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Informist, Friday, Apr. 4, 2025

By Sourabh Kumar

MUMBAI – The rupee surged on Friday and ended at an over three-month high against the dollar due to a slump in the dollar index, dealers said. The dollar index fell sharply as investors weighed in on the possibility of a recession in the US after President Donald Trump announced reciprocal tariffs on trading partners. Gains in the Indian currency were limited as some banks purchased the greenback, likely on behalf of the Reserve Bank of India, at multiple dollar/rupee levels, dealers said. 

"It (rupee) opened sharply higher because of the dollar index, but the gains were limited as there were some buying interest from a few importers as well as the central bank," a dealer with a foreign bank said.  

After opening at 85.0475 a dollar, the rupee settled at 85.2350 a dollar as against 85.4300 on Thursday. A rise in other Asian currencies also aided the rupee, dealers said. Indian currency rose 0.2% against the US currency, while other major Asian currencies appreciated 0.1%-0.8%.

Opening nearly 40 paise higher, the rupee found further support and rose to 84.9475 a dollar – the highest level since Dec. 18 - within half an hour. The rupee found support as the dollar index fell to a six-month low of 101.27 on Thursday on fears of a global recession after Trump announced reciprocal tariffs. The US action triggered safe-haven demand, though most investors turned their attention to other safe-haven assets such as gold, Japanese yen, and Swiss franc. This weighed on the dollar index.

At 1530 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.52. Though the index recovered slightly from Thursday, it was still below 103.69 on Wednesday.

Weaker growth in the US services sector also weighed on the dollar index. According to the Institute for Supply Management, the non-manufacturing purchasing managers' index fell to 50.8 in March, down from 53.5 in February. It was also sharply lower than 53.0, estimated in a Reuters poll. 

In a truncated week because of market holidays on Monday and Tuesday, the rupee continued to rise due to lower dollar index and foreign fund inflows. On a week-on-week basis, the Indian currency settled 0.3% higher against the greenback. 

While the rupee received support from a weak dollar index on Friday, gains in the Indian currency were capped as some banks purchased the greenback on behalf of importers, dealers said. Importers, including oil marketing companies, bought the greenback, taking advantage of lower dollar/rupee levels, dealers said. A fall in the domestic equities also limited the rise in the Indian rupee, dealers said. Nifty 50 closed 1.5% down and BSE Sensex ended 1.2% lower on Friday. 

Further, some banks also purchased the greenback, likely for the RBI to shore up its foreign exchange reserves, dealers said. This further limited the upward movement in the rupee, dealers said. 

FORWARDS

The premium on the one-year dollar/rupee forward contract hit an over 10-week high Friday, tracking a fall in yield on US Treasury notes, dealers said. The yield on the benchmark 10-year US Treasury note fell sharply as investors weighed in on the possibility of a recession in the US after President Donald Trump announced tariffs on several countries.

After closing 14 bps down at 4.06% on Thursday, the 10-year US Treasury yield fell further and was trading below 3.90% in European trade on Friday. Dealers expect the downward movement in US Treasury yields to keep the dollar/rupee forward premium elevated. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Aiding the rise in forward premiums was the purchase of greenback for forward delivery by some banks to take advantage of the arbitrage between the offshore non-deliverable forward and onshore forward rates, dealers said.

While premiums on longer tenor dollar/rupee forward contracts rose, those on shorter tenors dipped on Friday. Short-term forward premiums were down due to improved domestic liquidity conditions and a bleaker outlook on the US dollar, dealers said. The net liquidity absorbed by the Reserve Bank of India rose to INR 2.16 trillion on Thursday from INR 1.93 trillion on Wednesday.

At 1530 IST, the one-year forward premium was 198.94 paise against Thursday's close of 191.05. On an annualised basis, the premium was 2.33%, up from Thursday's close of 2.24%.

OUTLOOK

On Monday, the rupee will take cues from the movement of the dollar index and offshore Chinese yuan, dealers said. Market participants will keep a close watch on developments related to tariffs.

Amid the risk-off sentiment among investors, dealers expect overseas investors to continue exiting the domestic equity market, which may put some pressure on the rupee. However, foreign fund inflows into the government debt market are likely to continue, dealers said.

