fall in the rupee. Moreover, lack of intervention by the Reserve Bank of India through dollar sales around the current levels also weighed on the Indian currency, they said.
"There is strong buying (of dollars) in general from importers and I think they (RBI) also kind of let it go from 87.30 (a dollar)," said a dealer at a state-owned bank. Earlier in the day, the central bank had likely intervened through dollar sales at around 87.24 a dollar, which provided support to the Indian currency, according to dealers.
For the rest of the day, the rupee is seen moving in a range of 87.30-87.60 against the dollar. Dealers see immediate technical support for the Indian unit at 87.50 a dollar. (Pratiksha)
India Rupee: Sharply down on yuan weakness; RBI dlr sales prevent record low
| AT 1251 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 87.2250 | 87.1150 | 87.1150 | 87.2475 | 87.0675 |
MUMBAI – The rupee fell sharply against the dollar Wednesday tracking a weakening Chinese yuan, dealers said. However, some public-sector banks stepped in with dollar sales, likely on behalf of the Reserve Bank of India, which prevented the rupee from hitting a record low, they said. The rupee had hit a record low of 87.2825 on Monday.
"The rupee is lately not reacting to any domestic cues like the Budget or looking forward to the MPC (Monetary Policy Committee). It is reacting negatively only based on the global cues, which is the US-China trade war," a dealer at a private bank said. "At least for some time, the market sentiment will purely be based on any news on US tariff," he added.
Dealers said the rupee came under pressure as the onshore Chinese yuan fell 0.5% against the greenback on Wednesday. This was amid the tariff war going on between the US and China. The Chinese markets resumed on Wednesday after a week-long holiday for the Lunar New Year. China, on Tuesday, announced multiple retaliatory tariff measures on imports from the US, retaliating against Washington's additional 10% tariff on Beijing.
The local unit came under more pressure as banks purchased the greenback on behalf of overseas investors, who continued to withdraw funds from the Indian domestic market, dealers said. Overseas investors net sold $8.8 billion worth of shares from the Indian equities market so far this year. At 1304 IST, the benchmark indices, the Nifty 50 and the BSE Sensex were down 0.1% and 0.2%, respectively.
"The trend continues with the current global situation, there is continuous selling of the rupee and excessive buying of dollars," a dealer at a state-owned bank said.
For the rest of the day, the rupee is seen moving in a range of 87.00-87.30 against the dollar. Dealers see immediate technical support for the Indian unit at 87.25 a dollar. (Gowri Lakshmi)
India Rupee: Technical Levels for rupee - Feb 5
NEW DELHI – At 1045 IST, the rupee was at 87.1450 per dollar. At 0900 IST, the rupee was at 87.1150 a dollar against its previous close of 87.0675. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:
| Participants | S2 | S1 | R1 | R2 |
| State-owned bank | 87.23 | 87.20 | 87.05 | 87.02 |
| Private bank | 88.00 | 87.50 | 86.80 | 86.60 |
| Brokerage firm | 87.30 | 87.20 | 87.10 | 87.08 |
(Pratiksha and Sourabh Kumar)
India Rupee - Asia FX: Most rise as dollar index eases; Thai baht down
MUMBAI – Most Asian currencies rose against the greenback due to a fall in the dollar index, with the Philippines peso performing the best. The Philippines currency rose 0.4% against the greenback. The Philippines' currency also received support as the country's central bank said on Wednesday that it would take a "measured approach" towards rate cuts.
On Saturday, the central bank governor Eli Remolona had said that the central bank could cut the benchmark rate by at least 50 basis points this year from the current 5.75%.
The dollar index eased after China imposed retaliatory tariffs on the US. The index, which measures the strength of the greenback against a basket of six major currencies, was 107.90 at 0954 IST against 108.00 on Tuesday and 108.43 on Monday.
China retaliated after the tariffs announced by Trump on Beijing came into effect on Tuesday even as those announced on the other two countries – Mexico and Canada – were paused for at least a month.
