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Informist, Tuesday, Feb. 11, 2025

By Sourabh Kumar

MUMBAI – The rupee soared against the dollar on Tuesday, reversing all losses of the past week, as the Reserve Bank of India surprised the market with aggressive dollar sales to support the rupee, dealers said. The rupee ended 65 paise higher against the dollar, the most in a day since Nov. 11, 2022.

"It was a very surprising day," a dealer with a foreign bank said. "Nobody knew what to do, and we all just tried to minimise losses as much as possible. And after a point I just closed my books."

After moving in a range of 77 paise, the Indian currency settled at 86.8275 a dollar against 87.4750 a dollar on Monday due to the RBI's intervention, dealers said. The central bank had intervened in the offshore non-deliverable forwards market to support the rupee, before entering the spot market, which saw the rupee open higher against the greenback, dealers said.

Dealers had expected the rupee to open lower after US President Donald Trump on Monday announced imposition of 25% tariffs on all steel and aluminium imports into the country, effective Mar. 12. The dollar index strengthened to 108.46 on Tuesday, before easing slightly. The index, which measures the strength of the greenback against a basket of six major currencies, was 108.26 at 1530 IST against 108.33 on Monday and 108.10 on Friday.

However, the RBI's intervention in the currency market by selling dollars saw the rupee open higher and gain further during the day, dealers said. The RBI sold so much dollars that the rupee rose past 87 a dollar within the first half an hour, after opening at 87.3475 a dollar. "Throughout the day, it was just RBI, we did not stand a chance," a dealer with a private bank said.

Market participants were of the view that the RBI became more aggressive in defending the rupee this week than in the past one month or so, largely to inhibit speculative dollar purchases, which had picked up in recent weeks due to sharp fall in the Indian currency, dealers said.

The RBI is said to have sold around $15 billion since Monday in the spot market, as per dealers. In the offshore non-deliverable forwards market, the central bank is estimated to have sold around $10 billion.

"Since the whole market was on one side, buying dollars, and there was no one to offer, the rupee had moved in just one direction," a dealer with another private bank said. "Then, the RBI came hard on those who were just building their positions by speculative trading, and did not have a genuine requirement."

Just last week, the rupee fell 0.9% against the greenback. So far in the current calendar year till Friday, the rupee has fallen 2.1% against the dollar. However, after the RBI's intervention on Tuesday, the rupee's fall against the dollar has been limited to 1.4%.

The Indian currency has been depreciating since December. The start of a sharper depreciation in the rupee coincided with the time RBI Governor Sanjay Malhotra joined the office, sending the market a signal that the new chief is willing to allow flexibility in the exchange rate.

The rupee's fall seemingly accelerated after Sanjay Malhotra took charge as the RBI governor, which gave the market a signal that the new governor was willing to allow flexibility in the exchange rate. Further, so far this calendar year, overseas investors have been net sellers of Indian equities, which has also put pressure on the rupee, dealers said. So far this year, foreign investors have net sold $8.42 billion of domestic equities.

Thanks to the RBI, the rupee was the best performing currency on Tuesday. On a day when most other Asian currencies fell against the greenback, with the Thai baht falling 0.6%, the Indian rupee rose 0.7% against the US unit.

Some exporters also sold dollars, pushing the rupee to 86.6200 a dollar, the highest since Jan. 31. However, some gains were erased as importers purchased the greenback to take advantage of a relatively lower dollar/rupee levels, dealers said. 

FORWARDS

Premiums on the dollar/rupee forward contract ended down across most tenors on Tuesday as the RBI is likely to have sold forward dollars to nullify the impact of its aggressive intervention in the spot market on liquidity, dealers said.

Since selling dollars in the spot market sucks out the rupee liquidity, the central bank sold dollars for forward delivery, to nullify or at least minimise the effect of its spot intervention, dealers said. On Monday, the net liquidity injected by the RBI--a proxy for systemic liquidity deficit--rose to INR 1.96 trillion from INR 1.33 trillion on Sunday. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 189.87 paise, against 195.93 paise Monday. On an annualised basis, the premium was 2.19%, against Monday's close of 2.24%.

