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Informist, Monday, Feb. 17, 2025

By Gowri Lakshmi 

MUMBAI – The rupee pared its early gains and ended slightly lower against the dollar Monday as banks purchased the greenback on behalf of importers, dealers said. Volume remained lacklustre as US financial markets are shut on account of President's Day, they said. 

"The market was quiet due to the dull volume. Importers' buy (of dollars) was there mostly because they want to hedge against a rise in the dollar in coming days," a dealer at a private bank said. "87 (a dollar) again is not too far-fetched."

After touching a high of 86.6750 a dollar during the day, the rupee settled at 86.8775 against the dollar against 86.8225 on Friday. The Indian currency moved in a range of almost 20 paise during the day.

The rupee opened higher against the dollar at 86.6900 tracking a fall in the dollar index, dealers said. The dollar index fell to an over two-month low on Friday after data showed US retail sales fell the most in nearly two years in January. Retail sales declined 0.9% in January, after an upwardly revised 0.7% rise in December. Core retail sales fell 0.8% in January.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 106.79, unchanged from Friday and 107.07 on Thursday. The index had fallen to an over two-month low of 106.57 on Friday.

The rupee erased most of its gains shortly after the market opened as banks stepped in to purchase the greenback on behalf of importers, who wanted to take advantage of the relatively lower dollar/rupee levels, dealers said. "After opening higher, there was constant buying (of dollars). So the rupee could not sustain those gains at all," said a dealer at a private bank.

Volume in the currency market was subdued as US financial markets were shut for the day. This led the rupee to shed gains against the dollar, they said. The rupee was also weighed down by purchase of dollars by some state-owned banks ahead of daily reference rate fixing, according to some dealers. 

Some foreign banks also bought dollars on behalf of foreign portfolio investors, who looked to exit from the domestic equity market. This, too, weighed on the Indian unit, dealers said. So far in February, FPIs have withdrawn $2.19 billion from Indian equities.

However, a rise in domestic equities lent some support to the domestic currency, dealers said. Both the benchmark indices, the Nifty 50 and BSE Sensex, ended up 0.1%, each.

Meanwhile, data released during the last hour of the trade showed that India's merchandise trade deficit widened to $23 billion in January from $21.94 billion in December as imports continued to outpace exports. The trade deficit was $16.46 billion in January last year. This also exerted pressure on the Indian currency, according to dealers.

FORWARDS

Premiums on dollar/rupee forward contracts ended lower across tenors on Monday, with the one-year forward premium settling at an over two-month low as the Reserve Bank of India likely sold forward dollars for maturity in September, December and January, dealers said. 

The RBI likely sold dollars for forward delivery to offset the impact of its spot dollar sales on rupee liquidity, dealers said. Last week, the RBI likely sold almost nearly $20 billion through intervention in the foreign exchange spot market.

However, the fall in premiums was limited as some banks purchased dollars for forward delivery on behalf of importers, noting relatively lower premium levels, dealers said.

At 1530 IST, the one-year exact period dollar/rupee forward premium was 184.00 paise against 188.16 paise on Friday. On an annualised basis, the premium was 2.12%, down from Friday's close of 2.17%.

OUTLOOK 

On Tuesday, the rupee will take cues from the movement of the dollar index and crude oil prices, dealers said. Market participants are waiting for speeches by President of the Federal Reserve Bank of Philadelphia Patrick T. Harker and member of the Fed Reserve's Board of Governors Michelle W. Bowman later in the day, for more cues on the US interest rate path.

"I think the rupee will stabilise this week after the volatile trade last week," said a dealer at a foreign bank. "They will not want such instability in the market constantly." The rupee appreciated 0.7% against the dollar last week, primarily due to the central bank's aggressive intervention in the domestic spot market.

The Indian unit may also take cues from the movement of the offshore Chinese yuan and other Asian currencies, dealers said. They expect banks to continue buying dollars on behalf of importers, who fear the rupee will depreciate in the coming weeks. They also expect foreign portfolio investors to continue withdrawing funds from the Indian equity market, which may put further pressure on the local currency.

During the day, the rupee is seen in a range of 86.60-87.00 a dollar, with strong technical support pegged at 87.00 a dollar.

India Rupee - World FX: Yen rises on stronger-than-expected GDP data

MUMBAI – The Japanese yen was up 0.3% against the US dollar after data released early Monday showed that the country's GDP expanded more than expectations. Japan's GDP expanded 2.8% on year in the quarter ending December, beating the forecast of 1.0% rise in a Reuters poll. The data also boosted the view of the Bank of Japan continuing to raise interest rates at its upcoming policy meetings. 

