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Informist, Tuesday, Feb. 18, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended at an over-one-week low against the dollar Tuesday as banks persistently purchased the greenback on behalf of importers, dealers said. However, the Reserve Bank of India's active intervention through dollar sales prevented the Indian currency falling below the 87-per-dollar mark, they said. "87 (a dollar) is a difficult level to breach. They (the RBI) will heavily protect that level, as we saw today (Tuesday) and other days too. They are going for a phased depreciation (in the rupee)," a dealer at a private bank said.

After falling to a low of 86.9800 during the day, the rupee settled at 86.9500 against the dollar, compared to its previous close of 86.8775. The rupee moved just over 7 paise during the day.

A fall in most other Asian currencies also weighed on the rupee, dealers said. Barring the Thai baht, most Asian currencies fell 0.1-0.3% against the dollar, with the Philippines peso being the worst hit.

The rupee opened slightly lower against the dollar at 86.9050 as banks rushed to purchase the greenback on behalf of importers, dealers said. "Importers are continously buying because there is no going back to those levels (86.46-86.50 a dollar)," a dealer at a broking firm said. "The panic buying has settled, but booking profits continues."

The rupee also fell as banks purchased dollars immediately after the open to take advantage of the arbitrage opportunity with non-deliverable forwards rates, dealers said. Oil marketing companies too purchased dollars actively, wary of a further rise in crude oil prices amid uncertainty surrounding the tariff threats from the US. At 1530 IST, the April Brent Crude contract on the Intercontinental Exchange was at $75.71 per barrel, compared to the previous close of $75.22 per barrel and $74.74 per barrel Friday.

Some banks also purchased the greenback on behalf of foreign portfolio investors, who continued to exit the domestic markets, dealers said. So far in February, FPIs have net withdrawn $3.53 billion from the Indian markets. Importers' dollar demand coupled with FPI outflows dragged the rupee to the day's low of 86.9800 against the US unit. 

However, as soon as the rupee inched closer to the 87-per-dollar mark, state-owned banks stepped in with dollar sales, possibly on behalf of the RBI, dealers said. The central bank actively supplied dollars in the domestic spot market throughout the day, they said. "The rupee will likely hold the current level (86.90 a dollar) this week. They (RBI) are steadfastly protecting the rupee from falling below 87 (a dollar) a dealer at a state-owned bank said.

Market participants don't expect the RBI to let the rupee fall below the key level of 87-per-dollar easily, and see strong support at that level. "They (the RBI) have done a lot of hard work to bring the rupee above 87 (a dollar). It seems like they are comfortable keeping it in the 86.50-86.90 range for now, unless something major happens," said  a dealer at a state-owned bank. The rupee appreciated 0.7% against the dollar last week, primarily due to the central bank's aggressive intervention in the domestic spot market.

A marginal rise in the dollar index amid uncertainties around US President Donald Trump's tariff measures also put the rupee under pressure during the day, dealers said. The dollar index got a boost after US Federal Reserve Governor Michelle Bowman said Monday she would like to see inflation declining further this year before having greater confidence in lowering interest rates again, particularly given the uncertainty around the Trump administration's new policies.

The dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 106.90 at 1530 IST against 106.74 on Monday and 106.79 on Friday. Market participants are now waiting for the US Federal Open Market Committee's January meeting minutes due Wednesday.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended at its lowest level in 10 weeks as the RBI is likely to have sold forward dollars for maturity in January, dealers said. The central bank sold forward dollars to nullify the impact of its spot dollar sales on rupee liquidity, they said. As the central bank sells dollars in the spot market to support the rupee, it drains rupee liquidity out of the banking system.

Meanwhile, some importers purchased dollars for forward delivery, noting the relatively lower levels, which supported premiums. However,  most of them refrained from placing large bets as they expect premiums to fall further in the coming days, dealers said. Some market players were of the view that forward premiums might fall as low as 2.0% this week, should the RBI continue conducting buy/sell swaps.

At 1530 IST, the one-year exact period dollar/rupee forward premium was 181.65 paise, against 184.00 paise on Monday. On an annualised basis, the premium was 2.09%, down from Monday's close of 2.12%.

OUTLOOK

The currency market is shut Wednesday for Chhatrapati Shivaji Jayanti. On Thursday, the rupee will take cues from movement in the dollar index after investors assess the January US FOMC minutes due Wednesday, dealers said. The rupee will also take cues from movement in crude oil prices and the Chinese yuan amid growing concerns over US tariff threats.

