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Informist, Tuesday, Mar. 4, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended higher against the dollar on Tuesday after the dollar index slumped further during European trade, hitting an over one-week low, dealers said. However, gains in the Indian currency were capped as banks purchased the greenback on behalf of foreign portfolio investors and importers, they said. 

"The rupee is closely tracking the dollar index and definitely gaining from the general weakness. But the continuous negative sentiment of FPIs is limiting the rupee from rising," said a dealer at a brokerage firm. "The rupee was largely steady throughout the day, the reason it couldn't appreciate much despite a correction in dollar index is because of this sentiment of investors." 

After moving in a range of over 14 paise during the day, the rupee settled at 87.2650 a dollar, compared to its previous close of 87.3700.

A rise in most other Asian currencies also supported the Indian unit, dealers said. Barring the South Korean won, most other Asian currencies rose 0.1-0.4%, with the Thai Baht being the best perfomer amongst its peers.

The rupee opened flat against the dollar on Tuesday as weak risk appetite among investors owing to concerns about US tariffs offset the impact of a slump in the dollar index, dealers said. Risk appetite among overseas investors took a hit after US President Donald Trump on Monday announced that 25% tariffs on Canada and Mexico would kick in from Tuesday, with reciprocal tariffs starting Apr. 2, dealers said. Trump said there was "no room left" for a deal that would avert the tariffs by curbing fentanyl flows into the US. 

Banks bought dollars on behalf of foreign portfolio investors looking to pull out money from Indian markets, which exerted pressure on the Indian unit, dealers said. In February, FPIs net sold $3.99 billion worth of assets from the domestic market on a net basis. "Though outflows have muted from the equities now, the continued outflows weigh on the rupee. Unless some major news like a Russia-Ukraine peace or a negotiation in tariff talks comes in, this outflow will continue," said the dealer at a public-sector bank. 

The dollar index fell almost 1% on Monday after the US manufacturing data came in lower than expected, indicating slowing growth in the world's largest economy. However, the rupee could not benefit from the weakness in the dollar index during early trade and remained broadly steady for a majority of the day.

Banks also bought the greenback on behalf of oil marketing companies and other importers, looking to meet their payment requirements, which exerted pressure on the Indian unit, dealers said. "Apart from the general buying of importers and some FPIs, there is nothing much happening as we saw even yesterday (Monday). Most corporates have booked their profits last week itself, there is nothing to do for them right now, they are waiting for more cues," said a dealer at a state-owned bank. 

However, as soon as the rupee touched 87.40 a dollar, some banks stepped in with dollar sales, likely on behalf of the RBI, which prevented the rupee from falling sharply, dealers said. "The demand we have for dollar now is comparatively less but I guess at least till this month-end RBI is going to protect each level," said a dealer at a brokerage firm. "Most likely, they (RBI) won't allow 88 (a dollar) to break as it will hurt corporates here."

Dealers flagged that the RBI's likely intervention around 87.40 seemed peculiar as the rupee has breached the key level once last week. "I think they (RBI) are not targetting any level. By intervening at random levels, they are putting away buyers (of dollars), and killing speculation," said a dealer at a state-owned bank. 

However, during the last hour of the trade, the rupee got a boost and rose to a high of 87.2600 a dollar as the dollar index further slipped to an over one-week low during European trade. The dollar index fell further as the euro gained 0.3% after inflation in the bloc fell less than expected in February. The consumer price inflation in the bloc eased to 2.4% last month, after rising 2.5% a month prior, but remained above the market consensus of 2.3% in a Reuters poll. The core CPI slowed to 2.6% on year, down from 2.7% in January. 

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies was at 106.29, compared to 106.55 on Monday and 107.56 on Friday. The index fell to 106.16 in the day, its lowest level since Feb. 24.

FORWARDS 

Premiums on the one-year dollar/rupee forward contract ended sharply higher due to a fall in US Treasury yields, dealers said. US yields fell overnight after US manufacturing data came in lower than expected, adding to a slew of recent economic data that indicated towards slowing growth in the world's largest economy.

US yields also fell as investors flocked to safe haven assets such as US government debt as fears related to the impact of US tariffs triggered a sell-off in equity markets. However, some banks stepped in to sell dollars for forward delivery noting the relatively higher premium levels, which capped gains for the forward premiums, dealers said.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 191.25 paise, against 183.61 paise on Monday. On an annualised basis, the premium was at 2.19%, against Monday's close of 2.10%.

OUTLOOK

On Wednesday, the rupee will take cues from the movement in the dollar index and the Chinese yuan, dealers said. Market participants will closely track and assess any developemts related to US tariff imposition, they said. 

