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Informist, Wednesday, Apr. 2, 2025

By Gowri Lakshmi

MUMBAI – The rupee erased almost all losses and ended largely steady against the dollar Wednesday as dollar sales by foreign banks for foreign fund inflows offset the negative impact of dollar purchases by importers, dealers said. Most market participants also exercised caution ahead of US President Donald Trump's reciprocal tariff announcement later in the day, dealers said. 

"There was both buying and selling (of dollars) today (Wednesday) and the market moved in both directions," a currency trader at a brokerage firm said. "Except for the morning rush, there wasn't a panic buying (of dollars) situation in the market. Everyone is waiting for the tariff news."

After hitting a low of 85.7250 a dollar earlier in the day, the rupee settled at 85.4975 a dollar, against 85.4700 on Friday. Movements in other Asian currencies were mixed ahead of the US tariff announcements. The South Korean won logged 0.5% gains against the greenback while the Malaysian ringgit fell 0.4%. The Indian unit moved in a range of over 20 paise during the day.

The rupee opened sharply lower against the dollar as investors' risk appetite took a beating ahead of the announcement of reciprocal tariffs, dealers said. On Tuesday, the White House confirmed that Trump would proceed with imposing the tariffs on Wednesday but did not provide details about the size and scope of the new trade policies. 

Banks also bought dollars on behalf of foreign portfolio investors who exited the domestic stock market on Tuesday, which pulled the rupee to the day's low of 85.7250 shortly after opening, dealers said. The Indian unit also came under pressure as some banks rushed to purchase the greenback on behalf of oil marketing companies and other importers, who feared a sharp depreciation in the Indian unit after the tariff announcements, dealers said.

"FPI outflows from yesterday (Tuesday) impacted the opening levels coupled with dollar demand from oilers (oil importers) and importers at that hour," a dealer at a state-owned bank said. "Some (importers) mostly purchased dollars in anticipation of a fall in rupee after Trump's tariff news." 

However, the rupee erased most of its losses as some foreign banks, including a UK-based bank, sold the greenback for foreign fund inflows, likely into Indian corporates, dealers said. Some foreign fund inflows were also on account of foreign portfolio investors investing in the debt market, according to some dealers. In March, FPIs infused almost $3 billion in the debt market on expectations of a rate cut by the Reserve Bank of India's Monetary Policy Committee on Apr. 9.

The dollar index remained broadly steady ahead of the sweeping new reciprocal tariffs on global trading partners. Reciprocal tariffs will take effect as soon as Trump announces them, while the latest 25% tariff on auto imports will take effect Thursday. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 104.18, compared with 104.20 on Tuesday and 104.18 on Monday.

A sharp rise in domestic equities boosted the local currency, according to dealers. Equity indices rose on 

strong growth in goods and services collections and hopes that Trump will be lenient on India. The Nifty 50 closed at 23332.35 points, up 0.7%, and the BSE Sensex closed at 76617.44 points, up 0.8%.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended largely steady on Wednesday as traders avoided placing large bets ahead of the announcement on reciprocal tariffs, dealers said.

The one-year dollar/rupee forward premium had fallen in early trade in reaction to a surplus rupee liquidity in the banking system and on the view that the liquidity would improve further, dealers said. The RBI on Tuesday said it would purchase gilts worth INR 800.00 billion through four separate open market auctions this month, starting with an auction for INR 200.00 billion on Thursday. Data released on Tuesday showed the central bank absorbed INR 893.99 billion on Sunday, up from INR 716.72 billion on Saturday.

Some banks purchased forward dollars to take advantage of the arbitrage between the onshore forwards and offshore non-deliverable forwards rates, which supported the premiums, dealers said.

At 1530 IST, the one-year forward premium was 187.00 paise against Friday's close of 187.27. On an annualised basis, the premium was 2.18% against Friday's 2.19%.

OUTLOOK

On Thursday, the rupee will take cues from the movement in the dollar index after Trump announces the reciprocal tariffs, dealers said. Market participants are of the view that if the nature of US tariffs imposed on India is less aggressive, the rupee will rise sharply or hold the current levels in the near term. However, if the tariffs are not in favour of India, the rupee is likely to fall to 86.00 a dollar, dealers said.

"Tomorrow's (Thursday) range could be anywhere between 85-86 (a dollar) depending on the tariffs that will be announced by President Trump," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

The rupee will also take cues from the movement in crude oil prices and offshore Chinese yuan, dealers said. During the day, the rupee is seen moving in a range of 85.40-86.00 against the dollar. Dealers see technical support for the Indian unit at 86.00 a dollar.

India Rupee: Premium steady; mkt avoids large bets before US tariff rollout

MUMBAI – The premium on the one-year dollar/rupee forward contract was steady Wednesday as most market participants remained on the sidelines, avoiding large bets ahead of US President Donald Trump's announcement regarding reciprocal tariffs later in the day, dealers said.