OUTLOOK 

On Wednesday, the rupee will take cues from the movement of 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. They will also be cautious against placing large bets due to rise in RBI's intervention in the currency market.

Dealers expect banks to purchase the greenback on behalf of importers, noting a relatively lower dollar/rupee level. They also expect FPIs to continue to exit from the Indian equity market due risk-averse sentiment, which may also put the local currency under pressure. 

During the day, the rupee is seen in a range of 86.50-87.50 a dollar, with strong technical resistance pegged at 86.50 a dollar.

India Rupee - World FX: Dollar index firm as Trump announces new tariffs

MUMBAI – The dollar remained on a strong footing Tuesday as US President Donald Trump on Monday raised tariffs on steel and aluminium imports to 25% "without exceptions or exemptions". Reports said the tariffs would take effect on Mar. 4. Trump has said he will announce additional reciprocal tariffs on other countries over the coming days.

A slew of tariffs by Trump have led to fear that a multi-front trade war may break out, with major countries such as Canada, Mexico, Brazil and South Korea being impacted more as they are major suppliers of steel and aluminium to the US. At 1409 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.34, compared to its previous close of 108.33 and 108.10 on Friday.

Market participants are now waiting for a speech by US Federal Reserve Chair Jerome Powell and the Johnson Redbook retail sales data, both due later in the day, for more cues about the US economic health and the Fed's rate outlook.

The pound sterling was down 0.1% against the greenback on Tuesday. However, the fall of the currency was limited as data released earlier in the day showed that retail spending in the UK rose 2.6% on year in January, well above the average growth of 0.8% over the past 12 months.

Meanwhile, Bank of England's policymaker Catherine Mann on Tuesday warned that companies will struggle to raise prices this year as consumers are hit by a weakening labour market, suggesting that inflation in the country is receding.

The Canadian dollar was down 0.1% against the greenback due to uncertainties over US' tariff plans. The Australian dollar was up 0.1% against the US unit after Australian Prime Minister Anthony Albanese Tuesday said that Trump had agreed to consider 'exempting' the country from his steel and aluminium tariffs. Tracking rise in the Australian dollar, the New Zealand dollar was up 0.2% against the greenback. The Swiss franc traded 0.1% lower against the US dollar. 

The euro was down 0.1% while the Japanese yen traded 0.1% up against the dollar.  (Gowri Lakshmi)

India Rupee: Remains sharply higher on heavy dollar sales by RBI

MUMBAI – The rupee remained sharply higher against the dollar on Tuesday as the Reserve Bank of India likely continued with its heavy dollar sales in the spot market, dealers said. The rupee touched a high of 86.6200 a dollar, posting its biggest intraday rise in over two years.

"The RBI move is out of the blue, nobody in the market knows why it is happening," said Alok Singh, head of treasury at CSB Bank. "It doesn't seem like the RBI was aiming for a particular level, they intervened and subsequently the levels got to wherever they are now." 

Earlier in the day, Informist reported that the RBI has increased its support to the rupee significantly, with dealers estimating the central bank's dollar sales in the domestic spot market at nearly $15 billion since Monday. The RBI is likely to have sold almost $10 billion in the offshore non-deliverable forwards market as well since Monday, they said.

However, the rupee erased some of its early gains against the dollar as banks stepped in to purchase the greenback on behalf of importers, who wanted to take advantage of the lower dollar/rupee levels, dealers said. "Importers are buying at every dip (in dollar/rupee)," a dealer at a state-owned bank said.

On the other hand, exporters rushed to sell the greenback, as they fear the rupee may appreciate further from here on, thus, boosting the Indian currency, dealers said. "Nobody expected this move (in the rupee) today. While we were thinking an 88.00 (a dollar), the rupee came up to 86.60 levels, panic selling (of dollars) and panic buying happened all at once," said a dealer at a brokerage firm.

Banks also purchased the greenback on behalf of foreign portfolio investors, who continued to withdraw funds from the Indian stock market due to risk-off sentiment among investors amid US President Donald Trump's new tariff plans, said dealers. At 1316 IST, the benchmark indices, the Nifty 50 and Sensex, were down 1.4% and 1.3%, respectively.