Dealers expect the rupee to be weighed by dollar purchases on behalf of FPIs, who continue to exit Indian markets. However, the RBI 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. 

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.

India Rupee - World FX: Dollar index slumps on weak US PMI, strength in euro

MUMBAI – The dollar index fell on Tuesday extending its 1% fall from Monday, as data showed maufacturing activities in the US shrank more than expected last month. The US ISM manufacturing purchasing managers' index slipped to 50.3 in February from 50.9 a month prior, while the forward looking new orders index contracted to 48.6 from 55.1.

At 1459 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 106.30, compared with 106.55 on Monday and 107.56 on Friday. The index dropped to 106.40 in early trade, its lowest level since Feb. 26.

The dollar index was also weighed down by a rise in euro. The euro rose 0.3% against the US unit as European leaders, including UK's Prime Minister Kier Starmer, French President Emmnauel Macron, and Volodomyr Zelenskiy of Ukraine agreed to draft a peace plan to bring the three year long war between Ukraine and Russia. 

The euro also gained after inflation fell less than expected. The consumer price inflation in the bloc eased to 2.4% in February, after rising 2.5% a month prior, but remained above the market consensus of 2.3% in a Reuters poll. The core CPI slowed to 2.6% on year, down from 2.7% in January. The European Central Bank is scheduled to meet for their next monetary policy on Thursday.

The Japanese yen was up 0.3% against the US dollar after data on Tuesday showed that the output gap in Oct-Dec turned positive for the first time in six quarters. A positive output gap occurs when actual output exceeds the economy's full capacity and is a key datapoint assessed by the Bank of Japan to track economy's stable growth. 

On Tuesday, US President Donald Trump said he told the leaders of Japan and China that they could not continue reducing the value of their currencies and doing so is unfair to the US. Following Trump's statements, Japan's Prime Minister Shigeru Ishiba denied the allegation that Tokyo is manipulating currency valuation. "Japan hasn't adopted a so-called yen-weakening policy," Ishiba said in parliament. 

The Australian dollar was down 0.3% against the greenback even after Reserve Bank of Australia's February meeting minutes showed a cautious approach toward further rate cut. "Members observed that not having lifted interest rates as high as in countries that had faced a similar inflation challenge meant the Board should be cautious when deciding to lower the cash rate," the minutes of the meeting held on Feb 17-18 showed. 

The Canadian dollar was down 0.1% against the greenback after Washington proceeded to impose new 25% tariffs on imports from Mexico and Canada with effect from Tuesday, along with a 20% tariff raise on Chinese goods. China responded immediately after the deadline, announcing additional tariffs of 10-15% on certain US imports from Mar. 10 and a series of new export restrictions for designated US entities.

Further, Canadian Prime Minister Justin Trudeau on Monday said that retaliatory tariffs on the US would take effect on Tuesday, with Trudeau hinting more tariffs could follow. Canada will impose 25% tariffs on a range of goods imported goods from the US effective immediately with the first tranche of retaliation including a list of 1256 products ranging from agricultural products to electronic appliances. 

The pound sterling  and the New Zealand dollar traded flat against the dollar. While the Siwss franc was up 0.4% against the US dollar upon safe-haven inflows amid tariff fears and a trade war.  (Gowri Lakshmi)

India Rupee: Stays steady as RBI dlr sales offset FPIs, importers' dlr buys

MUMBAI – The rupee remained broadly steady against the dollar on Tuesday as some banks stepped in with dollar sales, likely on behalf of the Reserve Bank of India, which offset the impact of banks' dollar purchases for foreign portfolio investors and importers, dealers said. The RBI likely sold dollars at around 87.40 a dollar level, they said. The rupee has moved in a range of only 7 paise so far in the day. 

Banks also bought dollars on behalf of overseas investors, who continued to exit the Indian markets amid weak risk appetite induced by concern about US tariffs, dealers said. "The sentiment (of investors) has been negative for Indian markets for few months now. The rupee will continue to feel the pressure till the time FPIs are in the exit mode," a dealer at a brokerage firm said.

US President Donald Trump on Monday said 25% tariffs on Canada and Mexico would come into effect from Tuesday, with reciprocal tariffs starting Apr. 2. In February, FPIs net sold $3.99 billion worth of assets from the domestic market on a net basis.

Banks purchased the greenback on behalf of importers, who continued to shore up their dollar stockpiles, given the relatively lower dollar/rupee levels, dealers said. "Importers have no option of delaying their payments. So whenever it is ideal, they will stock up... be it in panic or otherwise," said a currency trader. 

However, the central bank intervened in the domestic spot market through dollar sales as soon as the rupee touched the day's low of 87.40 a dollar to protect the Indian unit from depreciating sharply. "Dollar demand as compared to previous weeks isn't there in market, but RBI is still active even at these levels just to protect the rupee and not necesarilly because there is intense pressure (on rupee)," a dealer at another brokerage firm said. 

