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Informist, Wednesday, Apr. 16, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended higher against the dollar for the third successive trading day Wednesday as the dollar index fell and banks sold dollars on behalf of foreign portfolio investors, dealers said. However, banks purchased dollars for importers and, possibly, for the Reserve Bank of India, capping the rise of the Indian currency, dealers said. 

After rising to a high of 85.5050, the rupee settled at 85.6775 a dollar, compared with its previous close of 85.7725. The Indian currency moved in a range of about 22 paise Wednesday.

Barring the Indonesian rupiah, most other Asian currencies strengthened against the greenback and rose 0.1-1.1%. The Thai baht was the best perfomer amongst regional peers.

The rupee opened higher against the dollar at 85.6100 as banks sold the greenback on behalf of overseas investors who were looking to invest in the domestic stock market, dealers said. The Nifty 50 and the BSE Sensex ended up 0.5% and 0.4%, respectively, on the day. Some foreign-fund inflows into government bonds also supported the rupee, dealers said.

"The flows have started coming in, especially after the 90-day pause on tariff imposition by the US," a dealer at a state-owned bank said. "Investor sentiment has shifted and is now moving on a positive note despite the uncertainties. So that is bringing in the flows," another dealer at the same bank said.

The dollar index declined Wednesday as the continuing tariff war between the US and China pushed investors away from the dollar towards other safe-haven assets. Amid the uncertainty surrounding the trade policies of the US, the dollar has lost its standing as a safe-haven currency. Consequently, currencies such as the euro, the Japanese yen, and the Swiss franc have gained on safe-haven flows.

In the latest development in the tariff war, Washington said Tuesday that China now faces up to 245% tariff as a result of its retaliation to US measures. China has retaliated with tariffs on imports from the US, with the cummulative tariff amounting to 125%. On Tuesday, Beijing asked the country's airlines to refrain from taking delivery of new Boeing planes and suspended purchases of aircraft-related equipment and parts from US-based companies.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.53, down from 100.10 Tuesday and 99.64 Monday. The index had hit an over-three-year low of 99.01 Friday.

Some traders also unwound their existing long dollar positions because of sustained weakness in the dollar index, which boosted the Indian currency, dealers said. However, as the rupee hit the day's high of 85.5050 a dollar, some public-sector banks stepped in to purchase dollars, possibly on behalf of the RBI, which limited the rupee's rise, dealers said. Importers remained on the sidelines for a couple of hours after the domestic spot market opened, anticipating a further rise in the Indian unit. 

Indian corporations and other importers bought dollars when the rupee was trading at around 85.65 a dollar and above, as the central bank likely prevented the rupee from rising sharply above 85.50 a dollar, dealers said. "For the time being, even if the rupee rises, it will be range-bound and is unlikely to rise above 85.50 and 85.45 a dollar," a currency trader at a private bank said. 

FORWARDS

After hitting a two-week low earlier in the day, the one-year exact-period dollar/rupee forward premium ended steady Wednesday after some banks bought dollars for forward delivery at relatively lower levels, dealers said.

The one-year forward premium fell to a two-week low of 2.15% in early trade Wednesday after data released Tuesday showed that India's CPI inflation fell to an over-five-year low in March. This has raised expectations of a rate cut at the next meeting of the RBI's Monetary Policy Committee in June, dealers said.

Data released Tuesday showed India's headline CPI inflation fell to 3.34% because of a decline in food inflation. This was the second consecutive month that CPI inflation was below the RBI's medium-term target of 4%.

After the RBI changed its policy stance to accomodative on Apr. 9, dealers anticipate more rate cuts by the RBI, which has dragged forward premiums lower. Since the RBI cut the repo rate and changed its stance, the one-year exact-period dollar/rupee forward premium has fallen about 10 basis points. During the same period, the yield on the 10-year benchmark US Treasury note has risen 9 bps. Forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the premium on the one-year exact period dollar/rupee forward contract ended at 187.16 paise, largely unchanged from Tuesday and down from 190.86 paise Friday. On an annualised basis, the premium ended at 2.18%, similar to Tuesday. 

OUTLOOK

On Thursday, the rupee will take cues from the movement of the dollar index and the offshore Chinese yuan, dealers said. Both the dollar index and the Chinese yuan are likely to remain under pressure. While a fall in the dollar index may support the rupee, the falling Chinese yuan may cap gains for the Indian currency, dealers said. Apart from a lower dollar index, continued foreign fund inflows may support the rupee Thursday, they said.

The RBI is expected to intervene in the foreign exchange market by purchasing the greenback, should the rupee rises sharply Thursday, dealers said. They expect banks to purchase dollars on behalf of importers who would want to take advantage of relatively lower dollar/rupee levels. This may put pressure on the rupee, dealers said. 

Market participants would watch for any further development in US-China trade relations, and announcements of any new tariffs by either side, dealers said. "With the latest news, I guess China is going to retaliate. We just don't know what and when... this uncertainty is something we have to deal with for the time being," a dealer at a state-owned bank said. 

During the day, the rupee is seen moving in a range of 85.40-86.00 against the dollar. Dealers see technical resistance for the Indian unit at 85.50 a dollar.

India Rupee - World FX: Canadian dlr up ahead of Bank of Canada rate decision

MUMBAI – The Canadian dollar was up 0.3% against the US dollar Wednesday, ahead of the monetary policy decision by the Bank of Canada due later in the day. Canada's central bank is expected to hold the benchmark rate steady amid ongoing tariff uncertainties. However, it is widely expected to resume the policy easing cycle from June. Traders are currently pricing in two additional rate cuts this year. At present, Bank of Canada's benchmark lending rate is 2.75%. 

