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Informist, Thursday, Mar. 20, 2025

By Pratiksha

NEW DELHI – The rupee settled at an over seven-week high against the dollar on Thursday but erased a significant portion of its gains as oil marketing companies and importers purchased the greenback, dealers said. The Reserve Bank of India also possibly intervened through dollar purchases to shore up its foreign exchange reserves, some dealers speculated.   

"There was lots of selling (of dollars) in the morning, for corporates and inflows. The dollar was also weak," said a dealer at a private bank. "But then buying (of dollars) came in, importers got active. It was expected, those levels could not have sustained for long." 

After touching a high of 86.1950 a dollar during the day, the Indian currency settled at 86.3675 on Thursday, against 86.4425 on Wednesday. The rupee moved in a range of 22 paise during the day. Most Asian currencies also gained against the dollar, with the Malaysian ringgit and Indonesian rupiah rising 0.3%. 

The domestic unit started the day slightly higher against the dollar as the dollar index remained weak after the US Federal Reserve on Wednesday signalled that interest rate cuts were likely later this year even as uncertainty around US tariffs loom. US Fed officials continued to guide only 50 basis points of rate cuts in 2025, the same median forecast as three months ago, even as they expect slower economic growth and higher inflation. Wednesday, the Federal Open Market Committee kept the Fed funds target range unchanged at 4.25-4.50% for the second straight meeting. 

Shortly after opening, the rupee gained further and rose above 86.30 a dollar as foreign banks sold dollars on behalf of Indian corporates, who were looking to cut their existing long dollar positions, in light of the sustained weakness in the dollar, dealers said. The dollar index, which measures the strength of the dollar against a basket of six major currencies, has declined over 3.7% so far this month. 

Further, some foreign banks sold dollars for foreign fund inflows into Indian markets, following which the Indian currency touched the day's high, dealers said. "We are seeing inflows now after the trend of outflows before. If these inflows sustain, we may see the rupee holding these levels of 86.30-86.50 (a dollar)," said a dealer at a foreign bank. 

The domestic currency also found support in banks' dollar sales on behalf of exporters, who looked to convert their foreign exchange-denominated earnings into rupees before closing their books for the financial year ending March, according to dealers. Some exporters also sold the greenback on fears of a further appreciation in the Indian unit, they said. The Indian currency has appreciated almost 1.3% against the dollar so far this month. 

A surge in domestic equities also provided support to the local currency, as per dealers. On Thursday, the Nifty 50 and the Sensex ended 1.2% higher each.  

However, as soon as the Indian currency rose past the key technical resistance of 86.20 a dollar, oil marketing companies and other importers rushed to buy dollars to make the most of the relatively lower dollar/rupee levels, which weighed on the local currency, dealers said. The Indian unit was also weighed by some big state-owned banks' dollar buying ahead of daily reference rate fixing, dealers said. "We saw some buying (of dollars) at the fixing, that probably kept a lid on the rise (of the rupee)," said a dealer at a state-owned bank. "Oilers (oil importers) were also pretty active."

Some dealers speculated that the central bank may have bought dollars, although "passively" to replenish its foreign exchange reserves. India's foreign exchange reserves were $653.97 billion in the week ended Mar. 7. Reserves have declined by over $50 billion from the record high of $704.89 billion hit in late September.

Further, the dollar index edged slightly higher during European trade, tracking losses in the euro and pound sterling, which also weighed on the Indian unit, dealers said. At 1530 IST, the dollar index was at 103.89, compared to 103.46 on Wednesday and 103.24 on Tuesday.  

FORWARDS

The premium on the one-year dollar/rupee forward contract ended largely steady on Thursday as banks' forward dollar sales on behalf of some Indian corporates offset the impact of a fall in the benchmark 10-year US Treasury yield, dealers said.

Some banks sold forward dollars for Indian corporates to take advantage of the relatively higher forward premium levels, dealers said. Premium on the one-year dollar/rupee forward has jumped almost 10 bps so far this month.

Banks also sold dollars for forward delivery as they expect the forward premium levels to decline after the RBI's $10 billion dollar/rupee buy/sell swap auction on Monday, dealers said. Under the swap auction, the RBI will buy dollars for immediate delivery and sell them for delivery after 36 months to meet the durable liquidity needs of the system.

The yield on the 10-year US Treasury note fell after the US FOMC kept its benchmark rates unchanged while indicating a 50 basis points rate cut this year. Fed officials also reduced their outlook for US economic growth in 2025 to 1.7% from their previous forecast of 2.1%.

