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Informist, Monday, Mar. 3, 2025

 

By Gowri Lakshmi

 

MUMBAI – The rupee ended higher against the dollar on Monday but erased a significant portion of its early gains as banks purchased the greenback on behalf of foreign portfolio investors and importers, dealers said. The dollar index declined from the near 3-week high it hit on Friday, which supported the Indian unit, they said.

 

"For now, the market is not expecting anything. As we saw today (Monday) the market doesn't have any more cues and there lacked a general enthusiasm. Market was mostly driven by importer demands (of dollar)," said a dealer at a brokerage firm. 

 

After rising to a high of 87.2475 a dollar during the day, the Indian unit settled at 87.3700 a dollar, compared to its previous close of 87.4950. During the day, the rupee moved in a range of only over 15 paise. A fall in the offshore Chinese yuan also weighed on the Indian unit. Other Asian currencies traded on a mixed note, with the Indonesian rupiah being the best perfomer with gains of 0.7% against the dollar.

 

The rupee opened sharply higher against the dollar as the dollar index weakened on expectations of a lesser aggressive approach towards tariff hike implementation by the US, dealers said. The dollar index declined after US Commerce Secretary Howard Lutnick on Sunday suggested that the tariffs on Canada and Mexico, which are set to be implemented from Tuesday, may not be the full 25% as threatened by the US administration earlier.

 

Further, data Friday showed that US Personal Consumption Expenditures Price Index, the US Federal Reserve's preferred gauge of inflation, cooled for the first time in nearly two years to 2.5% on year in January from 2.6% in December. The core inflation print rose on year to 2.6% in January, but was down from 2.9% in December. 

 

The dollar index remained broadly weak throughout the day, which aided the Indian currency, dealers said. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.10, compared to 107.56 Friday and 107.29 Thursday. 

 

However, as soon as the Indian unit rose to a high of 87.2475 a dollar, banks stepped in to purchase the greenback for importers to take advantage of the relatively lower dollar/rupee levels, dealers said.

 

The rupee was also down tracking a fall in the offshore Chinese yuan as US Presdent Donald Trump is likely to proceed with slapping additional 10% tariff on China from Tuesday, dealers said. Lutnick said Trump is expected to raise tariffs on China on Tuesday unless the country ends fentanyl trafficking into the US. The yuan fell 0.2% against the dollar on Monday.

 

The rupee stabilised around 87.30 a dollar levels for some time but was quickly dragged to the day's low of 87.4025 a dollar as banks bought the greenback on behalf of foreign portfolio investors, dealers said. Overseas investors likley withdrew funds from the Indian stock market as well as the debt market, they said. So far this year, FPIs have withdrawn $10.60 billion from the domestic market on a net basis. 

 

"FPIs are there. They have been net sellers and I don't think this trend is changing very soon," said a dealer at a state-owned bank. "So, the pressure on the rupee will stay. The good part is we are tracking day-to-day dollar movement now."

 

	AT 1530 IST	AT 0900 IST	HIGH	LOW	PREVIOUS(AT 1530 IST)
Spot rupee per $1	87.3700	87.3550	87.2475	87.4025	87.4950
1-year dlr/rupee fwd (paise)	183.61	180.50	185.16	180.00	179.75

 

FORWARDS

Premiums on the dollar/rupee forward contract ended higher across most tenures as banks purchased dollars for forward delivery, noting arbitrage between the onshore forwards and offshore non-deliverable forwards rates, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

 

Premiums were also supported by a fall in the benchmark 10-year US Treasury yield on Friday, dealers said. The yield on the 10-year benchmark US Treasury note fell after US Personal Consumption Expenditures Price Index, which is closely tracked by the US Federal Reserve, showed annual inflation in the world's largest economy cooled in January. 

 

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 183.61 paise, against 179.75 paise on Friday. On an annualised basis, the premium was at 2.10%, against Friday's close of 2.05%.

 

OUTLOOK

On Tuesday, the rupee will take cues from the movement of the dollar index after the release of the US manufacturing purchasing managers' index due later in the day, dealers said. The rupee will also closely track the movements in the offshore Chinese yuan and crude oil prices, they said. 

 

"In the near term we can expect the rupee to hover around 87.50 a dollar as there are no more global shocks or domestic data," said a dealer at a brokerage firm. "The market has digested the tariff-related news. Until there is an improvement in Ukraine peace talks and a general weakness in dollar index continues, the rupee may move within 20-25 paise movement in a day." 

 

The rupee is expected to come under pressure as overseas investors may continue exiting Indian financial markets, which may weigh on the rupee further, they said. 

 

However, the Reserve Bank of India will likely intervene through dollar sales in the domestic spot market if the rupee comes under immense pressure, dealers said. Market participants are of the view that the key level of 87.50 will be steadfastly protected by the central bank to prevent the rupee from falling sharply. 