For the rest of the day, the rupee is seen moving in a range of 87.20-87.50 against the dollar. Dealers see strong immediate technical support for the Indian unit at 87.40 a dollar.  (Gowri Lakshmi) 

India Rupee: Technical Levels for rupee - Mar 4

MUMBAI –  At 1054 IST, the rupee was at 87.3600 per dollar. At 0900 IST, the rupee was at 87.3700 a dollar, unchanged from its previous close. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee: Largely steady as weak risk appetite offsets slump in dlr index

MUMBAI – The rupee was largely steady against the dollar on Tuesday as weak risk appetite among investors owing to concerns about US tariffs offset the impact of a slump in the dollar index, dealers said. "We are expecting the rupee to trade on the higher side given the weak dollar index after PMI (puruchasing managers' index) yesterday (Monday)," said a dealer at a state-owned bank. "Unless a major news breaks on the US tariff front, we can see a continued uptick in rupee and less volatility in the market." 

The dollar index slumped after data on Monday showed that the US ISM manufacturing purchasing managers' index slipped to 50.3 in February from 50.9 the previous month, while the forward looking new orders index contracted to 48.6 from 55.1. At 0950 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 106.61, compared to 106.55 on Monday and 107.56 on Friday. The index dropped to 106.40 in early trade, its lowest level since Feb. 26.

However, risk appetite among foreign portfolio investors took a hit after US President Donald Trump on Monday announced that 25% tariffs on Canada and Mexico would kick in from Tuesday, with reciprocal tariffs starting Apr. 2, dealers said. Trump said there was "no room left" for a deal that would avert the tariffs by curbing fentanyl flows into the US. 

In February, FPIs net sold $3.99 billion worth of assets from the domestic market on a net basis. At 0950 IST, the benchmark indices, the Nifty 50 and the BSE Sensex, were down 0.3% each.

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

India Rupee - Asia FX: Most up as dlr index falls; Indonesian rupiah up 0.3%

MUMBAI – Most Asian currencies traded higher against the dollar on Tuesday as the dollar index slumped after data on Monday showed manufacturing activity in the US declined in February. The US ISM manufacturing purchasing managers' index slipped to 50.3 in February from 50.9 a month prior, while the forward looking new orders index contracted to 48.6 from 55.1.

At 0939 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 106.60, compared to 106.55 on Monday and 107.56 on Friday. The index dropped to 106.40 in early trade, its lowest level since Feb. 26.

However, gains in emerging market units were capped as risk sentiment among investors took a beating after US President Donald Trump announced that 25% tariffs on Canada and Mexico would kick in from Tuesday. Trump said there was "no room left" for a deal that would avert the tariffs by curbing fentanyl flows into the US. 

The Indonesian rupiah was up 0.3% against the US dollar, the most among its peers. However, gains in the Indonesian currency were capped after data released on Monday showed the country's inflation eased for the first time in over two decades in February. Indonesia' consumer price index in February fell 0.09% on year, the first instance of deflation since March 2000, and below market expectations of 0.60% inflation. The core inflation rate rose marginally to 2.48% on year from 2.36% in January. 

The Philippines peso was up 0.2% against the US unit after data on Monday showed the factory activity expanded, though at a softer pace for the second consecutive month in February. The Philippines' PMI stood at 51 last month. A PMI reading above 50 indicates expansion in the sector. Further, producer prices in the Philippines rose 0.8% on year in January, against a downwardly revised 0.1% rise in December. 

The Chinese yuan was up 0.1% against the greenback after Beijing vowed to retaliate against Washington for imposing additional 10% tariff on the country effective Tuesday. China's commerce ministry stated on Tuesday that it would impose countermeasures against the US tariffs, reiterating that Trump and his administration were trying to "shift the blame" and "bully" Beijing over fentanyl flows. China would hit back with a series of tariffs and non-tariff measures on American agricultural and food products, reports said. 

The Thai baht was up 0.1% against the US dollar after Prime Minister Paetongtarn Shinawatra held a discussion with other ministeries following a cabinet meeting and unveiled several measures to stimulate growth in Thailand's sluggish economy. The discussions focused on the progress of economic stimulus measures aimed at boosting GDP growth by 3-3.5%, reports said. 

Bucking the trend, the South Korean won was down 0.1% against the greenback as factory activity in the country contracted in February. The PMI fell to 49.9 last month from 50.3 in January. Further, South Korea's acting President Choi Sang-mok on Tuesday said the government, parliamet and the private sector should stand together to respond to the US 'trade war'.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Mar 4

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:

(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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