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Informist, Monday, Feb. 10, 2025

By Gowri Lakshmi 

MUMBAI – The rupee came off its record low and erased almost all its losses Monday as public-sector banks aggressively sold the greenback, possibly on behalf of the Reserve Bank of India, dealers said. The Indian unit was weighed down by a rise in the dollar index and persistent dollar purchases by importers and foreign portfolio investors during the day, they said. 

"The central bank was really active and aggressive in its (dollar) sales today, it saved the rupee from the big figure (88 a dollar) in the morning," a dealer at a private bank said. "They had to be slightly more aggressive to curb all that panic situation."

After slumping to a record low of 87.9500 a dollar earlier in the day, the rupee went on to settle at 87.4750 a dollar, compared to its previous close of 87.4250. Barring the South Korean won, all other Asian currencies fell against the greenback Monday. Other Asian currencies fell 0.1-0.7%, with the Malaysian ringgit being the worst performer.

The rupee was trading around 88.00-87.97 a dollar in the offshore non-deliverable forwards market a few minutes before the domestic spot market opened at 87.9225 a dollar. This was because some public-sector banks stepped in with dollar sales, probably on behalf of the RBI, in the offshore non-deliverable forwards market to prevent the rupee from testing the psychologically crucial level of 88-a-dollar, dealers said. The rupee, however, opened almost 50 paise lower against the greenback, posting its biggest fall at the open in over two years. 

The rupee slumped as the dollar index rose after US President Donald Trump held out new tariff threats Friday. He announced a 25% tariff on all steel and aluminium imports into the US and also said he will detail retaliatory measures on Tuesday or Wednesday, applying them to all countries and matching the tariff rates levied by each country. The announcements sparked fears of a full-fledged global trade war, hitting risk appetite among market participants. 

The dollar index also gained after data Friday showed a mixed labour market in the US, with job growth slowing in January. However, the unemployment rate was at 4.0%, the lowest since May. Non-farm payrolls rose by 143,000 last month, against the estimate of an increase of 170,000 in a Reuters poll.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.20, compared to its previous close of 108.10 and Thursday's 107.71.

Shortly after opening, the Indian unit fell to a lifetime low of 87.9500 as banks rushed to purchase the greenback on behalf of importers, who were wary of a further fall in the rupee, dealers said. However, the central bank immediately intervened through dollar sales in the spot market as well, which limited the local unit's sharp fall.

The rupee was also weighed down by banks' dollar purchases on behalf of overseas investors, who continued to exit the Indian stock market. On Monday, the benchmark indices Nifty 50 and BSE Sensex ended down 0.8% and 0.7%, respectively. So far into the year, foreign portfolio investors have sold $9.3 billion worth of shares from the Indian equities market, putting the local unit under immense pressure.

However, the central bank stepped up its intervention to support the currency, with some dealers saying it may have sold roughly $2.5 billion-$3.0 billion in the spot market. The RBI is also likely to have intervened in the dollar/rupee futures market to control the runaway depreciation in the Indian currency, they said. "They (the RBI) marked their presence in almost all segments--spot, NDF, futures. They were there everywhere!" said a dealer at a private bank. 

Further, exporters, who wanted to take advantage of the higher dollar/rupee levels, sold the greenback, which aided the Indian unit, dealers said.

The intervention by the central bank Monday was more aggressive than anything seen in the past two months, dealers said. While detailing the outcome of the Monetary Policy Committee's sixth bi-monthly meeting for the financial year 2024-25 (Apr-Mar) Friday, RBI Governor Sanjay Malhotra had said the central bank's interventions in the foreign exchange market focus on smoothening "excessive" and "disruptive" volatility.

"The fact that the RBI is trying to protect a level is very evident from what happened today. They do not want the rupee to breach 88 a dollar this soon even though it did test it (in the NDF market)," another dealer at a private bank said.

Following the strong intervention by the RBI, the rupee erased almost all losses and touched a high of 87.4500 a dollar. Traders started selling dollars to cover their existing positions in favour of the US unit, which also aided the rupee, dealers said. 

"Today's RBI intervention was just a signal for the market, saying "we are there". If the market has started thinking that it can move on its own and any and everybody can speculate, that will not happen. They (the RBI) just wanted to say this," said a dealer at a state-owned bank. 

Some importers bought the greenback around the 87.45-87.50 a dollar level to take advantage of the relatively lower levels, which weighed on the rupee, dealers said.

FORWARDS

Premiums on the dollar/rupee forwards contract ended higher across tenures Monday as some banks purchased dollars for forward delivery on behalf of importers, noting a sharp fall in the rupee earlier in the day, dealers said. "If the rupee is falling at such a rapid rate, importers are bound to start paying," said a dealer at a state-owned bank. "Most importers are feeling the pinch of not booking forwards earlier, so they are coming now."

Further, premiums rose as banks bought dollars for forward delivery, noting the arbitrage between the onshore forwards and offshore non-deliverable forward rates, dealers said. 

