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Informist, Friday, Feb. 28, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended at a three-week low against the dollar Friday as banks persistently bought the greenback on behalf of importers, dealers said. Some foreign banks also bought the greenback on behalf of foreign portfolio investors, which put more pressure on the rupee, they said.

Some banks were also caught off-guard by the lower-than-expected cut-off at the Reserve Bank of India's $10 billion swap auction, the results of which were released a few minutes before the market closed. Demand for dollars increased after the swap auction result, dealers said. The RBI set a cut-off premium of 655.10 paise at the auction of its three-year $10 billion dollar/rupee buy/sell swap. This was much lower than the median of 687.50 paise in an Informist poll of 10 foreign exchange dealers.

After falling to a three-week low of 87.5300 a dollar, the rupee settled at 87.4950 against the greenback. On Thursday, the Indian currency had closed at 87.2000 a dollar. The rupee moved in a range of 24 paise during the day. 

A fall in other Asian currencies due to a rise in the dollar index also weighed on the local unit, dealers said. Other Asian currencies fell 0.3-0.8%, with the South Korean won being the worst performer for the second day running.

Some public-sector banks stepped in with dollar sales, likely on behalf of the RBI, preventing the rupee from falling sharply, dealers said.

The rupee opened lower at 87.3300 a dollar as the dollar index strengthened, dealers said. The dollar index rose to an over-two-week high as US President Donald Trump said the proposed 25% tariffs on Canada and Mexico would come into effect from Mar. 4. He also announced an additional 10% duty on imports from China. He said these countries had failed to control exports of deadly drugs to the US.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.38, compared to 107.29 Thursday and 106.47 Wednesday.

Shortly after the domestic spot market opened, banks purchased the greenback on behalf of overseas investors who were exiting the Indian stock market, dealers said. This put the rupee under pressure, they said. The benchmark equity indices, Nifty 50 and BSE Sensex, each ended 1.9% lower Friday. So far in February, overseas investors have net sold $4.11 billion in the domestic equity market.

Some importers rushed to purchase dollars, putting further pressure on the rupee, dealers said. They demanded dollars as they anticipated a further fall in the local currency, dealers said. "Importers buying were passive in the morning because they thought RBI would protect the rupee, but soon the rupee went on an uptick (fell versus the dollar) and panic set in amongst them," said a dealer at a broking firm.

However, some public-sector banks stepped in with dollar sales, possibly on behalf of the RBI, which prevented the rupee from falling sharply, dealers said.

The RBI's intervention also prevented stop-losses on short dollar bets, dealers said. However, the intervention was "mild", they said. Some banks also sold the greenback on behalf of exporters to take advantage of the relatively higher dollar/rupee levels. "Now we can see the rupee getting some support from exporters at each fall (in the rupee) as RBI may not let a fast fall," said a dealer at a public-sector bank. "They may book profit instead of waiting for too long." 

FORWARDS

Premiums on most tenors of the dollar/rupee forward contract ended lower Friday as banks were taken by surprise by the lower-than-expected cut-off at the RBI's $10 billion dollar/rupee buy/sell swap auction, dealers said. The RBI set a cut-off premium of 655.10 paise against the median of 687.50 paise in an Informist poll of 10 foreign exchange dealers. The swap was for a period of three years.

While some market participants said the auction might not have seen very strong participantion due to its relatively 'longer' lock-in period of three years, others said the premium was still better than their outlook for the rupee, given its past performance.

The one-year dollar/rupee forward premium was at 179.75 paise. It was 2.05% on an annualised basis, down from the previous close of 2.10%.

OUTLOOK 

Market is shut Saturday. On Monday, the rupee will take cues from the movement of the dollar index after the US personal consumption expenditures data, dealers said. Traders will also assess any remarks from Trump on tariffs and related news. The rupee may also take cues from the movement of crude oil prices and the offshore Chinese yuan.
 

Dealers expect importers to continue buying dollars, wary of a further fall in the domestic currency, dealers said. However, public-sector banks are expected to step in with dollar sales on behalf of the central bank to prevent the rupee from falling sharply and to curb excessive market volatility.

During the day, the rupee is seen moving in a range of 87.20-87.70 against the dollar, with strong support for the Indian unit pegged at 87.65 a dollar.

India Rupee - World FX: Japanese yen falls 0.5% after Feb Tokyo CPI data

MUMBAI – The Japanese was down 0.5% against the US dollar as Tokyo's headline CPI for February climbed 2.9% on year comapred to 3.4% the previous month, data released on Friday showed. Core consumer prices in Tokyo rose 2.2% on year in February, slowing for the first time in four months, and down from 2.5% the previous month. 

Meanwhile, Bank of Japan Deputy Governor Shinichi Uchida said on Friday that the central bank would keep tapering its government bond purchases despite the recent rise in yields. He stressed that the central bank's huge bond holdings continue to exert a strong stimulus effect on the economy. Uchida also reiterated the central bank's readiness to continue raising short-term interest rates if economic and price developments move in line with its projections.

The dollar index advanced on Friday, ahead of the US core personal consumption expenditure data, due later in the day. The dollar index rose on Thursday after US President Donald Trump said tariffs announced on Canada and Mexico were on course to come into effect from Mar. 4. Apart from the 25% tariff on Canada and Mexico, Trump also imposed an additional duty of 10% on imports from China. This was in addition to the 10% tariff imposed on Feb. 4.