During the day, the rupee is seen moving in a range of 84.80-85.80 against the dollar. Dealers see technical resistance for the Indian unit at 84.80 a dollar.

The forward premium is also expected to inch up a bit, dealers said. However, some banks may sell forward dollars before the RBI's Monetary Policy Committee meeting outcome on Wednesday. 

India Rupee - World FX: Euro down as German factory orders stagnate in Feb

MUMBAI – The euro fell 0.5% against the US dollar Friday after industrial orders in February unexpectedly stagnated in Germany, the largest economy in the eurozone. German industrial orders stagnated amid rising concerns over the impact of reciprocal tariffs by the US. The data released Friday showed domestic orders fell 1.2% sequentially, while foreign orders rose 0.8%. A Reuters poll had estimated a rise of 3.5% in industrial orders. 

Following the fall in the euro, the dollar index was off its lows but remained broadly weak. The dollar index had hit a six-month low of 101.27 on Thursday after US President Donald Trump's reciprocal tariffs against major trading partners were more aggressive than expected, leading to fears of a full-blown trade war, which could trigger a global recession.

Data released by the Institute for Supply Management showed US non-manufacturing purchasing managers' index slowed to a nine-month low of 50.8 in March from 53.5 in February. The data, released Thursday, was also below a Reuters poll of 53.0, adding to the slew of recent weaker-than-expected economic data from the US. At 1431 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies was at 102.45, compared with 101.94 on Thursday and 103.69 on Wednesday.

Market participants are keenly waiting for the non-farm payrolls for March, due later in the day for more cues on the health of the US labour market. Traders will also assess the speech by US Federal Reserve Chair Jerome Powell due later Friday, to get insights on the Fed's outlook on interest rates. 

The Japanese yen was down 0.2% against the US currency, tracking a slight uptick in the dollar index. Data showed that Japan's household spending fell 0.5% on year in February. While the fall was less than expected, it was the first decline time in three months. 

The Australian dollar and the New Zealand dollar were down 1.9% and 1.8%, respectively. The Swiss franc was up 0.5% against the greenback due to safe-haven demand amid rising concerns on global growth and inflation. 

The pound sterling declined 0.9% against the greenback due to a slight recovery in the dollar index. However, losses were limited after the construction purchasing manager's index in March rose to 46.4 from 44.6. A PMI reading below 50 indicates a contraction in the sector. The Canadian dollar was down 0.3% ahead of unemployment data for March, due later in the day.  (Gowri Lakshmi)

India Rupee: 1-year fwd premium hits 10-week high tracking fall in US yields

MUMBAI – The premium on the one-year dollar/rupee forward contract hit over a 10-week high Friday, tracking a fall in yields on most US Treasury notes, dealers said. The yield on the benchmark 10-year US Treasury note fell over 20 basis points as investors weighed in the possibility of a recession in the US after President Donald Trump announced tariffs on several countries.

After closing 14 bps down at 4.06% on Thursday, the 10-year US Treasury yield fell further and was trading near 3.96% in early European trade Friday. Dealers expect the downward movement in US Treasury yields to keep dollar/rupee forward premium elevated. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

"The long-term has inched higher, and that is because of a fall in UST," a dealer with a state-owned bank said. "I think the premium will remain higher given the possibility of more fall in US yields."

So far this week, which was shortened due to market holidays on Monday and Tuesday, the one-year forward premium has risen over 10 bps. During the same time, the benchmark 10-year US Treasury yield has fallen over 25 bps. So far in the day, the one-year exact period dollar/rupee forward premium hit a high of 2.32%. It is the highest since premiums climbed to 2.34% on Jan. 22.

At 1343 IST, the one-year dollar/rupee forward premium was 197.81 paise against 191.05 paise on Thursday. On an annualised basis, the one-year premium was 2.32% against Thursday's close of 2.24%.

Aiding the forward premium's upward move was also some banks who purchased the greenback for forward delivery to take advantage of the arbitrage between the offshore non-deliverable forward and onshore forward rates, dealers said. 