 

Meanwhile, some market participants expect the Indian unit to appreciate in the medium-term as they expect risk appetite to improve if the Russia-Ukraine war comes to a close. "If the Ukraine peace talks get through, it may have a huge impact on the Russian sanctions. If those sanctions are withdrawn, some pressure on the rupee will be relieved and may even rise to 86.75 if the Fed cut rates too," said a currency trader. 

 

During the day, the rupee is seen moving in a range of 87.10-87.60 against the dollar, with strong resistance for the Indian unit pegged at 87.20 a dollar.

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India Rupee - World FX: Yen rises as dollar index slips from near 3-wk high

 

	AT 1507 IST	HIGH	LOW	PREVIOUS
GBP/USD	1.2614	1.2620	1.2583	1.2572
EUR/USD	1.0415	1.0424	1.0389	1.0376
NZD/USD	0.5606	0.5613	0.5594	0.5591
AUD/USD	0.6220	0.6231	0.6209	0.6204
USD/JPY	150.1870	151.0200	149.9500	150.6140
USD/CAD	1.4435	1.4453	1.4431	1.4465
EUR/JPY	156.4270	157.2980	155.9205	156.3412
CHF/USD	1.1098	1.1108	1.1072	1.1066
EUR/CHF	0.9384	0.9406	0.9366	0.9376

 

MUMBAI – The Japanese yen was up 0.4% against the dollar Monday after the dollar index declined from the near 3-week high it hit Friday on expectations of a less aggressive approach by the US towards the implementation of tariffs on Canada and Mexico. However, gains in the Japanese currency were capped after data published earlier in the day showed that Japan's factory activity contracted for the eighth consecutive month in February amid worries about US tariffs.

 

The final au Jibun Bank Japan Manufacturing Purchasing Managers' Index rose slightly to 49.0 from 48.7 in January. Despite the index posting a higher-than-expected rise of 48.9 in a Reuters poll, the reading remained below the key level of 50, indicating a contraction in the manufacturing sector.

 

The dollar index was off its high Monday as US Commerce Secretary Howard Lutnick Sunday suggested that the tariffs on Canada and Mexico, which are set to be implemented from Tuesday, may not be the full 25% as threatened by President Donald Trump earlier.

 

Further, data Friday showed that US Personal Consumption Expenditures Price Index, the US Federal Reserve's preferred gauge of inflation, cooled for the first time in nearly two years to 2.5% in January from 2.6% in December. The core inflation print rose on year to 2.6% in January, but was down from 2.9% in December. 

 

At 1507 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.22, compared to 107.56 Friday and 107.29 Thursday. The index had risen to a high of 107.66 Friday, the highest level since Feb. 13. Market participants now await the ISM Manufacturing Purchasing Managers' Index due Monday evening.

 

The Canadian dollar was up 0.2% after the US Commerce Secretary hinted at a less aggressive approach towards tariffs. The Swiss franc was up 0.2% against the greenback.

 

The euro rose 0.4% against the US currency as the bloc's Manufacturing Purchasing Managers' Index showed marginal improvement. The Manufacturing Purchasing Managers' Index in February rose to 47.6 from 46.6 in January, the highest reading in two years. However, gains were limited as the reading still indicated a contraction in the sector. Traders now await the eurozone's flash inflation reading for February later in the day.

 

The pound sterling was up 0.3% against the greenback. Earlier in the day, both the euro and the pound sterling strengthened after the UK's prime minister and other European leaders Sunday agreed to draw up a Ukraine peace plan to present to the US, after which Washington, DC, might be able to offer security guaranteers to Kyiv to deter Moscow.

 

The Australian dollar was up 0.2% as the Australia Manufacturing Purchasing Managers' Index inched higher to 50.4 in February from 50.2 in January. A purchasing managers' index reading above 50 indicates expansion of the manufacturing sector. Tracking a rise in the Australian dollar, the New Zealand dollar was up 0.1% against the US unit. Any change in the Australian economy directly impacts the New Zealand currency due to their close bilateral trade relations.  (Gowri Lakshmi)

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India Rupee: Pares some gains on FPI outflows, dollar purchases by importers

 

	AT 1428 IST	AT 0900 IST	HIGH	LOW	PREVIOUS (AT 1530 IST)
Spot rupee per $1	87.3825	87.3550	87.2475	87.4025	87.4950

 

MUMBAI – The rupee pared some gains against the US dollar as banks purchased the greenback on behalf of foreign portfolio investors, dealers said. The rupee was also weighed down by dollar purchases by importers, they said.

