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Informist, Tuesday, Feb. 25, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended sharply below the psychologically crucial 87-per-dollar mark on Tuesday, posting its biggest single day fall in over three weeks, as banks persistently purchased the greenback on behalf of importers and foreign portfolio investors, dealers said. Banks also bought dollars to cover their existing short dollar bets ahead of the front-month currency futures contract expiry, which weighed on the Indian unit, they said.

However, banks sold the greenback, likely on behalf of the Reserve Bank of India and exporters, which limited losses for the Indian unit, according to dealers. "I think they (RBI) tried to protect 87.00 before and then came around 87.20, but the buying (of dollars) pressure was immense," said a dealer at a private bank.

After depreciating 0.6% against the dollar, the rupee settled at 87.2100 a dollar, its lowest level since Feb. 10. The Indian currency moved in a range of almost 40 paise during the day. A fall in other Asian currencies also weighed on the local unit, dealers said. Other Asian currencies fell 0.2-0.6%, with the Thai baht being the worst performer amongst its peers.

The rupee started the day sharply lower at 86.8525 a dollar as the dollar index sustained its recovery from the 11-week low it hit on Monday, dealers said. The dollar index recovered late Monday after US President Donald Trump said the administration was on track to impose tariffs on Canada and Mexico. The deadline for Trump's pause on the imposition of tariffs on both contries ends Mar. 4. 

At 1530 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies was at 106.70, unchanged from its previous level and slightly higher than 106.64 Friday. The dollar index fell to 106.13 on Monday, its lowest level since Dec. 10. 

Shortly after the market opened, the rupee came further under pressure as banks rushed to purchase the greenback on behalf of importers to meet their month-end payment obligations, dealers said. "It's the month-end pressure seen on rupee, with the dollar index still strengthening, the rupee will only see a downtick from here on," said a dealer at a state-owned bank. 

Some foreign banks also purchased the greenback on behalf of foreign portfolio investors who are looking to exit the Indian markets. Dealers said that with the ongoing US tariff-induced trade wars, FPI outflows are likely to continue or even accelerate in the near term. So far this month, overseas investors have net sold $4.1 billion worth of shares. 

Dollar buying by some big state-owned banks ahead of daily reference rate fixing also weighed on the Indian unit, dealers said. Moreover, traders bought dollars to cover their existing short dollar bets ahead of the front-month currency futures contract expiry, causing the rupee to slip past the key 87-per-dollar mark. Following this, banks' multiple stop losses were triggered on short dollar bets and the rupee declined to the day's low of 87.2450 a dollar.

The RBI likely stepped in initially through dollar sales at around 87.00 per dollar, but after the unit breached the key level, the central bank likely intervened only at around 87.20-87.24 a dollar to support it, dealers said. However, the central bank's dollar sales were not aggressive in nature, they said. "RBI is trying to save the rupee, but the dollar demand is very high since its month-end. And the RBI aggression in selling dollars is no longer seen," said a dealer at a private bank.

Some banks also sold the greenback on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, dealers said. "It was expected once it breaches 87 it would easily go to 87.10 and then 87.20 in no time because these stop-losses were there," a dealer at a private bank said. "Exporters came in as soon as stop-losses were hit, which supported the rupee, but their selling (of dollars) was minimal as now they see rupee depreciating more." 

OUTLOOK 

The currency market is shut on Wednesday on account of Mahashivratri. On Thursday, the rupee will take cues from movement in the dollar index and the offshore Chinese yuan. Market participants will closely track any comments or hints on Trump's tariff plans. 

Dealers expect banks to continue purchasing the greenback on behalf of importers, fearing a further fall in the rupee amid uncertainties surrounding the US tariff policies. However, they also expect the central bank to intervene through dollar sales and prevent the rupee from falling sharply. 

"(I) expect rupee to be in the range of 86.90 to 87.50 (a dollar) on Thursday after tomorrow's holiday as the risk aversion continues with Trump imposing the tariffs on its two neighbors," said Anil Kumar Bhansali, head of treasury and executive director Finrex Treasury Advisors LLP.

During the day, the rupee is seen in a range of 86.90-87.50 a dollar, with strong technical support pegged at 87.30 a dollar.

India Rupee - World FX: Dlr index rebounds from 11-wk low on tariff worries

MUMBAI – The dollar index sustained its recovery from the 11-week low of 106.13 it hit Monday after US President Donald Trump said the administration was on track to impose tariffs on Canada and Mexico. The deadline for Trump's pause on the imposition of tariffs on both contries ends Mar. 4. "We're on time with the tariffs, and it seems like that's moving along very rapidly," Trump said Monday. "We've been mistreated very badly by many countries, not just Canada and Mexico. We've been taken advantage of."

At 1512 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies was at 106.62 against 106.70 Monday and 106.64 Friday. Market participants await the US House Price Index for December due later in the day. The Canadian dollar traded flat against the US unit ahead of the preliminary manufacturing sales data for January, also due later in the day. 

The Australian dollar and the New Zealand dollar were down 0.1% each against the US unit after a People's Bank of China official said the Chinese CPI will decline moderately in February. Any change in the Chinese economy directly impacts the currencies of Australia and New Zealand due to their close bilateral trade relations. 

The euro was flat against the US dollar. Meanwhile, data published Monday showed that Germany, the largest economy in the bloc, contracted 0.2% in Oct-Dec. 