The dollar index declined on Friday after data showed that the US retail sales in January fell by the most in nearly two years. Retail sales declined 0.9% in January, after an upwardly revised 0.7% rise in December. Core retail sales dropped 0.8%.

The dollar index, which measures the strength of the dollar, against a basket of six major currencies, remained largely steady on Monday. The index was 106.87 at 1530 IST, compared to 106.79 on Friday and 107.07 on Thursday. The dollar index had fallen to an over two-month low of 106.57 on Friday. Market participants await speeches by President of the Federal Reserve Bank of Philadelhpia Patrick T. Harker and member of the Fed Reseve's Board of Governors Michelle W. Bowman later in the day.

The euro was down 0.2% while the pound sterling traded flat against the US unit. Traders await UK unemployment data due Tuesday. The euro came under pressure due to increasingly deeper rate cut bets among investors. There was an uptick in expectations that the European Central Bank will resume cutting rates with key rates falling below 2% in 2026, as per a poll by Bloomberg. 

The Australian dollar was up 0.1% ahead of Reserve Bank of Australia's monetary policy decision due Tuesday. The Australian central bank is widely expected to lower its interest rates by 25 basis points, the first time in four years. Tracking gains in the Australian unit, the New Zealand dollar was up 0.1%. The Reserve Bank of New Zealand will announce its monetary policy decision on Wednesday.

The Canadian dollar and the Swiss franc were down 0.1%, each, against the greeback.  (Gowri Lakshmi)

India Rupee: 1-yr fwd premium at over 2-mo low as RBI likely sells fwd dlrs

MUMBAI – Premiums on dollar/rupee forward contracts were down across tenors on Monday, with the one-year forward premium falling to an over two-month low, as the Reserve Bank of India is likely to have sold forward dollars for maturity in September, December and January, dealers said. Consequently, the one-year dollar/rupee forward premium fell to 2.11% on an annualised basis, the lowest since Dec. 11.

"RBI is doing buy/sells today as well, and it has been almost a daily operation now," a dealer with a private bank said. "They have to take care of liquidity deficit as well."

The RBI sold dollars for forward delivery, likely to offset the impact of its spot dollar sales on rupee liquidity, dealers said. The RBI's intervention in the foreign exchange spot market last week amounted to nearly $20 billion of sales. Selling dollars in the currency market to support rupee sucks liquidity out of the banking system. 

The RBI has been conducting dollar/rupee buy/sell swaps intermittently, with most dealers expecting such sales to continue through long-term forward contracts. "I think now they would mostly be doing buy/sells in long-term contracts because a lot of their earlier swaps must be maturing, and there is still an uncertainty over the liquidity situation," a dealer with another private bank said.

On Sunday, the net liquidity injected by the RBI--a proxy for the systemic liquidity deficit--narrowed to INR 1.80 trillion from INR 2.14 trllion on Friday and INR 2.42 trillion on Thursday.

The RBI is not expected to substanitally increase the quantum of its forward dollar sales due to an already large outstanding sales of forward dollars, dealers said. The RBI's net outstanding forward sales, which comprise offshore non-deliverable forwards as well as onshore forward positions, were last known to be at $67.94 billion at the end of December. This number is estimated to have climbed to as high as $75 billion in January, Informist had reported earlier, citing market participants.

The fall in premiums on Monday was limited as some banks purchased dollars for forward delivery on behalf of importers, dealers said. Importers demanded forward dollars due to relatively lower premiums, they said. At 1331 IST, the one-year exact period dollar/rupee forward premium was 183.00 paise against 188.16 paise on Friday. On an annualised basis, the premium was at 2.11%, down from Friday's close of 2.17%.  (Sourabh Kumar)

India Rupee: Erases all gains on importers' dlr buys; fall in dlr index aids

MUMBAI –  The rupee erased all its gains against the dollar as banks purchased the greenback on behalf of importers, who wanted to take advantage of the relatively lower dollar/rupee levels, dealers said. The rupee rose to a high of 86.6750 earlier in the day due to weakness in the dollar index. 

"It seems like a buy (dollars) on dips (in dollar/rupee) market for the day but largely range bound within 86.60-86.80 (a dollar)," a dealer at a private bank said. Dealers said that volume in the currency market were lower than usual owing to US financial markets being shut on account of Presidents' Day. This aggravated the shedding of gains in the rupee against the dollar, they said. 

The Indian unit was also weighed down by some big state-owned banks' dollar buying ahead of daily reference rate fixing, dealers said. However, a fall in the dollar index provided support to the rupee, according to dealers. The dollar index fell after data on Friday showed US retail sales in January declined the most in nearly two years.