While premiums on longer tenor dollar/rupee forward contracts rose, those on shorter tenors dipped on Friday. At 1320 IST, forward premiums from one-month to five-month tenors were down, whereas premiums on higher tenors were up. Short-term forward premiums were down due to improved domestic liquidity conditions and a bleaker outlook on the US dollar, dealers said. 

"Due to such a fall in the dollar index, and possibility of a further fall in the dollar, people are reversing their positions in near-ends, and so there is receiving going on," a dealer with another state-owned bank said. 

Before recovering slightly, the dollar index had fallen to a six-month low of 101.27 on Thursday. Consequently, the rupee surged on Friday, rising above 85 a dollar, before falling back. At 1327 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was 102.31.

A surplus liquidity in the banking system aided near term forward premiums, dealers said. The Reserve Bank of India absorbed a net INR 2.16 triliion on Thursday against INR 1.93 trillion absorbed on Wednesday.

Further, the RBI's Monetary Policy Committee is scheduled to decide interest rates next week. As per market participants, the MPC is likely to cut the repo rate by 25 bps on Wednesday. Some banks also sold forward dollars before the monetary policy outcome, which weighed on the near-term forward premiums, dealers said. 

However, most dealers said a substantial change in forward premiums across tenors would be visible after the rate decision on Wednesday. "I think the 25 bps rate cut has already been priced in, still, I see 1-year (forward premium) falling to about 2.18% should they keep the stance unchanged and only cut 25 bps," a dealer with the state-owned bank said. "But if they cut 25 bps and then they also change the stance, then we could see 1-year falling to about 2.05%-2.10%."  (Sourabh Kumar)

India Rupee: Off high as PSU banks buy dollars likely for RBI, importers

MUMBAI – The rupee was off its earlier high against the dollar as some public-sector banks stepped in to purchase dollars, likely on behalf of the Reserve Bank of India, dealers said. The rupee had risen to a high of 84.9575 earlier in the day, its highest level since Dec. 20.

The RBI likely purchased the greenback at multiple dollar/rupee levels above 85.00 per dollar to shore up its foreign exchange reserves, dealers said. "They (RBI) came soon after 85.00 happened. Looks like finally we know which point is the hard stop for rupee. It is 85.00 for now," said a dealer at a private bank.

The rise of the rupee was limited also 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. "Earlier importers were expecting the dollar index to fall more and the rupee to rise further, so they (importers) waited for some time. But later on, buying pressure came," a dealer at a state-owned bank said. 

The dollar index tumbled to a six-month low on Thursday as the reciprocal tariffs announced by US President Donald Trump against major trading partners were more aggressive than expected, which triggered fears of a full-fledged global trade war, leading to a recession in the US. At 1315 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 102.19, compared to 101.94 on Thursday and 103.69 on Wednesday. The index had fallen to 101.27 on Thursday, its lowest level since Oct. 2.

A sharp fall in domestic equities also weighed on the rupee, according to some dealers. At 1315 IST, the benchmark indices, the Nifty 50 and BSE Sensex, were down 1.3% and 1.0% respectively.

For the rest of the session, the rupee is seen moving in a range of 84.90-85.30 against the dollar. Dealers see immediate technical resistance for the Indian unit at 84.90 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Apr 4

MUMBAI – At 1138 IST, the rupee was at 85.1950 per dollar. At 0900 IST, the rupee was at 85.0475 a dollar, against the previous close of 85.4300. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Pratiksha)

India Rupee - Asia FX: Most up as dollar index slips to 6-month low; yuan dn

MUMBAI – Most Asian currencies traded higher against the dollar Friday as the dollar index hit a six-month low on Thursday after US President Donald Trump's reciprocal tariffs against major trading partners were more aggressive than expected, leading to fears of a full-blown trade war, which could trigger a global recession.

Further, the US ISM non-manufacturing purchasing managers' index for March slowed to a nine-month low of 50.8 from 53.5 in February. The data, released Thursday, was also below a Reuters poll of 53, adding to the slew of weaker-than-expected economic data from the US recently. 

At 0951 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.66, compared to 101.94 on Thursday and 103.69 on Wednesday. The index fell to 101.27 on Thursday, its lowest level since Oct. 2. 