The one-year dollar/rupee forward premium had fallen in early trade in reaction to a surplus rupee liquidity and on the view that the liquidity would improve further, dealers said. However, some banks purchased forward dollars, taking advantage of the arbitrage between the onshore forwards and offshore non-deliverable forwards rates, dealers said. This offset the impact of a surplus rupee liquidity on forward premiums, dealers said.

"There is some onshore-offshore arbitrage, which is keeping it higher," a dealer with a state-owned bank said. "There is also quite a good fall in US yields, which have kept the premiums higher. But the tariff announcement at night is something all of us are waiting for."

Yields on most US Treasury notes fell Tuesday, with the 10-year US Treasury yield falling 6 basis points, after data showed a contraction in the US manufacturing sector last month. As per a survey by the Institute for Supply Management, the US manufacturing purchasing managers' index fell to 49.0 in March from 50.3 the month earlier. A reading below 50 indicates contraction in the sector, while one above it shows expansion. A fall in US Treasury yield pushed premiums higher, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

At home, data released Tuesday showed that the central bank absorbed INR 893.99 billion on Sunday, up from INR 716.72 billion on Saturday. A surplus liquidity in the banking system weighed on premiums, dealers said. The RBI on Tuesday said it would purchase gilts worth INR 800.00 billion through four separate open market auctions this month, starting with an auction for INR 200.00 billion on Thursday. 

"The liquidity surplus is likely to continue to increase as the latest open market operations purchase of INR 800 billion follows through, further supported by the upcoming bumper RBI dividend at end-May," Barclays said in a report.

Further, some dealers expect forward premiums to start falling next week, before the RBI's Monetary Policy Meeting meeting outcome on Apr. 9. At 1422 IST, the one-year forward premium was 188.50 paise against Friday's close of 187.27. On an annualised basis, the premium was 2.19%, similar to Friday's close. Foreign exchange market was closed on Monday for Ramzan-Id and on Tuesday to allow banks to close their yearly accounts. (Sourabh Kumar)

India Rupee - World FX: Dollar index steady ahead of US tariff announcements

MUMBAI — The dollar index remained broadly steady on Wednesday ahead of US President Donald Trump's tariff announcements. Trump is poised to impose sweeping reciprocal tariffs on global trading partners later in the day, with the reciprocal tariffs taking effect immediately after his announcement. The latest 25% tariff on auto imports will take effect on Thursday. 

At 1455 IST, the dollar index, which measures the dollar's strength against a basket of six major currencies, was at 104.17, compared to 104.20 on Tuesday and 104.18 on Monday. The dollar index fell on Tuesday after the US ISM manufacturing purchasing managers' index dropped to 49.0 in March from 50.3 in February. A PMI reading below 50 indicates a contraction in the sector. Further, the job openings also fell in February amid rising concerns over the impact of tariffs on the US economy. Job openings dropped 194,000 to 7.5687 million in February, data showed on Tuesday. 

The US ISM manufacturing PMI and the job openings and labour turnover survey added to the slew of weak economic data from the US, spurring fears of a recession in the world's largest economy. The Swiss franc was down 0.1% against the greenback.

The euro was up 0.1% against the greenback. On Tuesday, European Union Commission head Ursula von der Leyen said the bloc has a 'strong plan' to retaliate against tariffs imposed by the US but the bloc would prefer negotiating before proceeding with retaliatory measures. "Europe holds a lot of cards. From trade to technology to the size of our market," Ursula said. "But this strength is also built on our readiness to take firm countermeasures if necessary."

Data on Tuesday showed that the Eurozone inflation fell for the second consecutive month and slipped to 2.2%, strengthening the view that the European Central Bank will cut rates in April.

The Japanese yen traded flat against the US dollar ahead of the US tariff announcements. The New Zealand dollar was up 0.7% against the greenback after positive economic data from China. Data on Tuesday showed that China's manufacturing activities expanded at its fastest pace in 12 months with PMI at 50.5. Further, Chinese authorities are planning a nationwide expansion of the cash-pooling program, a draft regulation on Tuesday said. The Australian dollar was up 0.4% against the US unit. Both Australia and New Zealand share close trade relations with China. 

The pound sterling was flat against the greenback. On Tuesday, Bank of England policymaker Megan Greene said that higher US tariffs could weaken the UK's inflation and stressed that wage growth in the UK was easing slower than needed to keep the inflation on target. 

The Canadian dollar too traded flat against the greenback. On Tuesday, reports said that Ottawa will not impose retaliatory tariffs on most US agricultural and other essentials to avoid a weakening of the labour market.  (Gowri Lakshmi)

India Rupee: Erases some losses as foreign banks sell dollars for FX inflows

MUMBAI – The rupee erased some of its losses against the dollar as foreign banks sold the greenback for foreign fund inflows, dealers said. The rupee had fallen to a low of 85.7250 a dollar earlier in the day. 