At 1335 IST, the dollar index, which measures the strength of the dollar, against a basket of six major currencies, was at 106.72, compared to its previous close of 106.79 on Friday and 107.07 on Thursday. The dollar had fallen to an over two-month low of 106.57 on Friday. Most Asian currencies gained against the greenback due to weakness in the dollar index, which aided the Indian unit, dealers said.

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 86.80 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Feb 17

MUMBAI – At 1054 IST, the rupee was at 86.7425 per dollar. At 0900 IST, the rupee was at 86.6900 a dollar against its previous close of 86.8225. 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: Up on fall in dollar index; importers' dollar buys limit rise

MUMBAI- The rupee rose against the dollar in early trade Monday due to a fall in the dollar index, dealers said. However, some importers purchased the greenback, which limited the rise in the Indian currency, they said. Volume in the currency market was subdued so far in the day as the US financial markets are shut on account of Washington's Birthday.

"Market may not be much volatile due to dollar holiday. Rupee may be range bound within 86.50-75 (a dollar)," a dealer at a private bank said. 

The dollar index fell after data released on Friday showed retail sales in the US in January fell by the most in nearly two years. At 0929 IST, the dollar index, which measures the strength of the dollar, against a basket of six major currencies, was at 106.70, compared to 106.79 on Friday and 107.07 on Thursday. The dollar index had fallen to an over-two-month low of 106.57 on Friday.

The rupee came under pressure after banks purchased dollars on behalf of importers, dealers said. Importers purchased the greenback, taking advantage of relatively lower dollar/rupee levels, dealers said. However, most importers did not place large bets as they hoped for a further rise in the rupee, dealers said. 

"Importers are sufficiently hedged at these levels. They will mostly rush to buy at every dip (in dollar/rupee) below 86.50 again to hedge their payables," a dealer at a private bank said. 

A fall in domestic equities also weighed on the rupee. At 0928 IST, the benchmark indices, the Nifty 50 and the BSE Sensex were down 0.4% each. So far in February, investors have net withdrawn $2.19 billion from domestic stock markets. 

However, dealers expect banks to step in with dollar sales, likely on behalf of the Reserve Bank of India, if the rupee comes under immense pressure, to prevent the local unit from falling sharply. 

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 - Asia FX: Most up as dlr falls post weak US retail sales data

MUMBAI – Most Asian currencies traded higher against the dollar on Monday, tracking a fall in the dollar index. However, overall volume in the currency markets are expected to be relatively lower as US financial markets are shut on Monday on account of Presidents' Day.

The dollar index fell after data released on Friday showed retail sales in the US in January fell the most in nearly two years. Retail sales declined 0.9% in January, after an upwardly revised 0.7% rise in December, and against expectations of a 0.1% dip in a Reuters poll. Core retail sales dropped 0.8%. 

At 0846 IST, the dollar index, which measures the strength of the dollar, against a basket of six major currencies, was at 106.64, compared to 106.79 on Friday and 107.07 on Thursday. The dollar index had fallen to an over two-month low of 106.57 on Friday. Tracking the dollar index, the Malaysian ringgit was up 0.2% and the Indonesian rupiah was up 0.3% against the greenback.

The Chinese yuan was up 0.1% against the greenback. People's Bank of China Governor Pan Gongsheng on Sunday said a stable yuan has been a key to global and financial and economic stability and that Beijing would strive to continue to let market forces decide the exchange rate. "Recently, a number of factors have pushed up (the) dollar index, and non-dollar currencies have mostly depreciated. But RMB (Renminbi) has remained largely stable despite the high market volatility," Pan said. 

The Taiwan dollar traded 0.1% higher against the US unit. The Thai baht was up 0.1%. However, gains in the currency were limited after data showed Thailand's economic growth fell short of expectations. The Thai economy expanded 3.2% in Oct-Dec, lower than analysts' forecast of 3.9% growth in a Reuters poll. 

The South Koren won was flat against the greenback. Data on Sunday showed the number of jobs in South Korea's manufacturing sector declined to the lowest level in 12 years in January amid weak economic growth. The number of employed people in the manufacturing sector was 4.39 million the previous month, down 56,000 from a year ago. The weak manufacturing sector jobs data offset the impact of a fall in the dollar index on the South Korean currency. 

Meanwhile, the Philippines' peso was down 0.1% against the dollar after reports that Bangko Sentral ng Pilipinas was likely to push ahead with a planned 200 basis point cut in banks' reserve ratio requirements as early as April, following its decision to keep the policy rate steady on Thursday.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Feb 17

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:

(Sourabh Kumar, Gowri Lakshmi and Pratiksha)

End

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

Edited by Ashish Shirke

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