The Taiwan dollar was up 1.1% against the US dollar. Taiwan said Thursday that the tariffs levied by the US were unreasonable and it would engage in bilateral talks with Washington DC. "We feel that these measures are unreasonable, and we are also worried about the possible impact on the global economy," President Lai Ching-te said on his Facebook page. Taiwan is subject to 32% reciprocal tariff for its exports to the US.

The South Korean won was up 0.9% against the greenback. In the latest political development, a South Korean court has ruled to remove President Yoon Suk Yeol from office over his declaration of martial law. The constitutional court unanimously voted to oust Yoon and paved the way for presidential election to take place within the next 60 days.

The Malaysian ringgit was up 0.5%, while the Indonesia rupiah rose 0.5%. The Philippines peso was up 0.4% against the US unit. However, gains in the Philippines' currency were capped after data on Friday showed the annual inflation rate slowed to a near five-year low. Consumer price index inflation was 1.8% in March, the lowest since May 2020 and below a Reuters poll of 2%. 

The Thai baht was up 0.3% against the US dollar. Thailand's finance minister Pichai Chunhavajira Thursday said the country's economic growth could be reduced by 1 percentage point due to the imposition of harsher than  expected tariffs by the US. To maintain exports, Thailand will import more US goods, remove some tariffs on US exports into Thailand, and negotiate non-tariff trade barriers on US goods, Chunhavajira said. The US on Thursday imposed an adjusted 36% reciprocal tariff on Thailand. 

Bucking the trend, the Chinese yuan was down 0.2% against the greenback after the US imposed aggressive tariffs on Beijing. Trump said Thursday that he would consider a trade deal with China for TikTok if Beijing approves the sale of the app in exchange for relief from US import tariffs. TikTok faces an Apr. 5 deadline to reach a deal to find a non-Chinese buyer under threat of being banned from the US.

Further, data on Thursday showed China's Caixin services PMI rising to 51.9 in March from 51.4 in February. A PMI reading above 50 indicates expansion in the sector. Data released Thursday showed the country's composite PMI rising to 51.6 in March from 50.6 a month prior.  (Gowri Lakshmi)

India Rupee: Sees best opening in 10 months as dlr index slips to 6-mo low

MUMBAI – The rupee surged against the US dollar, posting its biggest opening gain in nearly 10 months, as the dollar index slumped to a six-month low on Thursday, dealers said. "This kind of rise is not due to any flows, this is purely from the general dollar weakness," a dealer at a private bank said. "It's hard to say where the rupee will go now but due to the dollar weakness, we can an expect sharp uptick (in rupee)." 

The dollar index tumbled to a six-month low on Thursday after reciprocal tariffs announced by US President Donald Trump against major trading partners were more aggressive than expected, triggering fears of a full-fledged global trade war and recession. With concerns looming over the health of the US economy and global growth due to the tariffs, the US dollar lost its safe-haven appeal as investors moved to other haven assets, further weighing on the US unit.  

"The slump (in dollar index) came despite the highly publicised announcement of reciprocal tariffs by the US administration, raising questions about whether protectionist measures are now hurting more than helping," Amit Pabari, managing director at CR Forex, said in a note. 

At 0945 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 101.63, compared to 101.94 on Thursday and 103.69 on Wednesday. The index fell to 101.27 on Thursday, its lowest level since Oct. 2. 

Notably, despite the sharp rise in the Indian unit, importers remained on the sidelines as they expect the rupee to rise further during the day, dealers said. The domestic currency touched an over three-month high of 84.9575 in early trade. "Most importers have hedged long before these levels, so until we see further rise, importers' (buying dollars) pressure may not be there," another dealer at a private bank said.

Some dealers also said if the rupee rises above 84.90 a dollar, the Reserve Bank of India might intervene through dollar purchases to shore up its foreign exchange reserves. During the day, the rupee is seen moving in a range of 84.90-85.20 against the dollar. Dealers see key technical resistance for the Indian unit at 84.90 a dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Apr 4

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: 

(Gowri Lakshmi and Pratiksha)

End

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

Edited by Saji George Titus

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