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Informist, Thursday, Feb. 13, 2025

By Gowri Lakshmi 

MUMBAI – The rupee ended steady against the dollar on Thursday as state-owned banks persistently sold the greenback, likely on behalf of the Reserve Bank of India, which offset the impact of banks' dollar purchases for importers, dealers said. However, the nature of the central banks' intervention was relatively less aggressive, compared to the heavy dollar sales seen in the last three days, dealers said. 

"One would say today was calm and quite but that was also because RBI wanted that," said a dealer at a private bank. "There is continuous buying (of dollars) from importers, but it is not reflecting because they (RBI) have kept it (rupee) at a level. Overall, the depreciation (in rupee) is going to happen."

After moving 14 paise during the day, the rupee ended at 86.8975 against the dollar, little changed from the previous close of 86.8925. "The excessive volatility in rupee's movement has been abated, its hopefully settling down," a dealer at another private bank said. However, other Asian currencies rose 0.1-0.6%, with the Thai baht being the best performer amongst its peers.

The rupee opened slightly higher at 86.8000 a dollar, tracking a fall in the dollar index. The dollar index fell following a rise in the euro, on reports that Moscow and Washington plan to hold talks to end the Ukraine war. The dollar index had hit an over-one week high on Wednesday on a higher-than-expected inflation print. The US consumer price index jumped 0.5% last month, the biggest gain since August 2023, after rising 0.4% in December. In the 12 months to January, the CPI rose 3.0%.

Moreover, some dealers speculated that the RBI may have intervened through dollar sales in the offshore non-deliverable forwards market before the domestic spot market opened, further supporting the local currency, dealers said.

During the day, the dollar index continued to ease following a rise in euro and pound sterling, which boosted the rupee, dealers said. The pound sterling strengthened after UK's GDP grew by 0.1% in Oct-Dec against expectations of a fall. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.59, against Wednesday's close of 107.97 and 107.92 on Tuesday. The index had risen to a high of 108.52 on Wednesday.

However, as soon as the Indian unit touched the day's high of 86.7700 a dollar, importers rushed to buy dollars, to take advantage of the relatively lower dollar/rupee levels, dealers said.

"Importers are surely buying (dollars) at every dip (in dollar/rupee pair)," a dealer at a state-owned bank said. "Even though most of them had booked their profits in the last three days, the buying continued as they don't expect any more appreciation given the aggression (of RBI dollar sales) has receded." So far this week, the rupee has appreciated 0.7% against the dollar.

However, state-owned banks stepped in with dollar sales, likely on behalf of the Reserve Bank of India at around 86.90 per dollar, which supported the local unit, dealers said. Dealers said the RBI seems to have taken a step back from the aggressive intervention it had been doing the last three days, and was intervening less aggressively on Thursday. However, the central bank's intervention ensured that the local unit did not fall beyond the key 87-per-dollar mark.

"See, we have come very close to 88 (a dollar) once. So, importers know that it can be tested again, which is why the fear and continuous buying (of dollars)," said a dealer at a foreign bank. "Everybody knows that the RBI will not keep on intervening this big all the time, they have to let it (rupee) go." The rupee had fallen to a lifetime low of 87.9500 a dollar on Monday.

Some foreign banks also bought dollars for foreign fund outflows, which weighed on the Indian unit, dealers said. Meanwhile, some traders remained cautious before placing large bets ahead of Indian Prime Minister Narendra Modi and US President Donald Trump's meeting.

FAR FORWARDS

Premiums on the one-year dollar/rupee forward contracts ended higher across most tenors on an annualized basis as banks purchased dollars for forward delivery on behalf of importers, who feared that the rupee may decline going ahead, dealers said. However, the rise in premiums was capped as the RBI is likely to have sold forward dollars for maturity in September, December, and January, they said.

