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Informist, Friday, Feb. 7, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended higher against the dollar Friday after the Reserve Bank of India's Monetary Policy Committee maintained a 'neutral' stance, while cutting the repo rate by 25 basis points, as widely expected, dealers said. 

"Everyone factored in the cut, so a fall was not there in the rupee. However, they were looking forward to more cues in comments by the governor, which also disappointed them," a dealer at a state-owned bank said. "The rupee appreciated (to 87.32) just momentarily probably on the neutral stance decision, but it quickly came back to levels (87.40)."

The rupee ended at 87.4250 a dollar, compared to the previous close of 87.5775. The rupee moved over 17 paise during the day. The Indian unit, which hit an intraday high of 87.3200, rose 0.2% against the dollar.

Barring the offshore Chinese yuan, all other Asian currencies also rose against the dollar. Other Asian currencies rose between 0.3-0.5%, with the Thai baht being the best performer amongst its peers.

The rupee opened higher at 87.4500 a dollar as the RBI is likely to have sold the greenback in the offshore non-deliverable forwards market. The rupee was trading around 87.58 a dollar, just shy of its record low of 87.5825, in the NDF market before the RBI intervened. The rise in the Indian unit was likely due to the central bank's intervention through dollar sales, according to dealers.

After the RBI announced the monetary policy, the rupee rose for a brief period, primarily as the Monetary Policy Committee kept the policy stance unchanged at 'neutral'. The unchanged policy stance tempered market's expectations of further rate cuts by the rate-setting panel, they said. The six-member panel unanimously voted to cut the repo rate by 25 basis points to 6.25%. 

Announcing the monetary policy, RBI Governor Sanjay Malhotra said the central bank aims to focus on smoothening excessive and disruptive volatility rather than targeting any specific exchange rate level or band for the rupee. "Our stated objective is to maintain orderliness and stability, without compromising market efficiency," he said. 

The MPC panel lowered the repo rate after nearly five years against the backdrop of declining inflation and food prices stabilising. The RBI projected FY26 GDP growth at 6.7%, higher than the 6.4% estimated by the National Statistics Office for the current year, which supported the rupee, dealers said.

During the day, the rupee rose to a high of 87.3200 after banks sold the greenback on behalf of foreign portfolio investors looking to invest in the initial public offerings of domestic companies, dealers said. However, the local unit soon erased gains on account of an ease in foreign fund inflows, and a slight uptick in the dollar index. The dollar index, which measures the strength of the dollar against a basket of six major currencies, rose to a high of 107.83 during the day. The index was at 107.71 on Thursday, and 107.62 on Wednesday.

"I'm not optimistic about a sharp and sustained appreciation in the rupee due to the immense pressure exerted by the dollar index. Any tariff-related news by the US in any part of the world will fuel depreciation," a dealer at a private bank said.

FORWARDS

Premiums on dollar/rupee forward contracts ended up across tenors after the Reserve Bank of India maintained its 'neutral' policy stance while cutting the repo rate by 25 basis points, dealers said. This has created uncertainty over the quantum and the timing of further rate cuts by the RBI, they said.

Further, a slight increase in the liquidity deficit also supported forward premiums, dealers said. On Thursday, net liquidity injected — a proxy for systemic liquidity deficit – was at INR 697.55 billion against INR 450.06 billion on Wednesday.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 193.40 paise, against 191.37 paise on Thursday. On an annualised basis, the premium was 2.21%, against Thursday's close of 2.19%.

OUTLOOK

The currency market is shut on Saturday. On Monday, the rupee is likely to take cues from the movement in the dollar index and crude oil prices. Market participants keenly await the US non-farm payrolls data due later in the day.

"There are no more domestic cues now. The rupee market may be volatile on Monday, and can only be tracked after the NFP comes out," a dealer at a state-owned bank said. 

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, albeit not aggressively.

During the day, the rupee is seen in a range of 87.30-87.70 a dollar, with strong technical support pegged at 87.50 a dollar.

India Rupee - World FX: Yen dn as IMF warns spillover effect of rate hikes

MUMBAI – The Japanese yen was down 0.4% against the dollar after the International Monetary Fund warned on Friday that a rising interest rate may double the cost of servicing the public debt by 2030. The global financial agency said Japan needed to be more vigilant of the fallout of higher rates, including the possibility of a rise in corporate bankruptcies.

The pound sterling was up 0.2% against the dollar Friday after data showed that UK house prices rose 0.7% on month in January against a 0.2% rise in December. The UK house prices index rose 3% on an annual basis.

Gains in sterling were limited as the Bank of England cut the benchmark rate by 25 basis points on Thursday, as widely expected, and reduced its growth outlook for 2025. The central bank said inflation is expected to be twice the 2% target in the current calendar year. Thursday's cut brought the benchmark rate to 4.50%, with Bank of England Governor Andrew Bailey thinking such high inflation to be a "bump in the road" before it falls back.

The euro was slightly down as industrial production in Germany, the largest economy of the bloc, fell way more than expected in December. Industrial production fell by 2.4%, against a fall of 0.6% forecast in a Reuters poll. Market participants await a speech by the European Central Bank's Vice-President Luis de Guindos, due later in the day. 

The dollar index was largely steady ahead of the release of the US employment report for January, due later in the day. The index had fallen on Thursday after data revealed that the number of Americans filing for unemployment benefits for the week ended Feb. 1 rose more than expected. The jobless claims rose 11,000 to a seasonally adjusted 219,000, against a forecast of 213,000 by a Reuters poll.

