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Informist, Friday, Mar. 21, 2025

By Pratiksha

NEW DELHI – The rupee ended at a 10-week high against the dollar, posting its biggest weekly gain in over two years, as foreign banks persistently sold dollars for foreign fund inflows and exporters, dealers said. The Reserve Bank of India likely intervened through dollar purchases but not aggressively, thus, further supporting the Indian unit, they said. 

"The market went crazy today, everybody was expecting RBI would come heavy at some key levels, but they were there in just small lots," said a dealer at a foreign bank. "A lot of longs (dollar positions) got unwound and exporters panicked too."

The rupee settled at 85.9725 a dollar, logging its best single day gain in over five weeks. It settled at 86.3675 on Thursday. The Indian currency appreciated over 1% against the dollar this week. The domestic unit came out as the best performer among its emerging market peers with a rise of 0.5% against the dollar on Friday. Most Asian currencies, on the contrary, fell against the greenback, tracking a rise in the dollar index. 

The Indian unit started the day on a positive note, opening almost 14 paise higher from its previous close, as foreign investment into Indian corporates prompted dollar sales by foreign banks, dealers said.

Banks also sold dollars 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, dealers said. Some exporters also sold the greenback in fear that the Indian unit may rise further in the coming days, they said. Following this, stop-losses were triggered on long dollar bets across multiple dollar/rupee levels, further aggravating the rise in the local unit, they said.

Noting the sharp rise in the local unit this week, traders sold dollars to trim their existing speculative positions in favour of the US unit, which also supported the Indian unit, dealers said. "Exporters who were unhedged panicked after the kind of movement that happened (in the rupee). A lot of offshore longs also go unwound," said a dealer at a private bank. 

Some foreign banks also sold the greenback for foreign fund inflows into domestic markets, as per dealers. On Friday, both the Nifty 50 and Sensex ended 0.7% higher each.

Some foreign fund inflows were also on account of the rebalancing of FTSE's All-World Index, according to dealers. The rejig, which comes into effect on Friday, is expected to attract almost $1.5 billion inflows into domestic equities. The rupee rose past the pschologically-crucial level of 86-per-dollar and touched a high of 85.9200 a dollar duuring the last leg of the trade. 

Meanwhile, the central bank likely bought the greenback at multiple dollar/rupee levels, albeit, less aggressively. "RBI bought (dollars) but not that signficantly, which is why the one way movement (in the rupee) just took off easily," said a dealer at another foreign bank. "Most of us were caught off guard, a lot of longs (dollar positions) were cut after that. There was panic."

Further, some banks also stepped in to purchase dollars on behalf of oil and other importers, noting the relatively lower dollar/rupee levels, which limited the rise in the Indian currency, dealers said.

The dollar index edged higher on Friday tracking weakness in the pound sterling and the euro, which weighed on the Indian unit, dealers said. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 104.03, compared with 103.80 on Thursday and 103.46 on Friday. 

FORWARDS

Premiums on the one-year dollar/rupee forward contracts ended at an over 2-week high as banks purchased dollars for forward delivery on behalf of importers, likely related to meet financial year-end payment requirements, dealers said. Some importers also bought dollars for forward delivery noting the appreciation in the Indian currency, they said. 

Further, some banks also bought forward dollars to take advantage of an arbitrage between the onshore and offshore non-deliverable forward levels, according to some dealers. The benchmark 10-year US Treasury yield edged lower Thursday, which also supported the premiums, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the one-year forward premium was at 2.18% against Thursday's 2.14%. On an absolute basis, it was 187.50 paise against 185.25 paise Thursday. 

OUTLOOK

On Monday, the rupee will take cues from movement in the dollar index and Chinese yuan, dealers said.

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. However, dealers expect the RBI to intervene through dollar purchases if the rupee appreciates sharply. 

"They have not been intervening heavily, but they will have to after a point. Their forward book is too large. They have to start building on their reserves," said a dealer at state-owned bank. The RBI's net outstanding sales of dollar/rupee forward contracts climbed to a new high of $77.53 billion at the end of January. 

During the day, the rupee is seen moving in a range of 85.80-86.30 against the dollar. Dealers see technical resistance for the Indian unit at 85.90 a dollar.

India Rupee - World FX: Yen up after BoJ rate hike bets rise post econ data

MUMBAI – The Japanese yen rose 0.4% against the dollar as latest inflation print from Japan reinforced the view of an interest rate hike by the Bank of Japan at its upcoming policy meetings. Data released on Friday showed the country's core inflation, which excludes food costs, rose 3.0% in February, marginally higher than the 2.9% expected in a Reuters poll. A separate index that excludes fresh food and fuel costs and is closely gauged by the Bank of Japan rose 2.6% last month, against 2.5% in January. 