At 1530 IST, the exact-period one-year dollar/rupee forward premium was 185.25 paise against 185.93 paise Wednesday. On an annualised basis, the forward premium was 2.14%, unchanged from Wednesday's close. 

OUTLOOK

On Friday, the rupee will take cues from movement in the dollar index and other Asian currencies, particularly the Chinese yuan, dealers said. "The rupee has been largely in sync with the dollar of late. So if the weakness in the dollar index continues, the rupee may continue on the upward side," said a dealer at a brokerage firm. 

Market participants now await the Bank of England's monetary policy decision later in the day. The central bank is widely expected to hold rates steady at 4.50% amid slowing economic growth and rising global uncertainties.

The Indian unit may continue to find support in banks' dollar sales on behalf of exporters, who are looking to meet their financial-year-end payment requirements, dealers said. During the day, the rupee is seen moving in a range of 86.10-86.50 against the dollar. Dealers see immediate technical resistance for the Indian unit at 86.15 a dollar.

India Rupee - World FX: Pound sterling down 0.3% ahead of BoE policy outcome

MUMBAI – The pound sterling was down 0.3% against the US dollar on Thursday ahead of Bank of England's monetary policy decision later in the day. The central bank is expected to hold rates steady at 4.5% due to rising uncertainties about the impact of higher tariffs by the US. Data released on Thursday showed the pace of pay growth in the UK was little changed and indicated signs of stability in the job market.

Pay, excluding bonuses, in the UK's private sector, a key gauge for the central bank, rose by 6.1% in the three months to January. Pay growth across the economy was 5.9%, in line with analysts' estimate in a Reuters poll.

The euro was also down 0.3% against the US dollar after data on Wednesday showed that the Eurozone inflation was lower than estimated in February, mostly attributed to a revision in Germany, the bloc's largest economy. The bloc's inflation, comprising of 20 nations was 2.3% in February, below 2.4% reported initially.

The fall in the currency was limited after Germany's producer prices rose 0.7% on year last month, climbing from 0.5% the prior month. Further, US President Donald Trump and his Ukrainian counterpart Volodymyr Zelensky agreed on Wednesday to end the war with Russia, easing geopolitical tension in the area.

Meanwhile, the US Federal Open Market Committee held the fed funds target range unchanged at 4.25-4.50%, as widely anticipated. Federal Reserve Chair Jerome Powell said that even though economists outside the US central bank may have forecast the likelihood of a recession, a severe downturn was not likely. The FOMC statement also dropped prior commentary on its employment and inflation goals being roughly in balance.

The committee revised the median annual GDP growth estimate sharply downwards to 1.7% for 2025, from 2.1% at its last meeting. In addition, the FOMC voted 11-1 to reduce the pace of its security sales from the Fed's balance sheet starting April. US Fed officials continued to guide for only 50 basis points of rate cuts in 2025.

Tracking losses in the euro and pound sterling, the dollar index inched up slightly in European trade. At 1454 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 103.80, compared to 103.46 on Wednesday and 103.24 on Tuesday.

The Swiss franc was up 0.3% against the US unit. The Swiss National Bank on Thursday lowered its benchmark rates by 25 basis points to 0.25%. "With today's rate adjustment, the SNB is ensuring that monetary conditions remain appropriate, given the low inflationary pressure and the heightened downside risks to inflation," the Swiss National Bank said in a statement.

The Australian dollar was down 0.7% against the greenback as employment in Australia declined unexpectedly in February. However, the unemployment rate remained low. Employment fell 52,800 in February, against expectations of a rise of 30,000 by a Reuters poll. Jobless rate remained low at 4.1%, data on Thursday showed.

Tracking fall in the Australian dollar, the New Zealand dollar plunged almost 1% against the US dollar. Any change in the Australian economy directly impacts the currency of New Zealand due to their close bilateral trade relations. However, losses in the New Zealand currency were limited after data on Thursday showed the country's economy expanded faster than expected in the quarter ended December. The GDP rose 0.7% in Oct-Dec from the prior quarter, beating analysts' forecast of 0.4% rise in a Reuters poll and the central bank's estimate of 0.3% growth.