However, the upward movement in premiums was capped as the RBI possibly sold forward dollars to neutralise the impact of its spot intervention and avoid pushing out rupee liquidity, according to dealers. The RBI is likely to have sold forward dollars for maturity in October and January, they said. 

A rise in the benchmark 10-year US Treasury yield also limited the rise in premiums, dealers said. Yield on the 10-year US Treasury note rose 4 basis points Friday to settle at 4.49%. 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 195.93 paise, against 193.40 paise Friday. On an annualised basis, the premium was 2.24%, against Friday's close of 2.21%. The premium rose to a high of 2.26% earlier in the day. 

OUTLOOK 

On Tuesday, the rupee will take cues from movement in the dollar index and the Chinese yuan, dealers said. Market participants will closely assess any tariff-related statements by Trump and the potential impact on global trade, they said.

Dealers expect banks to purchase the greenback on behalf of importers, wary of further depreciation in the rupee. They also expect FPIs to continue to exit from the Indian equity markets amid the widespread risk-averse sentiment, which may also put the local unit under pressure.

However, the RBI may continue to intervene through dollar sales to prevent the domestic currency from testing the psychologically-important level of 88-per-dollar, dealers said. "No matter what, 88 (a dollar) is just a matter of a few weeks now. As soon as he (Trump) announces new tariff measures, the global market is going to go haywire," a dealer at a private bank said. 

During the day, the rupee is seen in a range of 87.45-88.00 a dollar, with strong technical support pegged at 88.00 a dollar.

India Rupee - World FX: Dollar index gains on Trump's new tariff threats

MUMBAI – The dollar index rose Monday after US President Donald Trump on Friday announced fresh 25% tariffs on all steel and aluminium imports into the US. Trump also said he will announce further retaliatory measures on Tuesday or Wednesday, applying them to all and matching the tariff rates levied by each country. 

Last week, China announced retaliatory tariff measures against the US, which took effect on Monday. The new tariff announcements sparked fear of a full-fledged global trade war, dampening risk appetite among investors globally. 

The dollar index also gained after data on Friday showed a mixed labour market, with job growth slowing in January. However, the unemployment rate was 4.0%, the lowest since May 2024. Non-farm payrolls rose by 143,000 last month, the US Labor Department's data showed, against the estimate of an increase of 170,000 jobs in a Reuters poll.

At 1509 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.20, compared to its previous close of 108.10 and 107.71 on Thursday. 

Following the reports on new tariff announcement, major global currencies traded lower against the US unit. The Japanese yen was down 0.7% against the dollar, while both the Swiss franc and the pound sterling were down 0.1% each.

The euro was flat against the US unit ahead of European Central Bank President Christine Lagarde's speech due later in the day.  

Commodity-linked New Zealand dollar and Canadian dollar were down 0.1% and 0.3%, respectively. Canada is a major exporter of steel and aluminium to the US and is likely to be more impacted from the tariff impositions. The Australian dollar traded flat against the greenback ahead of the release of the consumer confidence index for February, due Tuesday.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Feb 10

MUMBAI – At 1203 IST, the rupee was at 87.5900 per dollar. At 0900 IST, the rupee was at 87.9225 a dollar against its previous close of 87.4250. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Pratiksha)

India Rupee: Erases most losses on RBI's aggressive dollar sales

MUMBAI – The rupee erased most of its losses against the dollar, thanks to the Reserve Bank of India, which is likely to have sold the greenback aggressively to prevent a runaway depreciation in the Indian currency, dealers said.

"Today (Monday), they (RBI) are a lot more aggressive because it (rupee) also opened with a 50 paise gap," a dealer with a private bank said. The rupee opened at 87.9225 a dollar against Friday's close of 87.4250 a dollar. It opened almost 50 paise down against the greenback, the most in over two years. The Indian currency fell to a record low of 87.9500 a dollar shortly after open, which prompted the central bank to intervene in the market.

Shortly after open, the central bank sold the greenback to prevent a further fall in the rupee, dealers said. The rupee came under pressure due to a strengthening dollar index after US President Donald Trump threatened to announce fresh tariffs this week.

On Friday, Trump said he will announce on Monday new 25% tariff on all steel and aluminium imports into the US, adding that he would also announce other retaliatory measures on Tuesday or Wednesday, applying them to all and matching the tariff rates levied by each country. The new tariff announcements sparked fear of a full-fledged global trade war, dampening risk appetite among investors globally. 

At 0950 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.30, compared to its previous close of 108.10 and 107.71 on Thursday. 

The intervention by the central bank on Monday was more aggressive than anything seen in about the past two months, dealers said. While detailing the outcome of the Monetary Policy Committee's sixth bi-monthly meeting for 2024-25 (Apr-Mar) on Friday, the RBI Governor Sanjay Malhotra had said the central bank's interventions in the foreign exchange market focus on smoothening "excessive" and "disruptive" volatility rather than targeting any specific exchange rate level or band, and the exchange rate policy has remained "very, very consistent" over the years.