So far this week, the rupee has appreciated 0.7% against the dollar, thanks to the RBI's aggressive intervention, especially on Monday and Tuesday. However, now that the RBI seems to have stopped its heavy intervention, dealers are of the view that Indian currency will depreciate going ahead and may fall below 87.00-a-dollar in the near term, prompting importers to purchase forward dollars, dealers said.

Further, the RBI sold forward dollars to offset the impact of its spot dollar sales on rupee liquidity, dealers said. On Wednesday, the net liquidity injected by the RBI--a proxy for the systemic liquidity deficit--rose to INR 2.07 trillion from INR 1.91 trillion on Tuesday.

"RBI is receiving in forwards but it is very minimal and nothing compared to their spot intervention," said a dealer at a state-owned bank. At 1530 IST, the one-year dollar/rupee forward premium was 192.00 paise against Wednesday's close of 192.15 paise. On an annualised basis, the one-year premium was 2.21% against Wednesday's 2.19%.

NEAR FORWARDS

The implied overnight cost of deploying dollars through foreign exchange swaps rose to as high as over 10.5% during the day, before coming off, owing to surplus dollars in the system after the RBI's aggressive intervention through dollar sales in the spot market earlier this week, dealers said.

Dollar/rupee forward premiums across most tenures also gained because of an intra-day rise in the dollar/rupee overnight swap rate, or cash-tom, they said. "Cash is pretty high after the dollar that has come in the system," said a dealer at a private bank. "This much rise was expected I feel."

The RBI intervened heavily in the spot market this week, especially on Monday and Tuesday, to prop up the rupee. The central bank sold nearly $15 billion in total in the spot market in the first two days of the week, according to dealers.

On an annualised basis, the dollar/rupee cash-tom rate rose to 6.30% earlier in the day. At 1530 IST, the rate was 2.94%, against 4.20% on Wednesday.

OUTLOOK

On Friday, the rupee will take cues from the movement of the dollar index, dealers said. Traders are waiting for the US weekly initial jobless claims data for the week ended Feb. 8, due later in the day. Market participants will also closely assess any trade and tariff-related announcements by the US, after Trump and Indian Prime Minister Narendra Modi conclude their talks, dealers said.

Dealers expect banks to purchase dollars on behalf of importers, who fear the rupee will depreciate in the coming weeks. They also expect foreign portfolio investors to continue to withdraw funds from the Indian equity market due risk-averse sentiment, which may put further pressure on the local currency.

During the day, the rupee is seen in a range of 86.70-87.20 a dollar, with strong technical support pegged at 87.00 a dollar.

India Rupee - World FX: Sterling up 0.3% post higher-than-view UK GDP data

MUMBAI – The pound sterling was up 0.3% against the US dollar after the UK economy unexpectedly grew 0.1% in Oct-Dec, against the analyst forecast of a contraction of 0.1% in a Reuters poll. The country's total GDP grew 0.9% through the 12 months in 2024, compared to the 0.4% growth in 2023. 

The euro was up 0.3% against the greenback after reports said that Washington aims to begin talks with Moscow to end the war in Ukraine. US President Donald Trump on Wednesday said that both Russian President Vladimir Putin and Ukrainain President Volodymyr Zelenskiy expressed a desire to end the war, after which Trump has ordered top US officials to begin peace talks to end the crisis. 

The dollar index fell following a rise in the euro and pound sterling during European trade. The index had jumped to an over one-week high on Wednesday after a hotter-than-expected inflation print in January.

Data showed consumer price inflation in the US increased at the fastest pace in more than a year in January. Data showed that in January, consumer prices rose 0.5% from the previous month and 3.0% on an annual basis. Economists polled by Reuters had forecast CPI inflation at 2.9% on year. Core inflation rose 3.3% on year, against 3.2% in December. 

At 1524 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.67, compared to its previous close of 107.97 and 107.92 on Tuesday. Market participants are now waiting for the initial jobless claims data for the week ended Feb. 8, due later in the day.