The pound sterling was down 0.2% against the greenback. On Thursday, the Bank of England kept benchmark rates unchanged at 4.5%, in a widely expected move. The central bank also warned against the assumption of rate cuts at upcoming meetings.

The euro was down 0.2% against the dollar after European Central Bank President Christine Lagarde hinted that the bloc's central bank was unable to gauge the interest rate trajectory amid rising uncertainties pertaining to US tariff policies and geopolitical tensions in the region. However, Lagarde said the process of disinflation remained "well on track", though the central bank's growth projections remain weak.

Tracking weakness in the pound sterling and the euro, the dollar index advanced on Friday. Further, US initial jobless claims data released Thursday showed that the number of Americans filing new applications for unemployment benefits rose less than expected last week. US weekly jobless claims rose by 2,000 to a seasonally adjusted 223,000 claims for the week ended Saturday. Economists had forecast 224,000 claims for the period.

At 1525 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 104.03, compared to 103.80 on Thursday and 103.46 on Friday. 

The Australian dollar was down 0.3% against the US unit as investor sentiment turned jittery across the globe amid rising uncertainties about Washington's trade policy. Tracking losses in the Australian dollar, the New Zealand dollar was down 0.1% against the greenback. The Swiss franc was down 0.2%

The Canadian dollar was down 0.1% against the US unit after Bank of Canada Governor Tiff Macklem on Thursday said the impact of higher tariffs from Washington loomed and the central bank might have to change the way it conducted monetary policy to become less-forward looking than usual. "So we need to set policy that minimizes the risk. That means being less forward-looking than normal until the situation is clearer," Macklem said. "And it may mean acting quickly when things crystallize. We need to be flexible and adaptable," he continued, without giving specific details.  (Gowri Lakshmi)

India Rupee: 1-year premium hits over 2-wk high as importers buy fwd dollars

MUMBAI – Premiums on dollar/rupee forward contracts were higher across tenors, with the one-year premium hitting over 2-week high, as banks purchased dollars for forward delivery on behalf of importers, likely related to their year-end payment requirements, dealers said. Further, some banks also bought forward dollars to take advantage of an arbitrage between the onshore and offshore non-deliverable forward levels, according to some dealers.

"There is definitely a slightly paying by importers, though the volume is quite less at our end," a dealer with a state-owned bank said. "I think some arbitrage paying is also there, but it will come down because of the swap." The Reserve Bank of India will conduct a $10 billion dollar/rupee buy/sell swap auction for a period of three years on Monday. 

The persistent liquidity deficit in the banking system also pushed premiums higher, dealers said. The net liquidity injected by the RBI, which is a proxy for systemic liquidity conditions, was INR 2.32 trillion Thursday against INR 2.23 trillion Wednesday.

The benchmark 10-year US Treasury yield edged down Thursday, which also pushed premiums higher, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries.

However, as traders expect forward premiums to fall before the scheduled dollar/rupee buy/sell swap auction by the RBI on Monday, some banks also sold forward dollars at relatively higher levels, dealers said. Earlier in the day, the one-year dollar/rupee forward premium hit 2.21% on an annualised basis, the highest in over two weeks.

The one-year forward premium was at 2.18% at 1417 IST against Thursday's 2.14%. On an absolute basis, it was 187.96 paise against 185.25 paise Thursday.  (Sourabh Kumar)

India Rupee: Surges as exporters sell dlrs; RBI's likely dlr buys cap rise

MUMBAI – The rupee surged to a 10-week high against the dollar on Friday as banks sold dollars on behalf of exporters, who wanted to meet their financial year-end payment obligations, leading to stop-losses being triggered on long dollar bets across multiple dollar/rupee levels, dealers said.

"86.20 (a dollar) was a well protected level, once the resistance at that level broke, traders sold off their dollar holdings," a currency trader at a brokerage firm said. "Multiple stop-losses would have triggered above 86.20 levels."  

A sharp rise in domestic equities also boosted the domestic currency, they said. At 1230 IST, the benchmark the Nifty 50 and the BSE Sensex were up 0.8% each. Earlier in the day, the rupee got a boost as foreign investment into Indian corporates spurred dollar sales by foreign banks, dealers said.