The pound sterling and the Swiss franc traded flat against the greenback while the Japanese yen was up 0.2% against the US dollar.  (Gowri Lakshmi)

India Rupee: Slumps past 87/$ on importers' dollar buys; stop-losses hit

MUMBAI – The rupee slumped past the psychologically crucial level of 87 a dollar on Tuesday as banks continuously purchased the greenback on behalf of importers as well as foreign portfolio investors, dealers said. Multiple stop-losses were also hit, which dragged the rupee to the day's low of 87.2300 a dollar, they said. 

The rupee came under immense pressure as banks persistently purchased the greenback on behalf of importers for their month-end payment obligations, dealers said. Traders also purchased dollars ahead of the expiry of futures contracts, which put the rupee under more pressure, they said. 

Some foreign banks have also been purchasing dollars actively since morning on behalf of overseas investors, who exited Indian markets. This weighed on the rupee, dealers said. So far this month, FPIs have net sold $4.1 billion from the domestic market.

However, some banks stepped in with dollar sales, likely on behalf of the RBI, which prevented the rupee from falling more, they said. Dealers said that the RBI's intervention in the domestic spot market was 'mild' in nature, compared to its interventions previously.

"Given the mild intervention and the excessive dollar demand due to month-end payments, they will have to step up either supplies (of dollar) or let it fall, which may create panic," said a dealer at a private bank. "Exporters were eyeing 87 for sometime now, we can expect some selling (of dollars) from their side," another dealer at a brokerage firm said.

For the rest of the day, the rupee is seen moving in a range of 86.90-87.35 against the dollar. Dealers see immediate support for the Indian unit at 87.25 a dollar.  (Gowri Lakshmi) 

India Rupee: Technical Levels for rupee - Feb 25

MUMBAI – At 1057 IST, the rupee was at 86.8600 per dollar. At 0900 IST, the rupee was at 86.8525 a dollar against its previous close of 86.6950. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha and Sourabh Kumar)

India Rupee: Sharply down on FPI outflows, strength in dollar index

India Rupee: Sharply down on FPI outflows, strength in dollar index

MUMBAI – The rupee was sharply down against the dollar on Tuesday as some foreign banks purchased dollars on behalf of foreign portfolio investors, dealers said. A recovery in the dollar index from a near 11-week low hit on Monday also weighed on the rupee, they said. 

Foreign banks purchased the greenback on behalf of overseas investors, who continued to exit Indian markets, dealers said. So far this month, FPIs have sold $4.1 billion worth of shares from the domestic market. "FPI buys (of dollars) have been a phenomena for some many months now, they still continue given the uncertainties pertaining to the US policies now," said a dealer at a state-owned bank. 

Other banks also purchased the greenback to meet their dollar reuirements for the expiry of futures contracts, which put the rupee under immense pressure, dealers said. "It (rupee) was trading at around 86.75 before market opened and it was dragged to 86.88 for these payment needs. It's a month-end trend," a dealer at a public sector bank said. "Unless and until some supply (of dollars) comes in, we can't expect an uptick in rupee movement." 

Importers also rushed to purchase dollars to meet their month-end payment obligations and as they see the rupee depreciating further during the day, dealers said. "It's a buy (dollars) on dips market for the importers. They are seen at all levels," a dealer at a brokerage firm said. 

A recovery in dollar index also put the rupee under pressure, dealers said. The index recovered after US President Donald Trump on Monday confirmed that Washington would proceed with the tariffs on Canada and Mexico from next month. Both countries were given a month-long suspension from tariffs till Mar. 4. The dollar index, which measures the strength in the greenback against a basket of six major currencies, was 106.61 at 0933 IST, against 106.70 on Monday and 106.64 on Friday. 

During the day, the rupee is seen moving in a range of 86.70-86.95 against the dollar. Dealers see immediate technical support for the Indian unit at 86.90 a dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Feb 25

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 and Pratiksha)

India Rupee - Asia FX: Most dn; South Korean won falls post 25-bps rate cut

MUMBAI – Most Asian currencies were down in early trade Tuesday, as the dollar index recovered from an 11-week low hit on Monday. The index recovered after US President Donald Trump said his administration was on track to impose tariffs on Canada and Mexico. He had paused the imposition of tariffs on the two countries, and the deadline for the pause to end is Mar. 4.

The dollar index also received a boost as market participants assess delay in the US Federal Reserve cutting rates further. Chicago Federal Reserve Bank President Austan Goolsbee said Monday that the US Federal Reserve would need more clarity on the economic impact of Trump's policies before it could cut rates further. This supported the US currency.

The South Korean won was down 0.1% against the greenback as the Bank of Korea cut its benchmark interest rate by 25 basis points to 2.75%, though the fall was limited as market participants had expected the cut. The central bank also revised its forecast for this year's growth down to 1.5% from 1.9%. The inflation forecast was kept unchanged at 1.9% for the current as well as next year.

The Taiwan dollar was down 0.2% against the greenback. The Philippines peso and the Indonesian rupiah were down 0.1% each against the US dollar. The Malaysian ringgit fell 0.1% against the US currency. 

The Thai baht was down 0.1% against the US dollar ahead of the Bank of Thailand's policy decision on Wednesday, where it is expected to keep policy rates steady at 2.25%, as per a poll by The Wall Street Journal.  (Sourabh Kumar)

End

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

Edited by Tanima Banerjee

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