The Japanese yen was up 0.2% against the greenback after data on Thursday showed that Japan's corporate goods prices rose in January at the fastest pace in nearly two years, keeping hopes high for further interest rate hikes by the Bank of Japan. Japan's producer price index rose 4.2% on year in January, the central bank said. The data came stronger than the revised rise of 3.9% in December.

The Canadian dollar was up 0.1% against the greenback. The minutes of the Bank of Canada's latest policy meeting published earlier in the day showed that policymakers are concerned about the potential tariff hikes and a trade war with the US, which would permanently shrink the level of Canada's GDP. "It was clear that a protracted trade conflict would lead to a decline in economic activity,' the minutes said. "Governing Council members also noted that the adverse impact on the level of GDP would be permanent, and the growth of GDP would be reduced until the Canadian economy adjusts to the tariffs."

The New Zealand dollar was down 0.1% against the US dollar after Reserve Bank of New Zealand's survey on Thursday showed that two-year inflation expectation will decline to 2.06% in the quarter ending March, from the 2.12% seen in the last quarter of 2024. Following a fall in the New Zealand currency, the Australian dollar was also down 0.2%. 

Meanwhile, Australia's Trade Minister Don Farrell said on Thursday that the country had ramped up aluminium supply to the US with Washington's approval, addressing a hindrance to Canberra's request for an exemption from US tariffs on aluminium and steel. (Gowri Lakshmi)

India Rupee: Erases all gains on importers' dollar buys; RBI's dlr sales aid

MUMBAI – The rupee erased all gains against the dollar on Thursday as banks purchased the greenback on behalf of importers and for foreign fund outflows, dealers said. However, some public-sector banks stepped in with dollar sales, likely on behalf of the Reserve Bank of India, at around 86.90 per dollar, which supported the local unit, they said. 

Earlier in the day, the rupee rose to a high of 86.7725 a dollar owing to an ease in the dollar index, dealers said. Following this, banks bought dollars on behalf of importers, who wanted to take advantage of the relatively lower dollar/rupee levels. This put the rupee under pressure, as per dealers.

Dealers said the RBI seems to have taken a step back from the aggressive intervention it had been doing the last three days, and was intervening less aggressively on Thursday. Due to this, importers continued to buy dollars on every dip in dollar/rupee as they now expect the Indian currency to depreciate in the coming weeks. So far this week, the rupee has appreciated 0.7% against the dollar. 

"Importers' buying (of dollars) hasn't gone down, its always there. The rupee will not hold the current levels of 86 (around the 86.00 per dollar mark) for long, it will probably be just for this week. After that, the rupee hitting 87.00 (a dollar) is very easy," a dealer at a state-owned bank said.

The rupee was further weighed and pulled to the day's low of 86.9025 on foreign banks' dollar demand for foreign fund outflows, dealers said. However, a rise in the domestic stock market lent some support to the rupee, according to some dealers. At 1230 IST, both the benchmark indices, the Nifty 50 and the BSE Sensex, were up 0.6%, each. 

A further ease in the dollar index also aided the rupee. The dollar index was off the over-one week high it hit on Wednesday tracking gains in the pound sterling and the euro. The pound sterling rose 0.5% against the dollar after data released on Thursday showed the UK economy grew 0.1% in Oct-Dec, against a forecase of it shrinking by 0.1% in a Reuters poll. Euro rose 0.5% against the US unit after reports of developments of peace talks on the Ukraine war between US President Donald Trump and Russian President Vladmir Putin.

At 1254 IST, the dollar index, whcih measures the strength of the dollar against a basket of six major currencies was at 107.54, compared to its previous close of 107.97 and 107.92 on Tuesday. The dollar index hit an over one week high of 108.52 on Wednesday.