However, gains in the Indian currency were capped as some public sector banks stepped in to purchase the greenback, likely on behalf of the Reserve Bank of India to shore up its foreign exchange reserves, dealers said. The RBI is likely to have purchased the greenback, first at around 86.20 a dollar and then at around 86.10, they said. However, the central bank's intervention was not seen as aggressive in nature, according to dealers. 

"RBI buying (dollars) is there but it is not really reflected on the levels, likely they are purchasing only minimum quantum, otherwise rupee would have fell below 86.30 (a dollar)," a dealer at a private bank said. 

Further, 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, which also weighed on the Indian unit, dealers said. 

For the rest of the day, the rupee is seen moving in a range of 86.00-86.50 against the dollar. Dealers see immediate technical resistance for the Indian unit at 86.00 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Mar 21

MUMBAI – At 1053 IST, the rupee was at 86.2375 per dollar. At 0900 IST, the rupee was at 86.2275 a dollar, against the previous close of 86.3675. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Sourabh Kumar)

India Rupee: Pares some gains as importers buy dlrs; FX inflows into cos aid

MUMBAI – The rupee erased some of its early gains against the dollar as public sector banks rushed to purchase the greenback on behalf of oil marketing companies and other importers, noting the relatively lower dollar/rupee levels, dealers said. 

The rupee rose to a high of 86.1925, its highest level since Jan. 24, in early trade as foreign investment into Indian corporates spurred dollar sales by foreign banks, dealers said. "Some foreign banks were heard selling almost a yard ($1 billion) in the morning. Even in NDF (non-deliverable forward) market in the morning, the rupee was rising probably due to the flows," a dealer at a state-owned bank said. 

A slight rise in domestic equities also supported the Indian unit, according to some dealers. At 0955 IST, the benchmark indices, the Nifty 50 and the BSE Sensex, were up 0.3% each.  

The dollar index recovered on Friday due to weakness in the Japanese yen and the pound sterling, which also exerted some some pressure on the Indian unit, dealers said.

On Thursday, US initial jobless clims data showed that the number of Americans filing new applications for unemployment benefits rose last week, suggesting uncertainty about the health of the labour market. US weekly jobless claims saw a rise of 2,000 to a seasonally adjusted 223,000 for the week ended Mar. 15. Economists polled by Reuters had forecast only 224,000 claims for the period. 

At 0955 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 104.03, compared to 103.80 on Thursday and 103.46 on Wednesday.

For the rest of the day, the rupee is seen moving in a range of 86.00-86.50 against the dollar. Dealers see immediate technical resistance for the Indian unit at 86.15 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Mixed; Taiwan dollar, Philippines peso down

MUMBAI – Asian currencies traded on a mixed note against the dollar on Friday as investors continued to assess the health of the US economy after the release of recent economic data, and in view of the tariff policies of US President Donald Trump.

Data released Thursday showed tht the number of Americans filing new applications for unemployment benefits rose last week. US weekly jobless claims rose by 2,000 to a seasonally adjusted 223,000 for the week ended Mar. 15. Economists polled by Reuters had forecast 224,000 claims for the period. 

At 0815 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 103.86, compared to 103.80 on Thursday and 103.46 on Wednesday. The Indonesian rupiah was down 0.1% against the dollar due to a rise in the dollar index. The Malaysian ringgit was steady against the greenback on Friday. 

The Philippines' peso was down 0.1% against the greenback. The Philippines' central bank governor Eli Remolona said the central bank would resist any large volatility in the peso, particularly if the currency was weakening. His remarks came against the backdrop of Indonesia's and Turkey's markets turning volatile this week. "A big swing toward the direction of depreciation tends to be inflationary," Remolona said in an interview with Bloomberg. "So we worry about that, so we have to somehow resist that."

The Chinese yuan traded flat against the greenback. The South Korean won was steady against the greenback as a strong dollar index was offset by a rise in the country's producer price index. The index rose to 120.33 in February from 120.27 a month prior.

The Taiwan dollar was down 0.1% against the greenback. On Thursday, Taiwan's central bank held its benchmark lending rates, as expected, prompted by concerns over inflation and uncertainty pertaining to US trade policies. Taiwan's central bank lowered the country's GDP forecast for this year to 3.05% from 3.13% in December, which weighed on its currency.

The Thai baht was down 0.3% against the greenback. Losses in the currency were limited as reports on Thursday showed that Bank of Thailand may relax some mortgage rules to revamp its sluggish property sector, thereby supporting the economy.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Mar 21

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:

(Pratiksha and Sourabh Kumar)

End

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

Edited by Akul Nishant Akhoury

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