 

The rupee had risen to a high of 87.2475 in early trade, but came under pressure and fell to a low of 87.4025 a dollar as banks continuously bought the US currency on behalf of overseas investors, who withdrew funds from the Indian stock market as well as the government securities market, dealers said. So far this year, FPIs have withdrawn $10.60 billion from the domestic market on a net basis.

 

"At the end of the day FPIs are net sellers, and we are barely seeing any inflows given the way with which tariffs are affecting the EMs (emerging markets)," said a dealer at a state-owned bank. "It's hard to track the rupee's movement."

 

Importers wanted to take advantage of the relatively lower dollar/rupee levels, dealers said. "Importers' demand will always be there. In the morning some enthusiasm lacked but as they saw it (rupee) rise, some of them encashed profits given the levels," a dealer at another public-sector bank said.

 

Dealers expect the market to be less volatile and the rupee to trade within the range of 87.20-87.50 against the dollar during the day. If the rupee comes under immense pressure, they expect the Reserve Bank of India to step in with dollar sales, to prevent the rupee from falling sharply, dealers said. They see immediate resistance level pegged at 87.20 a dollar.  (Gowri Lakshmi)

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 India Rupee: Premiums up as banks buy fwd dlrs on onshore-offshore arbitrage

 

	AT 1310 IST	AT 0900 IST	HIGH	LOW	PREVIOUS (AT 1530 IST)
Spot rupee per $1	87.3825	87.3550	87.2475	87.3950	87.4950
1-year dollar/rupee forward (paise)	184.11	180.50	184.11	180.00	179.75

 

NEW DELHI – Premiums on the dollar/rupee forward contract rose across most tenures as banks purchased dollars for forward delivery, noting arbitrage between the onshore forwards and offshore non-deliverable forwards rates, dealers said. 

 

"There is some arbitrage paying that we are seeing, mostly in the near (near-term forward) segment," said a dealer at a foreign bank. "Today, it (premiums) should remain on the higher side." Banks executed sell/buy swaps--sell for immediate delivery and buy for delivery later--in the onshore forwards market, noting a rise in premiums in the offshore NDF market, dealers said.

 

Premiums were also supported by a fall in the benchmark 10-year US treasury yield on Friday, dealers said. The yield on the 10-year benchmark US Treasury note fell on Friday after a report closely tracked by the US Federal Reserve showed annual inflation in the world's largest economy cooled in January. 

 

Forwards of a currency pair are reflective of the interest rate differential between the two countries. The US personal consumption expenditures price index rose 2.5% on year in January after increasing 2.6% in December. The core inflation print rose on year to 2.6% in January, against 2.9% in December.

 

Market participants see strong technical support for the premium on the one-year dollar/rupee forward contract at 2.00%. "It did not break the 2% mark even after the (RBI's buy/sell) swap auction (on Friday), so there is some resistance there," said a dealer at a private bank. 

 

At 1310 IST, the premium on the one-year exact-period dollar/rupee forward contract was 184.11 paise, against 179.75 paise on Friday. On an annualised basis, the premium was at 2.11%, against Friday's close of 2.05%. (Pratiksha)

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India Rupee: Technical Levels for rupee - Mar 3

 

MUMBAI – At 1105 IST, the rupee was at 87.3325 per dollar. At 0900 IST, the rupee was at 87.3550 a dollar against its previous close of 87.4950. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

 

Participants	S2	S1	R1	R2
State-owned bank	87.45	87.40	87.20	87.13
Private bank	88.00	87.50	87.0	86.80
Brokerage firm	87.60	87.50	87.20	87.00

 

(Gowri Lakshmi)

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India Rupee - Asia FX: Mixed on uncertainty over Trump's tariff hike plans

 

MUMBAI – Asian currencies traded on a mixed note on Monday even after a fall in the dollar index as investors remain uncertian over the outlook of tariff hikes by the US. Even though the US administration on Sunday hinted at a lesser aggressive approach toward the implementation of tariffs on Canada and Mexico, it is likely to proceed with slapping China with additional 10% tariff hike on Tuesday. 

 

The dollar index declined on Monday from an over-two-week high it hit on Friday, as US Commerce Secretary Howard Lutnick on Sunday suggested that the tariff on Canada and Mexico, which are set to be implemented from Tuesday may not be the full 25% as threatened by Washington earlier. "There are going to be tariffs on Tuesday on Mexico and Canada. Exactly what they are, we're going to leave that for the president and his team to negotiate," Lutnick said. Lutnick also said Trump is expected to raise tariffs on China on Tuesday unless the country ends fentanyl trafficking into the US. 

 

Further, data on Friday showed that the personal consumer expenditure, the US Federal Reserve's preferred gauge of inflation, cooled for the first time in nearly two years to 2.5% in January from 2.6% in December. The core inflation print rose on year to 2.6% in January, but was down from 2.9% in December. 