Dealers expect banks to continue purchasing dollars on behalf of importers, who are wary of a further fall in the rupee in the coming days. On the other hand, they expect exporters to step in to sell dollars to take advantage of the higher dollar/rupee levels in case the local currency falls below the key 87-per-dollar mark.

"Exporters are currently waiting but we can expect them as soon as rupee falls below 87 (a dollar)," a dealer at a brokerage said. "Once it hits 87, it's easy to fall to 87.10 and below due to possibility of stop-lossess being triggered at that level." However, dealers said they expect the central bank to continue intervening through dollar sales to prevent the rupee from falling below 87-per-dollar. 

During the day, the rupee is seen in a range of 86.80-87.20 a dollar, with strong technical support pegged at 87.00 a dollar.

India Rupee - World FX: Australian dollar steady after expected 25 bps rate cut

MUMBAI – The Australian dollar traded flat against the US dollar on Tuesday after the Reserve Bank of Australia lowered its cash rate by 25 basis points to 4.10%, as widely expected. This is the first time in over four years that the Australian central bank has cut rates. Further, the central bank expects the underlying inflation to fall faster than previously expected after a downwardly revised economic outlook. However, it was cautious in indicating further policy easing.

The pound sterling was down 0.1% against the US dollar. However, losses in the currency were limited after wage growth in the UK increased. Data on Tuesday showed that UK wages rose 5.9% on year in Oct-Dec, in line with analysts' estimates in a Reuters poll. Market participants now await Bank of England Governor Andrew Bailey's speech later in the day for further cues on the rate outlook for the year. 

The Canadian dollar was down 0.1% against the greenback ahead of the consumer price inflation for January due later in the day. The Swiss franc was flat against the US unit.

The euro was down 0.2%. Market participants await European Central Bank Executive Board member Piero Cipollone's speech later in the day for cues on further rate action. 

The New Zealand dollar was down 0.4% against the greenback ahead of the Reserve Bank of New Zealand's monetary policy decision due Wednesday. The central bank is expected to deliver a 50 bps cut, as per a Bloomberg poll. 

The dollar index gained slightly on Tuesday after Federal Reserve Governor Michelle Bowman on Monday said she would want further data prints to confidently say that inflation would decline further this year before the Fed went for another rate cut, due to uncertainty over the impact of Trump's trade policies. 

At 1430 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies was at 106.96, compared to 106.74 on Monday and 106.79 on Friday. Traders now await minutes of the US Federal Open Market Committee's January meeting, due Wednesday.

The Japanese yen was down 0.3% against the greenback. The Bank of Japan Governor Kazuo Ueda on Tuesday said that the sharp volatility seen in Japan's foreign exchange market and stock market last summer was largely caused by investors' risk-off sentiment over weak US jobs data and slow down in the US economy.  (Gowri Lakshmi)

India Rupee: Down as importers buy dollars; RBI's dlr sales prevent 87/$1

MUMBAI – The rupee remained lower against the dollar Tuesday as banks purchased the greenback on behalf of importers, dealers said. However, some banks' dollar sales, likely on behalf of the Reserve Bank of India, supported the local unit and prevented it from hitting 87 a dollar level, they said. 

The rupee was dragged to the day's low of 86.9800 a dollar as importers persistently demanded dollars, fearing a further fall in the Indian unit, dealers said. Some oil marketing companies too purchased dollars actively, wary of a further rise in crude oil prices amid uncertainty surrounding tariff threats from the US. 

At 1236 IST, the April Brent crude contract on the Intercontinental Exchange was at $75.48 per barrel, compared to the previous close of $75.22 per barrel and $74.74 per barrel on Friday. 

"It is a buy (dollars) on dips market. Importer buys are always there. The initial euphoria of rupee appreciation has come down. It (rupee) hasn't gone up above 86.30 levels it hit last week, so they (importers) know it is only a downward movement from here on," a dealer at a brokerage firm said.

A slight rise in the dollar index also weighed on the rupee, according to dealers. At 1236 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 106.96, compared to the previous close of 106.74 and 106.79 on Friday. Going ahead, market participants await the US Federal Open Market Committee's January meeting minutes due Wednesday.

To limit the pressure on rupee, some banks stepped in with dollar sales likely on behalf of the RBI, dealers said. "It is highly unlikely that the rupee will breach 87 (per dollar). There is significant supply (of dollars) at current levels," a dealer at a state-owned bank said. 