Traders also assessed the second estimate for US GDP growth, which stood at 2.3% in Oct-Dec as initally forecast, data on Thursday showed. Further, initial jobless claims data on Thursday showed that the number of Americans filing new applications for unemployment benefits rose to the highest in five months in the week ended Saturday. The weekly jobless claims rose 22,000 to 242,000. Economists had forecast 221,000 claims for the same period in a Reuters poll.

At 1530 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at an over two-week high of 107.37, compared to 107.29 on Thursday and 106.47 on Wednesday. 

The Canadian dollar was flat against the US dollar as traders await Canada's GDP data for the quarter ended December, due Friday. Following the additional 10% tariff on China, the Australian dollar and the New Zealand dollar fell 0.3% and 0.5% against the dollar, respectively. Any change in the Chinese economy impacts the currencies of Australia and New Zealand due to their close trade relations. 

The euro was was up 0.1% against the greenback. Gains in the currency were capped as Germany, the largest economy in the euro bloc, posted a rise in import prices, data on Friday showed. Germany's import prices increased 3.1% on year in January, against an estimate of a 2.7% rise in a Reuters poll. Market participants now await Germany's preliminary inflation rate for February, due later in the evening. 

Further, data from the European Central Bank on Friday showed that consumer inflation expectations in January declined to 2.6% from 2.8% the previous month. 

The pound sterling was flat against the dollar. Data on Friday showed that house prices in the UK rose 3.9% on year in February, compared to 4.1% the previous month. The Swiss franc was down 0.1% against the greenback.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Feb 28

MUMBAI – At 1140 IST, the rupee was at 87.4000 per dollar. At 0900 IST, the rupee was at 87.3300 a dollar against its previous close of 87.2000. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi, Sourabh Kumar and Pratiksha)

India Rupee: Sharply down as dollar index surges after Trump's tariff plans

MUMBAI – The rupee was sharply down against the dollar on Friday as the dollar index surged after US President Donald Trump announced his tariff hike plans, dealers said. On Thursday, Trump said that the proposed 25% tariffs on Canada and Mexico will come into effect from Mar. 4 as they failed to control exports of deadly drugs to the US. Further, he also slapped an additional 10% duty on Chinese exports to the US, on top of another 10% levied on Feb. 4. 

At 0916 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.35, compared to 107.29 on Thursday and 106.47 on Wednesday. The index rose to a high of 107.40 in early trade, its highest level since Feb. 13. 

Meanwhile, some dealers speculated that the central bank may have sold dollars in early trade to prevent the rupee from falling further. They expect the central bank to intervene aggressively if the local unit inches closer to the key 87.50 a dollar level. On Thursday, the RBI has intervened aggressively in the spot market to support the rupee, dealers said. 

Dealers said importers may rush to buy dollars if the rupee falls past 87.40 a dollar, in fear that the rupee may depreciate further. "Importers panic buying can be seen after 87.40, now they are calm but if yesterday's (Thursday) low is crossed, they will buy (dollars) aggressively and stop losses can be easily triggered," said a dealer at a state-owned bank. 

The rupee also came under pressure as banks purchased the greenback on behalf of foreign portfolio investors, who continued to exit the Indian stock market, dealers said. At 0922 IST, the benchmark indices, the Nifty 50 and the BSE Sensex were both down 1% each. So far this month, overseas investors have net sold $4.1 billion worth of shares from the Indian equitiy market. 

During the day, the rupee is seen moving in a range of 87.20-87.50 against the dollar. Dealers see strong support for the Indian unit at 87.50 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Most down as dollar index rises on US tariff measures

MUMBAI – Most Asian currencies were down in early trade Friday, tracking a rise in the dollar index after US President Donald Trump said tariffs announced on Canada and Mexico were on course to come into efffect from Mar. 4.

Apart from the 25% tariff on Canada and Mexico, Trump also imposed an additional duty of 10% on imports from China. This was in addition to the 10% tariff imposed earlier on Feb. 4. 

Market participants took more cues from Trump's tariff announcements than from data released on Thursday, which showed a weakening US economy. The data showed that US weekly initial jobless claims increased by 22,000 to a seasonally adjusted figure of 242,000 claims. It was more than the estimate of 221,000 claims by economists in a Reuters poll. Another data released Thursday also showed a slowing US economy – the second estimate of the US GDP for Oct-Dec showed the economy expanded at 2.3% on year, which was lower than the previous quarter's growth of 3.1%.

The dollar index, which measures the strength in the greenback against a basket of six major currencies, wwas at an over one-week high of 107.36 at 0825 IST. On Thursday, the index was at 107.29 and it was at 106.47 on Wednesday. The Taiwan dollar was down 0.3% against the US dollar.

The South Korean won slipped 0.9% against the US currency due to a strengthening dollar index. Investors now await trade data for February, which could provide some cues regarding the health of South Korea's economy. A poll by Reuters forecast exports to have grown 3.8% on year in February, against a fall of 10.2% last month. However, it also showed that such growth was due to more working days in February.

The Philippines peso was down 0.2% against the greenback. The Indonesian rupiah was down 0.7%, with the Malaysian ringgit falling 0.5% against the greenback. The Thai baht was down 0.1% against the US dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Feb 28

MUMBAI – Following are the expected support and resistance levels for the rupee on Friday, as forecast by leading banks and brokerages in an Informist poll:

(Sourabh Kumar and Pratiksha)

End

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

Edited by Rajeev Pai

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