Foreign banks, including a UK-based bank, sold the greenback for foreign-fund inflows, likely into some Indian corporates, dealers said. Some foreign fund inflows were also on account of foreign portfolio investors investing in the government debt market, according to some dealers. 

"The initial buying (of dollar) pressure has come down. Now some selling (of dollars) have happened. The rupee should be steady for the rest of the day and a clearer picture (on rupee levels) will get once tariff announcements come," a dealer at a state-owned bank said. US President Donald Trump is poised to impose sweeping new reciprocal tariffs on global trading partners later in the day. Reciprocal tariffs would take effect immediately after Trump announces them, while a 25% tariff on auto imports will take effect on Thursday. 

If the nature of US tariffs imposed on India is less aggressive, dealers expect the rupee to rise sharply. "If tariffs is in favour of India, then we can expect the rupee to appreciate," a currency trader at a state-owned bank said. "If there are aggressive tariffs then we can expect the rupee to breach 86 (a dollar) sooner than expected."

The dollar index was broadly steady ahead of the US tariff announcements. On Tuesday, the White House confirmed that Trump would proceed with imposing the tariffs on Wednesday, but did not provide details about the size and scope of the new trade policies. At 1231 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 104.24, compared with 104.20 on Tuesday and 104.18 on Monday.

For the rest of the day, the rupee is seen moving in a range of 85.45-85.80 against the dollar. Dealers see immediate technical resistance for the Indian unit at 85.50 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Apr 2

MUMBAI – At 1036 IST, the rupee was at 85.6400 per dollar. At 0900 IST, the rupee was at 85.6750 a dollar, against the previous close of 85.4700. 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: Sharply down on weak risk sentiment ahead of US tariff measures

MUMBAI – The rupee was sharply down against the US dollar on Wednesday as investors sentiment turned weak ahead of the announcement of reciprocal tariffs by US President Donald Trump later in the day, dealers said. "The market (dollar/rupee) is seen moving upward. Banks are building long (dollar) positions and there are importer buys (of dollars)," a dealer at a state-owned bank said. 

The rupee came under pressure as banks purchased the greenback on behalf of oil marketing companies and other importers, fearing further fall in the rupee, dealers said. On Tuesday, the White House confirmed that Trump would proceed with imposing tariffs on Wednesday, but did not provide details about the size and scope of the new trade policies. 

Some banks also purchased the greenback on behalf of foreign portfolio investors, who exited the domestic stock market on Tuesday, according to some dealers. On Tuesday, the benchmark indices, the Nifty 50 and the BSE Sensex, ended down 1.5% and 1.8%, respectively. While the stock market was open on Tuesday, the foreign exchange market was closed. The rupee dropped to a low of 85.7250 a dollar in early trade on Wednesday. 

The dollar index remained steady ahead of the tariff announcements. At 0944 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies was at 104.20, unchanged from 104.20 on Tuesday and 104.18 on Monday. The index fell on Tuesday after the US ISM manufacturing purchasing managers' index dropped to 49.0 in March from 50.3 in February. A PMI reading below 50 indicates contraction in the sector. This data adds to the slew of weak economic data from the US of late, spurring fears of a recession in the world's largest economy.

During the day, the rupee is seen moving in a range of 85.50-85.90 against the dollar. Dealers see key technical support for the Indian unit at 85.75 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Mixed ahead of Trump's reciprocal tariff announcement

MUMBAI – Asian currencies were mixed against the dollar on Wednesday as investors waited for US President Donald Trump's announcement on reciprocal tariffs. Ahead of the announcement later in the day, the dollar index remained steady. The index, which measures the strength in the greenback against a basket of six major currencies, was at 104.21 at 0839 IST, against 104.20 on Wednesday and 104.18 on Tuesday.

The US dollar came under pressure as data released on Tuesday showed contraction in the US manufacturing sector. As per a survey by the Institute for Supply Management, the US manufacturing purchasing managers' index fell to 49.0 in March from 50.3 the month earlier. A reading below 50 indicates contraction in the sector, while one above it shows expansion.

The South Korean won was up 0.4% against the greenback after inflation in the far-east nation rose more than expected in March. Consumer prices rose 2.1% on year last month, against the expectation of 2.0% in a Reuters poll. It was also above February's print of 2.0%. The latest inflation data may complicate Bank of Korea's further action on interest rates.

The South Korean central bank had slashed the benchmark rate by 25 basis points at its last meeting in February. It had said more rate cuts were on the cards this year. The Bank of Korea targets inflation at 2.0% in the medium term.

The Taiwan dollar was steady against the US dollar as market participants awaited details about Trump's reciprocal tariffs. The Philippines peso was also steady against the greenback. The Indonesian rupiah fell 0.1% against the greenback, while the Malaysian ringgit was down 0.3%. The Thai baht rose 0.1%.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Apr 2

MUMBAI – Following are the expected support and resistance levels for the rupee on Wednesday, 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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