For the rest of the day, the rupee is seen moving in a range of 86.80-87.10 against the dollar. Dealers see immediate technical support for the Indian unit at 87.00 a dollar.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - Feb 18

MUMBAI – At 1118 IST, the rupee was at 86.9675 per dollar. At 0900 IST, the rupee was at 86.9050 a dollar against its previous close of 86.8775. 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 fall as dollar index rises; Philippines peso down 0.3%

MUMBAI – Most Asian currencies traded lower against the US dollar on Tuesday as the dollar index rose in early trade. The dollar index was up after the US Federal Reserve Governor Michelle Bowman on Monday said she would want further data prints to say inflation would decline further this year before the Fed went for another rate cut, as she is uncertain about the impact of Trump's trade and tariff policies. 

"I would like to gain greater confidence that progress in lowering inflation will continue as we consider making further adjustments," Bowman said. 

At 0924 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 106.93, compared to 106.74 on Monday and 106.79 on Friday. Traders now await minutes of the US Federal Open Market Committee's January meeting, due Wednesday. The Taiwan dollar was down 0.2% against the US unit. The South Korean won was down 0.1% against the US unit. 

The Philippines's peso was down 0.3% against the greenback. Data on Monday showed that the amount of remittances hit a record high in 2024, boosting the Philippines' economy amid a weak peso. Data from the central bank showed that personal remittances rose 3% to an all time high of $38.34 billion in 2024.

The Malaysian ringgit was down 0.2% against the greenback. Losses in the currency were limited after Bank Negara Malaysia Governor Datuk Seri Abdul Rasheed Ghaffour expressed confidence in the Malaysian currency despite the ongoing global uncertainty.

The Indonesian rupaih was down 0.2% ahead of Bank Indonesia's monetary policy announcement on Wednesday. The central bank is widely expected to hold interest rates steady, focusing on the Indonesian currency's stability amid concerns about a sluggish economy. Bank Indonesia unexpectedly cut its rates by 25 basis points last month to boost economic growth.

The Thai baht was down 0.1% after data on Monday showed that the Thai economy grew less than expected in Oct-Dec. Thailand's GDP rose 3.2% on year in the quarter ended December, lower than the forecast of 3.9% in a Reuters poll.

The Chinese yuan was down 0.1% against the US dollar. On Monday, Chinese President Xi Jingping held a rare meeting with officials of major tech players, such as Alibaba founder Jack Ma, urging them to be confident about China's model and market.  (Gowri Lakshmi)

India Rupee: Slightly down as importers buy dollars; RBI dlr sales limit fall

MUMBAI – The rupee was slightly down against the dollar as banks purchased the greenback on behalf of importers, who were wary of a further fall in the Indian currency, dealers said. However, some banks sold dollars, likely on behalf of the Reserve Bank of India, which prevented the rupee from falling more, dealers said. 

"There are importers, but for now we are seeing RBI selling at current levels, which has kept the levels protected," a dealer with a foreign bank said. 

Apart from importers, a slight uptick in the dollar index weighed on the Indian currency, dealers said. The dollar index gained slightly due to uncertainties over the US President Donald Trump's tariff policies. The index, which measures the strength in the greenback against a basket of six major currencies, was 106.93 at 0919 IST against 106.74 on Monday and 106.79 on Friday.

The dollar index also gained after US Federal Reserve Governor Michelle Bowman said Monday that she would like to see inflation declining further this year before having greater confidence in lowering interest rates again, particularly amid the uncertainty around the Trump administration's new policies. 

A fall in other Asian currencies also weighed on the rupee, dealers said. Philippines peso and Malaysian ringgit were the worst-hit currencies, falling 0.3% each against the greenback on Tuesday.

Shortly after the rupee opened at 86.9050 a dollar against Monday's close of 86.8775 a dollar, importers' demand for the greenback weighed on the Indian currency, dealers said. Importers purchased dollars fearing that the rupee may fall further going ahead, dealers said. 

However, the fall in the Indian unit was limited by the Reserve Bank of India's intervention in the foreign exchange market, dealers said. The RBI was seen selling dollars around 86.9600 a dollar, they said. Some section of the market believed that the rupee may not fall below 87 a dollar on Tuesday due to RBI's dollar sales. "Since morning, there is buying pressure, and I feel it is up to the central bank if they want it to breach 87 a dollar or not, but I think they will protect it all the way till just before 87 a dollar," a dealer with a state-owned bank said.

During the day, the rupee is seen moving in a range of 86.80-87.10 against the dollar. Dealers see strong technical support for the Indian unit at 87.00 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Feb 18

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:

(Sourabh Kumar, 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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