China on Tuesday announced 15% tariff on coal and liquefied natural gas imports from the US. It also imposed 10?ditional tariff on oil and agricultural equipment imports from the US. China further said it would probe the tech giant Google for alleged antitrust violations.
All these measures announced by China on Tuesday raised investors' concerns over a possible trade war between the two countries. Investors are now waiting for a meeting between the presidents of the US and China, as per reports.
The Taiwan dollar was up 0.3% against the greenback. A rise in its domestic equity index, the Taiwan Stock Exchange Capitalization Weighted Stock Index, also supported the Taiwanese currency.
The South Korean won rose 0.2% against the US currency. The headline inflation in South Korea accelerated by 2.2% on year in January, faster than expected. It was also higher than December's rise of 1.9%. A poll by the Wall Street Journal had forecast the CPI to have risen by 2.0% last month.
The Indonesian rupiah rose 0.2% against the greenback, due to a fall in the dollar index. However, gains were limited as data showed that Indonesia's economy expanded at 5.03% in 2024, the slowest in three years. The Malaysian ringgit was up 0.3% against the US dollar.
The Thai baht was, however, down 0.2% against the greenback amid continuous tussles between the government and the central bank. Supavud Saicheua, an adviser to Thailand Prime Minister Paetongtarn Shinawatra, again called for the central bank to deliver more rate cuts this year, echoing Thai government's stand. (Sourabh Kumar)
India Rupee: Down on caution over possible US-China trade war, RBI rate cut
| AT 0934 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 87.1375 | 87.1150 | 87.1150 | 87.1600 | 87.0675 |
MUMBAI – The rupee was lower against the dollar in early trade Wednesday as traders purchased the greenback, cautious of a potential trade war between the US and China, dealers said. Demand for the US currency was also high as market players widely expect the Reserve Bank of India to cut the repo rate by 25 basis point on Friday.
"There are two factors playing right mow – first there is a caution prevailing in the market after China also imposed tariffs, and did not wait for the meeting between Xi Jinping and Trump, and then there is a chance that RBI will cut repo rate by 25 bps," a dealer with a state-owned bank said.
The RBI's Monetary Policy Committee is scheduled to announce its policy decision on Friday. Most market players expect a 25 bps rate cut, which is most likely to put pressure on the Indian rupee, dealers said. Therefore, demand for dollars has increased before the policy outcome, dealers said.
Some foreign fund outflows from domestic equities in early trade also weighed on the rupee, dealers said.
However, the fall of the Indian rupee was limited as the dollar index eased after China announced retaliatory tariffs on the US, dealers said. While US President Donald Trump agreed to pause imposition of tariffs on Canada and Mexico, tariffs on China came into effect on Tuesday. Reacting to the tariffs by US, Beijing Tuesday announced 15% tariff on coal and liquefied natural gas imports from the US. It also imposed 10?ditional tariff on oil and agricultural equipment imports.
All these measures announced by China on Tuesday raised investors' concerns over a possible trade war between the two countries. Investors are now waiting for a meeting between the presidents of the US and China, as per reports.
The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 107.88 at 0929 IST against 108.50 at close of the Indian market on Tuesday. The index was at 108.00 on Tuesday and 108.43 on Monday. The dollar index also came under pressure after data released Tuesday showed that job openings in the US in December fell the most since October 2023.
During the day, the rupee is seen moving in a range of 87.00-87.20 against the dollar. Dealers see immediate technical support for the Indian unit at 87.20 a dollar. (Sourabh Kumar)
India Rupee: Expected range for rupee - Feb 5
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:
| PARTICIPANT | SUPPORT | RESISTANCE |
| State-owned bank | 87.22 | 87.02 |
| State-owned bank | 87.02 | 87.16 |
| Private bank | 87.20 | 87.00 |
| Foreign bank | 87.25 | 87.00 |
| Foreign bank | 87.29 | 86.90 |
(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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