"With 87.30 broken, the next support (for dollar/rupee) is 86.50, from where a decent rally, in which RBI buys dollars to recoup its FX reserves, could take it back to 87.50, which is the next resistance," said a dealer at another brokerage firm.

For the rest of the day, the rupee is seen moving in a range of 86.50-87.00 against the dollar. Dealers see strong technical resistance for the Indian unit at 87.50 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Feb 11

MUMBAI – At 1227 IST, the rupee was at 86.8900 per dollar. At 0900 IST, the rupee was at 87.3475 a dollar against its previous close of 87.4750. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Pratiksha)

India Rupee - Asia FX: Most down as dlr index rises post Trump's new tariffs

MUMBAI – Most Asian currencies traded lower against the greenback on Tuesday as the dollar index rose after US President Donald Trump on Monday signed procalimations to raise tariffs on all aluminium imports to 25%. Trump's new tariff measures would take effect on Mar. 4, reports said. He also raised tariffs on all steel imports to 25%.

The tariff are expected to trigger a multi-front trade war, with South Korea expected to be impacted more within Asia, as the country is a major exporter of steel to the US. The South Korean won fell 0.1% against the greenback. Data on Monday showed public institutions in South Korea hired less than 20,000 new employees, posting the lowest recruitment level in five years. 

At 0858 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.44, compared to its previous close of 108.33 and 108.10 on Friday. 

The Thai baht slumped 0.6% against the US unit, the most worst hit among its Asian peers. Reports on Monday said the Bank of Thailand would start the process to select a new central bank governor in March, ending incumbent Governor Sethput Suthiwartnarueput's five-year term in September. 

The Indonesian rupiah was down 0.1%. The Philippines' peso was down 0.1% against the dollar, tracking a fall in domestic equities. At 0910 IST, benchmark index PSEIx was down 1.2%. 

Bucking the trend, the Taiwan dollar and the Chinese yuan traded flat against the greenback. The Malaysian ringgit was also flat against the greenback.

Market participants are now waiting for a speech by US Federal Reserve Chair Jerome Powell and the Johnson Redbook retail sales data, both due later in the day, for more cues about the US economic health and the Fed's rate outlook.  (Gowri Lakshmi) 

India Rupee: Above 87/$1 on strong RBI dlr sales; biggest gain in over 2 yrs

MUMBAI - The rupee surged on Tuesday and rose above the 87-per-dollar mark as the Reserve Bank of India intervened aggressively through dollar sales, dealers said. The rupee gained 84 paise so far in early trade, posting its biggest intraday rise since Nov. 11, 2022. "A (almost) one rupee movement in a day is rare event in the dollar/rupee pair. 86.60 (a dollar) will be well guarded now," a dealer at a private bank said.

Shortly after the market opened, the RBI stepped in aggressively, leading to stop losses being triggered on long dollar bets at around 87.10 levels and then at 86.80. The rupee rose to a high of 86.6400 a dollar so far in trade. 

"There is continuous aggressive selling (of dollars). They (RBI) really want to bring the rupee levels down from 87, there was a lot of negativity and criticism surrounding the rupee's depreciation. They (RBI) probably just want limited fall for the rupee," another dealer at a state-owned bank said. The RBI had also intervened aggressively in the spot market on Monday, that led to the rupee recovering from its lifetime low of 87.9500 a dollar. 

Before the spot market opened, the central bank also intervened in the offshore non-deliverable forwards market aggressively to support the rupee, dealers said. "They (RBI) are tapping all the segments now, there was no reason to intervene in the offshore market, but they did," said a dealer at a private bank. "Seems like the runaway depreciation (in the rupee) we thought will happen may not happen soon."

Following the jump in the Indian currency, banks rushed to purchase the greenback on behalf of importers, who wanted to take advantage of the lower dollar/rupee levels, limiting gains for the rupee, dealers said. 

During the day, the rupee is seen moving in a range of 86.50-87.00 against the dollar. Dealers see strong technical resistance for the Indian unit at 86.50 a dollar. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Feb 11

MUMBAI – Following are the expected support and resistance levels for the rupee on Tuesday, 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 Ashish Shirke

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