The Canadian dollar was up 0.2% against the greenback ahead of Bank of Canada Governor Tiff Macklem's speech later in the day. Traders also await PPI data from Canada for February, due later in the day.  Japanese financial markets were shut on Thursday on account of Vernal Equinox Day.  (Gowri Lakshmi) 

India Rupee: Premium steady as corporates' fwd dlr sales offset US ylds rise

MUMBAI – The premium on the one-year dollar/rupee forward contract was steady Thursday as banks sold forward dollars on behalf of some Indian corporates that offset the upward pressure from a fall in the benchmark 10-year US Treasury yield, dealers said.

"There is not much movement today, but we have seen some receiving from corporates," a dealer with a state-owned bank said. "I think on the upside it may not go above 2.20% on a medium-term basis, but in the coming days it may sharply come down first," the dealer added. Forward premiums are expected to fall ahead of the $10-billion dollar/rupee buy/sell swap auction conducted by the Reserve Bank of India Monday. The swap will be for a period of three years. 

Some banks sold forward dollars for Indian corporates, taking advantage of a relatively higher forward premiums, as they expect it to come down before the swap, dealers said. Forward premiums had risen earlier in the day because of a fall in the 10-year US Treasury yield Wednesday. The yield on the 10-year US Treasury note fell after the US Federal Open Market Committee kept its benchmark rates unchanged while indicating a 50 basis points rate cut this year.

Fed officials also reduced their outlook for US economic growth in 2025 to 1.7% from their previous forecast of 2.1%. The 10-year US Treasury yield moved 4 bps lower to settle at 4.25% Wednesday.

The persistent liquidity deficit in the banking system also pushed premiums higher, dealers said. The net liquidity injected by the Reserve Bank of India, which is a proxy for systemic liquidity conditions, was INR 2.29 trillion Wednesday against INR 2.23 trillion Tuesday.

The exact-period one-year dollar/rupee forward premium was 184.70 paise at 1424 IST against 185.93 paise Wednesday. On an annualised basis, the forward premium was 2.14%, similar to Wednesday's close.  (Sourabh Kumar)

India Rupee: Erases most gains as banks buy dollars for oil cos, importers

MUMBAI – The rupee erased most of its gains against the dollar on Thursday as banks purchased the greenback on behalf of oil marketing companies and other importers, who wanted to take advantage of the relatively lower dollar/rupee levels, dealers said. The rupee rose to a high of 86.1975 a dollar during the day, its highest level since Jan. 24. 

Some banks purchased dollars ahead of the daily reference-rate fixing, which also weighed on the Indian unit, dealers said. "I think the rupee will come back to the 86.20 levels by afternoon, there are no significant demands (for dollars). The move was largely fix-related buying," a currency trader at a brokerage firm said. Some dealers also speculated that a few state-owned banks might have purchased dollars on behalf of the Reserve Bank of India to shore up their reserves. 

However, the rupee remained supported by banks' dollar sales on behalf of Indian corporates, who looked to trim their existing long dollar positions, noting the weakness in the dollar index for the past few weeks, dealers said. The dollar index, which measures the strength of the dollar against a basket of six major currencies, has slumped over 3.7% so far this month.  

Some banks also sold the greenback on behalf of exporters, who feared further appreciation in the rupee, dealers said. "Market is on the crazy side, exporters' instincts have kicked in, they have started booking profits now," a dealer at a private bank said. "86.30 (a dollar) should hold for the day." Some exporters also sold dollars to meet their financial-year-end payment requirements, they said.  

A sharp rise in domestic equities also favoured the Indian unit, according to some dealers. At 1324 IST, the benchmark Nifty 50 and the BSE Sensex were up 1.1% each. 

The dollar index rose slightly in European trade but remained broadly weak on Thursday. The index weakened after the US Federal Reserve on Wednesday signalled interest rate cuts were likely later this year, even as uncertainty around US tariffs looms. At 1324 IST, the dollar index was at 103.70, compared to 103.46 on Wednesday and 103.24 on Tuesday.  

Market participants now await the Bank of England's monetary policy decision later in the day. The central bank is widely expected to hold rates steady at 4.50% amid slowing economic growth and rising global uncertainties. 

For the rest of the day, the rupee is seen moving in a range of 86.10-86.50 against the dollar. Dealers see immediate technical resistance for the Indian unit at 86.15 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Mar 20

MUMBAI – At 1122 IST, the rupee was at 86.3350 per dollar. At 0900 IST, the rupee was at 86.4100 a dollar, against the previous close of 86.4425. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee - Asia FX: Most up as dlr index falls post US FOMC rate decision

MUMBAI – Most Asian currencies were higher against the dollar Thursday as the dollar index eased after the US Federal Open Market Committee kept the benchmark rate steady, but indicated 50-basis-point rate cuts later this year. The Indonesian rupiah gained the most, rising 0.4% against the greenback after Indonesia's central bank held rates steady on Wednesday.