"It was just the talk they do, because looking at today's intervention, they clearly did not want the rupee to hit 88 a dollar," a dealer with another private bank said.

During the day, the rupee is seen moving in a range of 87.40-88.00 against the dollar. Dealers see strong technical resistance for the Indian unit at 87.45 a dollar.  (Sourabh Kumar)

India Rupee: At record low on Trump's fresh tariff threats; RBI limits losses

MUMBAI – The rupee tumbled and hit a record low against the dollar on Monday after US President Donald Trump threatened to announce fresh tariffs this week, dealers said. The rupee opened at 87.9225 and hit a lifetime low of 87.9500 immediately after the domestic spot market opened.  

"The dollar is going stong and will continue to strengthen in the coming days which is putting all other currencies under pressure. FIIs are still the net sellers and more buying (of dollars) is expected during the day. The rupee will likley breach 88 (a dollar) and beyond, maybe 88.10," a dealer at a state-owned bank said. 

On Friday, Trump said he will announce on Monday new 25% tariff on all steel and aluminium imports into the US, adding that he would also announce other retaliatory measures on Tuesday or Wednesday, applying them to all and matching the tariff rates levied by each country. The new tariff announcements sparked fear of a full-fledged global trade war, dampening risk appetite among investors globally. 

Meanwhile, some public-sector banks stepped in through dollar sales, likely on behalf of the Reserve Bank of India at around 87.95 a dollar, which prevented the local unit from inching towards the psychologically crucial level of 88-per-dollar, dealers said. The RBI's intervention, however, was 'mild' in nature, according to dealers. 

At 0950 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.30, compared to its previous close of 108.10 and 107.71 on Thursday. 

The rupee also came under pressure as banks rushed to purchase the greenback on behalf of importers, who feared a further fall in the local unit, dealers said. So far this calendar year, the Indian currency has depreciated 2.7% against the dollar. '

Dealers said some banks also sold the greenback on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, which provided some cushion to the Indian currency. However, most exporters were in a 'wait and watch' mode, as they expect the local unit to depreciate further. "Exporters' selling is active since the levels are attractive and they are booking profits. But given that the rupee is only expected to depreciate in the coming weeks, most are seeing levels beyond 88 ( a dollar)," a dealer at a public sector bank said. 

During the day, the rupee is seen moving in a range of 87.80-88.10 against the dollar. Dealers see strong technical support for the Indian unit at 88.00 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Most down as dlr rises after Trump's new tariff threats

MUMBAI – Most Asian currencies fell against the dollar on Monday as the dollar index rose after US President Donald Trump announced the imposition of new tariffs. Trump announced new 25% tariff on all steel and aluminium imports into the US and said he would also announce other retaliatory measures on Tuesday or Wednesday, applying them to all and matching the tariff rates levied by each country. "And very simply, it's, if they charge us, we charge them," Trump said to reporters on reciprocal tariff plan.  

China's retaliatory tariff measures announced against the US came into effect on Monday. The new tariff announcements sparked fear of a full-fledged global trade war, hitting risk appetite among investors globally. 

The dollar index also rose after data on Friday painted a mixed picture of the US labour market, with job growth slowing in January. However, the unemployment rate was at 4.0%, the lowest since May 2024. Non-farm payrolls rose by 143,000 last month, against the estimate of an 170,000 increase in a Reuters poll.

Market participants are of the view that Trump's tariffs could be inflationary and put further pressure on the US Federal Reserve to keep interest rates higher. 

At 0853 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.40, compared to its previous close of 108.10 and 107.71 on Thursday. 

The Malaysian ringgit tumbled 0.7% against the greenback, the worst hit amongst its peers, while the Indonesian rupiah was down 0.4%. The Chinese yuan was down 0.2% against the US unit. However, losses in the currency were limited after data showed China's consumer inflation accelarated to its fastest in five months in January. The Consumer Price Index in January rose 0.5% on year, against 0.1% in December and above the estimate of a 0.4% rise in a Reueters poll. 

The Philippines peso was down 0.2% against the US unit on increased expectations of a rate cut by the Philippines central bank on Thursday. The central bank is widely expected to cut rates by 25 basis points to spur growth in its sluggish economy. 

Bucking the trend, the South Korean won was flat against the dollar. South Korea's opposition ldeader Jae-myung proposed an extra budget worth $21 billion to boost the economy amid domestic political turmoil and rising uncertainty from the US. "The government should not miss the golden opportunity for economic recovery through fiscal expansion," Lee said at the Parliament on Monday. "I propose a minimum of 30 trillion won extra budget to restore people's livelihoods and the economy."

The Thai baht was also flat against the US unit, while the Taiwan dollar was down 0.2%.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Feb 10

MUMBAI – Following are the expected support and resistance levels for the rupee on Monday, as forecast by leading banks and brokerages in an Informist poll:

(Pratiksha and Gowri Lakshmi)

End

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

Edited by Rajeev Pai

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