More Stories

Informist, Thursday, Feb. 6, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended at a record closing low for the second consecutive day Thursday as the dollar index rose during European trade and as banks bought the greenback on behalf of importers and foreign portfolio investors, dealers said. However, the Reserve Bank of India's likely intervention through dollar sales ensured the Indian currency did not depreciate sharply, dealers said. 

"There is a lot of corporate hedging that has started and that is leading to a lot of dollar demand," said a dealer at a private bank. "They (RBI) have tried to keep a control on the levels, but the buying (of dollars) is a lot."

After hitting a lifetime low of 87.5825 a dollar during the day, the rupee ended at a record closing low of 87.5775 a dollar, against 87.4650 on Wednesday.

A fall in other Asian currencies also weighed on the local unit, according to some dealers. Other Asian currencies fell between 0.1%-0.6% against the greenback, with the Thai baht the worst performer. The Indian rupee fell 0.1% against the dollar on Thursday.

The rupee opened slightly lower against the dollar at 87.5200 as banks rushed to purchase the greenback on behalf of importers, dealers said. Importers bought the greenback with a sense of 'panic' as they expect the Indian unit to depreciate further in the coming days, they said. 

Dealers expect the Indian currency to weaken if the RBI's Monetary Policy Committee opts to cut the repo rate on Friday. The rate-setting panel is expected to lower interest rates for the first time in nearly five years, according to an Informist poll. The committee is widely expected to deliver a 25 basis point repo rate cut on Friday, bringing it down to 6.25%. 

The rupee also weakened against the greenback because banks purchased dollars immediately after open in order to take advantage of arbitrage opportunity with the non-deliverable forwards rates, dealers said.

The rupee was also weighed as oil marketing companies actively purchased the dollar to take advantage of the relatively lower crude oil prices, according to some dealers. Crude oil prices have fallen over 1% since Tuesday after the US agreed to delay imposition of tariffs on Mexico and Canada. However, market participants fear that crude oil prices may shoot up amid a possibility of a trade war escalation between the US and China.

As the rupee fell to 87.56 a dollar, the RBI stepped in to sell the greenback to prevent a further decline in the local currency, according to dealers.

At 1530 IST, the April Brent crude contract on the Intercontinental Exchange was at $75.20 per barrel, compared to the previous close of $74.61 per barrel on Wednesday and $76.20 per barrel on Tuesday.

Some banks also bought the greenback on behalf of overseas investors who continued to withdraw funds from the Indian stock market, which put the rupee under further pressure, dealers said. The benchmark indices, the Nifty 50 and the BSE Sensex ended 0.4% and 0.3% lower, respectively. So far into the calendar year, FPIs have net sold $8.7 billion worth of shares from the domestic stock market.

"The rupee with limited intervention now is going for a correction and that's the sudden and sharp fall we are seeing now," a dealer at a private bank said. "With the heavy intervention before, the rupee was valued wrongly. The rupee is now getting fair but also is an underperforming currency compared to other Asian currencies," the dealer said.

The rupee was dragged to its lifetime low of 87.5825 a dollar as the dollar index rose during European trade, dealers said. The dollar index got a boost after major currencies in the basket, the euro and the pound sterling, declined. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.03, compared to its previous close of 107.62 and 108.00 on Tuesday. 

Dealers said some banks also sold the greenback on behalf of exporters, which provided some cushion to the local currency. However, they said most exporters continue to be in a 'wait and watch' mode as they expect the rupee to come under further pressure in the coming days.

The central bank likely continuously intervened through dollar sales in the spot market, dealers said. The rupee moved in a range of just 8 paise during the day. Dealers also said that the nature of the central bank's intervention was slightly aggressive, compared to its recent "mild" interventions in the spot market. 

FORWARDS 

The premium on the one-year dollar/rupee forward contract ended slightly higher, tracking a fall in the benchmark 10-year US Treasury yield, dealers said. The 10-year US Treasury yield fell 9 bps to 4.43% on Wednesday. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

US Treasury yields fell after data showed US services sector activity unexpectedly slowed in January. US non-manufacturing purchasing managers' index declined to 52.8 in January from 54.0 the previous month. Economists polled by Reuters had forecast the services PMI edging up to 54.3. A PMI reading above 50 indicates expansion in the economy.

Meanwhile, most market participants refrained from placing large bets ahead of the Reserve Bank of India's Monetary Policy Committee meeting outcome on Friday, dealers said. 

Most market participants expect the RBI's rate setting panel to cut the repo rate by 25 basis points on Friday. A 25-bps rate cut in India will lead to narrowing of the differential between Indian and US yields, thus, weighing on premiums.

At 1530 IST, on an annualised basis, the exact period one-year dollar/rupee forward premium was at 2.19%, against 2.17% on Wednesday. In absolute terms, the one-year premium was 191.37 paise against Wednesday's close of 191.25 paise.