The US Federal Open Market Committee kept the the Fed funds target range steady at 4.25-4.50%, as widely anticipated, for the second consecutive meeting. The dollar index came under pressure as the committee also revised the median annual GDP growth estimate for 2025 to 1.7% from 2.1% at the last meeting.

The dollar index also fell as the pound sterling, which constitutes 11.9% in the dollar index, strengthened against the greenback ahead of the rate decision by the Bank of England later in the day. The Bank of England is expected to hold the bank rate steady at 4.5%. 

The dollar index, which measures the strength of the dollar against a basket of six major currencies was at 103.40 at 0916 IST, against the close of 103.46 on Wednesday and 103.24 on Tuesday. 

Market participants also assessed the rate decision by the People's Bank of China, which also held its benchmark lending rates steady on Thursday, juggling between reviving the sluggish economy and stabilising its currency. The Chinese central bank kept the 1-year loan prime rate at 3.1% and 5-year loan prime rate at 3.6%. 

The Taiwan dollar was up 0.1% against the greenback ahead of the policy decision by the country's central bank, due later in the day. It is expected to hold the benchmark policy rate unchanged, as per a poll of economists by The Wall Street Journal.

The South Korean won rose 0.2% against the greenback. A rise in its benchmark index, the Korea Composite Stock Price Index, aided the currency. On Thursday, the stock index was up 0.6%.

The Philippine peso was up 0.2% against the US dollar due to weakness in the dollar index. However, gains were capped as the Philippines' central bank Governor Eli Remolona indicated at a rate cut in April in an interview to Bloomberg News Wednesday.

The Malaysian ringgit rose 0.2% against the greenback as the country's exports recovered in February. Last month, Malaysia's exports rose 6.2% on year and imports rose 5.5% on year. Threreby, the country's trade surplus increased more than three times in February as compared with January. The Thai baht was steady against the US dollar.  (Sourabh Kumar)

India Rupee: Sharply up as traders trim long dollars bets, local shares rise

MUMBAI - The rupee rose sharply against the US dollar on Thursday as banks continued to sell dollars to trim their existing long dollar positions, noting the sustained weakness in the dollar index, dealers said. A rise in domestic equities also aided the Indian unit, they said. The rupee rose to a high of 86.2500 a dollar in early trade.

"People who had earlier built long dollar positions when it (rupee) was 86.50 levels, now the dynamics have changed and the trend continues to be of selling dollars instead," a dealer at a state-owned bank said. "It's highly likely that after rupee rises to 86.25 (a dollar), stop-losses (on long dollar bets) will be triggered, bringing it to 86.15 or 86.12." 

The dollar index, which has been on a declining spree of late, remained weak as the US Federal Reserve on Wednesday signalled interest rate cuts were likely later this year even as uncertainty around US tariffs loom. US Fed officials continued to guide for only 50 basis points of rate cuts in 2025, the same median forecast as three months ago, even as they expect slower economic growth and higher inflation. The Federal Open Makret Committee kept the Fed funds target range unchanged at 4.25-4.50% for the second straight meeting. 

The dollar index also came under pressure as the pound sterling strengthened to a four-month high ahead of the rate decision by the Bank of England, later in the day. At 1000 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies was at 103.39, compared to 103.46 on Wednesday and 103.24 on Tuesday.

A rise in domestic equities also supported the Indian unit, according to dealers. At 1000 IST, the benchmark indices, the Nifty 50 and the BSE Sensex were up 0.6%, each. Tracking weakness in the dollar index, most other Asian currencies rose, which further lent support to the domestic unit. Asian currencies rose 0.1-0.4% against the greenback in early trade.

Dealers said a lack of dollar purchases from importers as well as the Reserve Bank of India also provided support to the rupee. "The market has taken a call to not buy (dollars) aggressively now. Buying will likely come at around 86.10 levels," the trader at the state-owned bank said.  

For the rest of the day, the rupee is seen moving in a range of 86.10-86.90 against the dollar. Dealers see immediate technical resistance for the Indian unit at 86.20 a dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Mar 20

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

(Pratiksha and Sourabh Kumar)

End

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

Edited by Saji George Titus

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