At 1601 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.70, compared with its previous close of 107.71 and 107.44 on Wednesday. Market participants are now waiting for the non-farm payrolls data, due later in the day. 

The Swiss franc was up 0.1% against the greenback, while the Australian dollar and the New Zealand dollar were up 0.2% each against the greenback. The Canadian dollar was flat against the US unit ahead of key employment report due later in the day.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Feb 7

MUMBAI – At 1134 IST, the rupee was at 87.4775 per dollar. At 0900 IST, the rupee was at 87.4500 a dollar against its previous close of 87.5775. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar, Gowri Lakshmi, and Pratiksha)

India Rupee: Stays up as MPC keeps stance 'neutral'; repo rate cut by 25 bps

MUMBAI – The rupee remained up against the dollar Friday after the Reserve Bank of India's Monetary Policy Committee cut the repo rate, in line with market expectations, but opted to keep the policy stance unchanged at 'neutral', dealers said. The unchanged policy stance tempered market's expectations of further rate cuts by the RBI's rate-setting panel, they said. The six-member panel unanimously voted to cut the repo rate by 25 basis points, bringing it to 6.25% from 6.50%. 

"The initial movement was solely because the stance was kept unchanged. We were expecting they will change it. There was no fall seen since most of the rate cut was factored in," said a dealer at a state-owned bank. "At this point, nobody can really tell when the next rate cut will happen. That is supporting the rupee." Following the policy announcement, the rupee rose as high as 87.3650 a dollar during the day. 

RBI Governor Sanjay Malhotra, in his first policy statement, said that the central bank will focus on smoothening excessive and disruptive volatility rather than targeting any specific exchange rate level or band. "Our stated objective is to maintain orderliness and stability, without compromising market efficiency," he said. 

The RBI projected FY26 GDP growth at 6.7%, higher than the 6.4% estimated by the government for the current year, which also supported the rupee. Market participants now await the central bank governor's comments at the post-policy press conference starting 1200 IST, for further cues on the RBI's rate cut cycle.  

"The market can be expected to be volatile and persist as the press conference is still due. Commentary from the governor and other deputy governors will have significant impact and reactions from the market," a dealer at a private bank said.

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 resistance for the Indian unit at 87.25 a dollar. (Gowri Lakshmi)

India Rupee: Rises as bks sell dlrs likely for RBI in NDF; MPC outcome eyed

MUMBAI – The rupee was up against the dollar Friday as some banks sold dollars likely on behalf of the Reserve Bank of India in the offshore non-deliverable forwards market before the spot market opened, dealers said.

"Some selling (of dollars) by the RBI in NDF was there in the morning. Moreover, a rate-cut is factored in. The market is mostly waiting for the (policy) announcement," a dealer at a brokerage firm said.

The rupee was around 87.58 a dollar, just shy of its record low of 87.5825, in the NDF market 10 minutes before the domestic spot market opened at 0900 IST at 87.4500 a dollar. This was likely due to the central bank's intervention through dollar sales, according to dealers.

Market participants are now waiting for the outcome of the RBI's Monetary Policy Committee meeting at 1000 IST. 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, bringing it down to 6.25%.

The dollar index fell on Thursday after the US initial jobless claims for the week ended Feb. 1 showed a marginal rise in the number of Americans filing for unemployment benefits. The jobless claims rose 11,000 to a seasonally adjusted 219,000, against a forecast of 213,000 by a Reuters poll. The dollar index also fell as the Japanese yen hit an over eight-week high Thursday on rising expectations of an interest rate hike by the Bank of Japan. 

At 0932 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.76, compared to its previous close of 107.71 and 107.62 on Wednesday.

During the day, the rupee is seen moving in a range of 87.20-87.70 against the dollar. Dealers see immediate technical resistance for the Indian unit at 87.25 a dollar. (Gowri Lakshmi)

India Rupee - Asia FX:Mixed even as dlr index steady; Malaysian ringgit down

MUMBAI – Asian currencies were mixed against the US dollar even though the dollar index was steady in early trade Friday. Data released in the US on Thursday showed that the number of Americans filing for unemployment benefits increased in the week ended Feb. 1. Initial claims for state unemployment benefits rose 11,000 to a seasonally adjusted 219,000 in the week last week. A Reuters poll had forecast 213,000 claims.

The dollar index fell on Thursday after the data was released. The index, which measures the strength of the greenback against a basket of six major currencies, was at 107.74 against 107.71 on Thursday and 107.62 on Wednesday.

The dollar index also eased Thursday as the US currency came under pressure from a strengthening Japanese yen. The yen has risen in the past week as expectations of a further rate hike by Bank of Japan were cemented after some strong economic data as well as comments from the far-east nation's central bank officials.

In Asia, market participants will keep an eye on the interest rate decision by the Reserve Bank of India. The Taiwan dollar and South Korean won were steady early Friday. In an interview on Thursday, Bank of Korea Governor Rhee Chang-yong said a rate cut this month is not certain. He emphasised the need for more fiscal stimulus, amid the ongoing political turmoil in the country. Bank of Korea is set to decide the future course of monetary policy on Feb. 25. The Indonesian rupiah was also steady against the greenback.

The Philippines peso was up 0.2% against the US dollar. Market participants remained uncertain of a rate cut by the country's central bank at its meeting on Feb. 13. While the Malaysian ringgit was down 0.1%, the Thai baht was up 0.2% against the greenback. Data released on Thursday showed that the headline CPI in Thailand rose 1.3% on year in January, against a 1.2% rise in December.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Feb 7

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, Sourabh Kumar, and Gowri Lakshmi)

End

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

Edited by Saji George Titus

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