OUTLOOK

On Friday, the rupee may open steady on caution ahead of the RBI's Monetary Policy Committee's outcome at 1000 IST, dealers said. Market participants will closely assess RBI Governor Sanjay Malhotra's comments related to the rupee and its movement. They will also be watchful of the RBI announcing measures to support the weakening rupee. 

"Whether the RBI cuts rates or not, the market will be volatile. If they cut, it's definitely a depreciation and if they hold rates, the rupee may appreciate," a dealer at a state-owned bank said. "The market is mostly looking forward to any commentary by the governor and others, which will shape the course of the rupee's movement."

The rupee will also take cues from the movement in the dollar index and the Chinese yuan, dealers said. Market participants are also waiting for the monetary policy decision by the Bank of England due later in the day, where the central bank is widely expected to cut interest rates by 25 bps to boost their sluggish economy. Market participants will also assess the US initial jobless claims data due later in the day.

Dealers expect banks to continue purchasing the greenback on behalf of importers, fearing a further fall in the rupee. However, they also expect the central bank to step in with its dollar sales, if the rupee comes under immense pressure and to curb excessive volatility in the market. 

During the day, the rupee is seen in a range of 87.30-87.80 a dollar, with strong technical support pegged at 87.80 a dollar. 

India Rupee - World FX: Pound sterling down 0.5% ahead of BoE policy outcome

MUMBAI – The pound sterling was down 0.5% against the US dollar ahead of the Bank of England's monetary policy decision later in the day. The central bank is widely expected to cut its interest rate by 25 basis points, bringing it down to 4.50%, to boost the country's sluggish economy.

The euro was down 0.4% against the US unit as the bloc's construction purchasing managers' index remained below 50 in January though it rose to 45.4 from 42.9 in December. A PMI reading below 50 indicates contraction in construction activities.

The Japanese yen was down 0.1% against the greenback after hitting an eight-week high earlier in the day after Bank of Japan policymaker Naoki Tamura said the central bank must continue to raise interest rates at least 1% in the second half of the fiscal year, beginning in April. "Bearing in mind that short-term interest rates should be at 1% by the second half of fiscal 2025, I think the Bank needs to raise rates in a timely and gradual manner, in response to the increasing likelihood of achieving its price target," Tamura said.

Tracking a fall in the euro and the pound sterling, the dollar index edged higher. The index had fallen on Wednesday after data showed US services sector activity unexpectedly slowed in January. US non-manufacturing purchasing managers' index declined to 52.8 in January from 54.0 the previous month. Economists polled by Reuters had forecast the services PMI edging up to 54.3. A PMI reading above 50 indicates expansion in the economy. Market participants are now waiting for the US initial jobless claims data for January, due later in the day.

At 1502 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.03, compared to its previous close of 107.62 on Wednesday and 108.00 on Tuesday.

The Australian dollar was down 0.4% against the greenback after data released Thursday showed that the country's trade surplus fell to $3.2 billion in December. Imports spiked 5.9% while exports only rose 1.1%. Tracking a fall in the Australian dollar, the New Zealand dollar was down 0.6%. Both the currencies were also weighed down by weakness in the Chinese yuan against the US unit. Any change in the Chinese economy directly impacts the currencies of Australia and New Zealand due to their close bilateral trade relations.  (Gowri Lakshmi)

India Rupee: Remains down as importers buy dlrs; RBI's dlr sales limit fall

MUMBAI – The rupee remained lower against the dollar Thursday as banks persistently purchased the greenback on behalf of importers, wary of a further fall in the Indian unit, dealers said. However, state-owned banks' dollar sales, likely on behalf of the Reserve Bank of India at around 87.56/$1, prevented the rupee from falling further, they said.

"There is some strong selling (of dollars) going on which is keeping the rupee holding a level. The primary reason why they (RBI) are seen intervening strongly, especially today (Thursday), is because of the likelihood of a rate cut, which will drag down the rupee anyway. So to prevent a sharp depreciation, RBI is actively selling (dollars)," a dealer at a private bank said.

The rupee hit a lifetime low of 87.5700 against the dollar earlier in the day due to excessive dollar demand from importers, in expectation that the Indian currency may weaken further after the outcome of the RBI's Monetary Policy Committee meeting Friday. The rate-setting panel is expected to lower interest rates for the first time in nearly five years, according to an Informist poll. The committee is widely expected to deliver a 25 basis point repo rate cut on Friday, bringing it down to 6.25%. 

According to some dealers, the local unit also came under pressure as oil marketing companies rushed to purchase dollars to take advantage of the relatively lower prices of crude oil this week. Crude oil prices have fallen almost 2% since Tuesday after the US agreed to delay tariff imposition on Mexico and Canada. However, market participants fear that crude oil prices may shoot up amid a possibility of a trade war escalation between the US and China.