 

At 1000 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies was at 107.25, compared to 107.56 on Friday and 107.29 on Thursday. The index rose to a high of 107.66 on Friday, the highest level since Feb. 13. The Malaysian ringgit was down 0.1%.

 

The Chinese yuan was down 0.1% against the US unit. However, losses in the currency were capped after data on Monday showed that China's manufacturing activity expanded at the fastest pace in three months in February. The Manufacturing Purchasing Managers' Index was at 50.2 last month from 49.1 in January. The reading was also higher than the forecast of 49.9 in a Reuters poll. The non-manufacturing PMI rose to 50.4 in February from 50.2 a month prior. A PMI reading above 50 indicates expansion in the manufacturing sector. 

 

Further, China's banks are cutting the interest rates offered on US dollar deposits following an instruction from the People's Bank of China, possibly to curtail dollar hoarding and to support the weakening Chinese currency, Reuters reported on Friday citing sources.

 

The South Korean won was down 0.1%, while the Taiwan dollar traded flat against the US unit. The Thai baht was also steady against the greenback. On Sunday, Bank of Thailand announced that it is set to appoint former bureaucrat Somchai Sujjaponse as the new chairman of the central bank, after a contentious selection process.  

 

Further, on Monday, Thailand's Prime Minister Paetongtarn Shinawatra expressed his confidence in the country's economy. "We will work to the best of our ability to continue pushing for more investment. But of course, I will have to stay till the end of my term to ensure this happens," Shinawatra said. Political stability is required to ensure confidence among foreign investors, while political games only hinder the government's bid to attract more investors to come and invest in Thailand, she added.

 

The Philippines' peso was up 0.1%, while the Indonesian rupiah gained 0.4% against the dollar, emerging as the best perfomer among its peers after posting gains in domestic equities. At 1000 IST, the Jakarta composite index was up 3.2%.  (Gowri Lakshmi)

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India Rupee: Sharply up, dlr index falls as US tariffs seen less aggressive

 

	AT 0945 IST	AT 0900 IST	HIGH	LOW	PREVIOUS (AT 1530 IST)
Spot rupee per $1	87.2775	87.3550	87.2600	87.3550	87.4950

 

MUMBAI – The rupee was sharply up against the dollar on Monday following a decline in the dollar index on expectation of a less aggressive approach by the US towards the implementation of tariff hikes on Canada and Mexico, dealers said. A rise in the euro after renewed push for peace in Ukraine also weighed on the dollar index. 

 

"Market is now lacking in any enthusiasm. It is on the upside (rupee/dollar movement) due to a general weakness in the dollar index. For the day we see a range-bound trading 87.20-87.40 a dollar," a dealer at a state-owned bank said. "If it (rupee) continues to appreciate and rises above 87.20 (a dollar), some stop losses (on long dollar bets) may easily be triggered and it can rise to 87.13 as well."

 

The dollar index declined on Monday from an over two-week high hit on Friday after US Commerce Secretary Howard Lutnick on Sunday suggested that the tariffs on Canada and Mexico, which are set to be implemented from Tuesday, may not be the full 25% as threatened by Washington earlier.

 

At 0935 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies was at 107.25, compared with 107.56 on Friday and 107.29 on Thursday. The index rose to a high of 107.66 on Friday, the highest level since Feb. 13.

 

However, a fall in offshore Chinese yuan capped gains in the domestic currency as US Presdent Donald Trump is likely to proceed with slapping China with additional 10% tariff hike on Tuesday. Lutnick said Trump is expected to raise tariffs on China on Tuesday unless the country ends fentanyl trafficking into the US. 

 

A fall in domestic equities capped the gains in rupee, dealers said. Dealers are of the view that during the day the rupee may come under more pressure as foreign portfolio investors may continue to pull out funds from Indian equities over uncertainty around Trump's tariff plans. So far this year, FPIs have withdrawn $10.60 billion from the domestic market on a net basis. At 0935 IST, the benchmark indices, the Nifty 50 and the BSE Sensex were down 0.4%, each.   

 

During the day, the rupee is seen moving in a range of 87.15-87.50 against the dollar. Dealers see immediate resistance for the Indian unit at 87.20 a dollar.  (Gowri Lakshmi)

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India Rupee: Expected range for rupee - Mar 3

 

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:

 

PARTICIPANT	SUPPORT	RESISTANCE
Private bank	87.45	87.28
Private bank	87.45	87.20
Foreign bank	87.65	87.15
Brokerage firm	87.60	87.10
Brokerage firm	87.42	87.22

 

 

 

 

 

 

 

 

(Pratiksha and Gowri Lakshmi)

 

End

 

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

 

Edited by Tanima Banerjee

 

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