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 support for the Indian unit at 87.00 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Feb 13

MUMBAI – At 1205 IST, the rupee was at 86.8700 per dollar. At 0900 IST, the rupee was at 86.8000 a dollar against its previous close of 86.8925. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Sourabh Kumar)

India Rupee: Asia FX: Most up; Philippines' peso flat before policy meet

MUMBAI – Most Asian currencies were higher against the dollar on Thursday after the dollar index came off the over one-week high hit on Wednesday following a hotter-than-expected US inflation print for January. The dollar index advanced on Wednesday after data showed that in January, US consumer prices rose 0.5% from the previous month and 3.0% on an annual basis. Economists polled by Reuters had forecast CPI inflation at 2.9% on year. Core inflation rose 3.3% on year, against 3.2% in December.

Following the strong data, the dollar index rose sharply. However, it came off highs tracking a rise in the euro, after reports that Trump and Russian President Vladimir Putin were planning negotiations to end the Ukraine war. At 0907 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.74, compared to its previous close of 107.97 and 107.92 on Tuesday. 

The Philippines' peso traded flat against the US unit ahead of the central bank's monetary policy announcement later in the day. Market participants widely expect the central bank to deliver a 25-basis-point cut amid sluggish economic growth. A quarter percentage point cut will bring the policy rate to 5.50%, a two-year low.

The South Korean won was up 0.4% against the greenback. On Wednesday, South Korea's acting President Choi Sang-mon said he expects an immediate aggreement within the country's parliament on extra budget to support the sluggish economy due to dampened domestic demand and rising global uncertainity. "I hope that parliament reaches an agreement on the basic principles regarding the supplementary budget as soon as possible," Choi said. 

The Malaysian ringgit was up 0.3% against the greenback as Malaysia's central bank said on Wednesday that it is ready to manage the excessive volatility and movement in the ringgit. Bank Negara Malaysia said its presence in the foreign exchange market was to manage excessive volatility and ensure orderly market conditions.

The Indonesian rupiah was up 0.2% against the US dollar, while the Thai baht was up 0.4%, tracking gains in the domestic stock market. At 0955 IST, the benchmark index, the Thai Set Index was up 0.5%. The Chinese yuan was up 0.3%, while the Taiwan dollar was up 0.2% against the greenback.  (Gowri Lakshmi)

India Rupee: Rises as dollar index eases from 1-wk high; mkt relatively calm

MUMBAI – The rupee was higher against the dollar on Thursday, as the dollar index eased from the over one-week high hit on Wednesday following a hotter-than-expected US inflation print for January, dealers said. 

Data showed that in January, consumer prices in the US rose 0.5% from the previous month and 3.0% on an annual basis. Economists polled by Reuters had forecast CPI inflation at 2.9% on year. Core inflation rose 3.3% on year, against 3.2% in December.

The dollar index eased tracking a rise in the euro after reports that US President Donald Trump and Russian President Vladimir Putin are entering into talks to end the Ukraine war. At 0928 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.81, compared to its previous close of 107.97, and 107.92 on Tuesday. 

Some dealers also speculated that the central bank may have sold dollars in the offshore non-deliverable forwards market, which supported the local unit.

After a highly volatile trading sessions in the last three days owing to RBI's aggressive intervention, especially during the first one hour after opening, the currency market remained relatively calm on Thursday. Dealers said traders would be cautious of placing long bets in favour of the US unit after unusually aggressive RBI intervention through dollar sales in the last three days.

Morever, importers also remained on the sidelines and did not step in to buy dollars around the current dollar/rupee levels as most of them have hedged their positions in the past three days. "The spot market may be a little quiet today, it mostly should be range-bound within 86.60-86.90," a dealer at a state-owned bank said. 

Traders also remained cautious before placing large bets as Indian Prime Minister Narendra Modi and Trump are scheduled to meet later in the day. Trump will announce his reciprocal tariff plan before Modi's visit, a White House official said on Wednesday.

"The rupee is expected to stay volatile within the range of 86.60–87.20 in the near term, with the 87.20 serving as a strong resistance level, while 86.50 will act as a key support with a biasness towards appreciation," Amit Pabari, managing director at CR Forex, 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 13

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:

(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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