At 1252 IST, the March Brent Crude contract on the Intercontinental Exchange was at $74.86 per barrel, against its previous close of $74.61 on Wednesday and $76.20 on Tuesday.

The rupee also came under pressure as banks bought dollars on behalf of foreign portfolio investors, who continued to withdraw funds from the Indian stock market. At 1252 IST, the benchmark indices, the Nifty 50 and the Sensex, were both down 0.4%. 

However, the rupee was supported by persistent dollar sales, likely on behalf of the RBI. The central bank likely intervened to prevent the rupee from falling sharply and to curb excessive market volatility, dealers said. They also said that the nature of the central bank's intervention was slightly aggressive, compared to its recent "mild" interventions in the spot market lately. 

For the rest of the day, the rupee is seen moving in a range of 87.30-87.70 against the dollar. Dealers see immediate technical support for the Indian unit at 87.60 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Feb 6

MUMBAI – At 1118 IST, the rupee was at 87.5475 per dollar. At 0900 IST, the rupee was at 87.5200 a dollar against its previous close of 87.4650. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Pratiksha)

India Rupee - Asia FX: Most down as dollar index recovers from over a wk low

MUMBAI – Most Asian currencies were down against the US dollar Thursday as the dollar index recovered after hitting an over week's low on Wednesday. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 107.67 against 107.62 on Wednesday and 108.00 on Tuesday.

Data released on Wednesday by the Institute for Supply Management showed that the US non-manufacturing managers' index fell to 52.8 in January from 54.0 in December. However, another data released the same day showed underlying strength in the US economy, helping the dollar index recover. Private jobs rose by 183,000 jobs in January, more than 150,000 forecast by economists in a Reuters poll. Last month's figure was also more than December's upwardly revised figure of 176,000.

The South Korean won was down 0.4% against the greenback. However, its fall was limited as data released Thursday showed the country registered a current account surplus in December, on account of higher trade surplus.

The Philippines peso was down 0.1% against the greenback. The fall was limited as data released Thursday showed that the country's unemployment rate fell to 3.1% in December from 3.2% in November. The country's central bank is scheduled to meet on Feb. 13 for a rate decision. As of now, the market widely expects a rate cut, albeit the overall pace may slow down, should data continue to suggest a stronger economy.

The Indonesian rupiah was down 0.2% against the US dollar due to a slight recovery in the dollar index. Data showed that the country's economy expanded 5.03% in 2024, similar to the previous year's 5.05% growth.

The Malaysian ringgit was steady against the dollar. The country's economy minister, Seri Raifizi Ramli, Wednesday said the country was on track to meet its 2025 GDP growth target of 4.5-5.5%.

While the Taiwan dollar was steady, the Thai baht was down 0.3% against the greenback. Data showed that the headline CPI in Thailand rose 1.32% on year in January, the same as forecast in a Reuters poll, and higher than the 1.2% rise in December. (Sourabh Kumar)

India Rupee: Hits record low as importers buy dollars on RBI rate cut view

MUMBAI – The rupee hit a lifetime low of 87.5550 against the dollar Thursday as banks rushed to purchase the greenback, on behalf of importers, dealers said. They said importers were actively purchasing dollars as they expect the Reserve Bank of India's Monetary Policy Committee to cut the repo rate on Friday.

"Importers are panic buying, which is dragging the rupee. The rate cut by the RBI has now been factored in, which will pull the rupee further down," a dealer at a brokerage firm said. Importers rushed to purchase the greenback as they expect the RBI to cut the repo rate by 25 basis points, which may weigh on the rupee, dealers said. 

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 the rate steady, and may start cutting rates only from April.

Some dealers expect the Indian rupee to stabilise in the coming weeks, after the MPC meeting outcome on Friday. "The rupee has been on a one-way rally. Even though the rupee is bearish, a pullback is definitely expected in two weeks," a dealer at a private bank said. 

The rupee could not take any support from the ease in the dollar index, according to some dealers. However, the dollar index has started to recover, and was slightly up compared to the Indian market close on Wednesday. The dollar index had eased on Wednesday due to a strengthening Japanese yen. The Japanese currency was trading higher on rising expectations of a continued interest rate hike by the Bank of Japan on the back of stronger wage growth data. 

At 0935 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 107.70, compared to 107.62 on Wednesday and 108.00 on Tuesday. 

During the day, the rupee is seen moving in a range of 87.30-87.70 against the dollar. Dealers see immediate technical support for the Indian unit at 87.60 a dollar. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Feb 6

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, Pratiksha, and Gowri Lakshmi)

End

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

Edited by Vandana Hingorani

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.