Data released Tuesday showed that Canada's annual inflation rate unexpectedly slowed to 2.3% in March. It was lower than the forecast of 2.6% rise in a Reuters poll. On a monthly basis, the CPI rose 0.3%.

The euro was up 0.7% against the greenback as investors continued to move away from the US dollar towards other safe haven assets, amid the ongoing uncertainties around international trade. However, gains in the currency were limited after data published Wednesday showed that inflation rate in the bloc eased to 2.2% on year in March from 2.3% in February. On a monthly basis, the CPI rose 0.6% in March. 

The dollar index fell further during the European market session on Wednesday. Amid the ongoing tariff war between the US and China, investors have continued to move away from the US dollar towards other safe haven assets. As per latest development, a White House fact sheet released Tuesday said, "China now faces up to a 245% tariff on imports to the United States as a result of its retaliatory actions." China directed its airlines Tuesday to halt further orders of Boeing jets, as per reports.

At 1448 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 99.51, down from 100.10 Tuesday and 99.64 Monday. The index had hit an over-three-year low of 99.01 on Friday. The Swiss franc, on account of safe haven flows, strengthened 0.7% against the US unit. 

The Japanese yen was up 0.4% against the greenback. Bank of Japan Governor Kazuo Ueda Wednesday said the central bank may need to take policy action if US tariffs hurt the Japanese economy, hinting the possibility of a pause to the bank's rate-hike cycle. Ueda said US President Donald Trump's tariff threats and uncertainties around it "have moved close towards the bad scenario." "But we will scrutinise without pre-conception the extent to which US tariffs could hurt the economy," he added. "A policy response may become necessary. We will make an appropriate decision in accordance with changes in developments."

Further, Tokyo is set to begin their bilateral trade negotiations with Washington on Wednesday. Tokyo's top trade negotiator Ryosei Akazawa will meet US Treasury Secretary Scott Bessent and US trade representative Jamieson Greer to discuss tariff and trade policies alongwith energy projects and issue of exchange rate. 

The pound sterling was up 0.4% against the greenback. However, gains in the currency were capped after UK's annual inflation rate slowed and fell to 2.6% in March, below the analysts' expectation of 2.7% rise in a Reuters poll. Core inflation rose by 3.4% in the 12 months to March, down slightly from 3.5% rise in February. 

The Australian dollar was up 0.4% against the greenback after upbeat GDP data from China. As China is a major trading partner of Australia, a better-than-expected GDP figure from China increases the potential exports of Australian goods to the world's second largest economy. Data on Wednesday showed China's economy expanded 5.4% on year in Jan-Mar, higher than the forecast of 5.1% in a Reuters poll.  (Gowri Lakshmi)

India Rupee: 1-yr premium hits 2-wk low as lower India CPI ups rate cut bets

MUMBAI – The one-year dollar/rupee forward premium hit a two-week low on Wednesday after data showed India's CPI inflation fell to a multi-year low in March, raising expectations of a rate cut by the Reserve Bank of India at its Monetary Policy Committee meeting in June, dealers said. In the event of a rate cut by the RBI, the interest rate differential between the US and India falls, pushing dollar/rupee forward premiums down.

Data released on Tuesday showed India's headline CPI inflation fell to an over five-year low of 3.34% due to a decline in food inflation. Yhis was the second consecutive month that CPI inflation was below the RBI's medium-term target of 4%.

"There is less movement today, and the market has no clue about what is happening," a dealer with a state-owned bank said. "Today, it had gone down largely after the CPI, but I do not see any clear movement in forwards until there is some clarity on tariff situation. Premiums have not been exactly tracking UST on a daily basis (US Treasury yield) since MPC (Monetary Policy Committee) stance change."

The central bank had cut the repo rate by 25 basis points and changed the stance to accomodative on Apr. 9. Since then, the one-year exact-period dollar/rupee forward premium has fallen about 10 basis points. During the same period, the yield on the benchmark 10-year US Treasury note rose 9 bps. Forwards of a currency pair are reflective of the interest rate differential between the two countries. On Tuesday, the benchmark 10-year US Treasury yield fell 3 bps to settle at 4.35%. It fell further in European trade Wednesday.

On an annualised basis, the one-year exact-period dollar/rupee forward premium hit a two-week low of 2.15% in early trade Wednesday, which attracted banks that wanted to purchase forward dollars at relatively lower levels, dealers said. Such banks purchased dollars for forward delivery, pushing premiums up from the day's low. They said the forward premium may remain elevated, given the uncertain global trade scenario.

"If there is some trade deal between India and the US, then only premiums will probably come down, but not by much, just around 4-5 bps," a dealer with another state-owned bank said. 

Most market participants refrained from placing large bets due to lack of clarity in the movement of forward premiums, dealers said. At 1416 IST, the one-year exact period forward premium was 2.18%, on an annualised basis, similar to Tuesday's close. On an absolute basis, the premium was 186.66 paise, barely changed from Tuesday's close of 187.16 paise.  (Sourabh Kumar)

India Rupee: Pares some gains on banks' dlr buys for importers, likely for RBI

MUMBAI – The rupee erased some of its gains against the dollar from early trade due to banks' continuous purchases of the greenback by importers, dealers said. Some public-sector banks also bought dollars, likely on behalf of the Reserve Bank of India, to shore up its foreign exchange reserves, dealers said.  

"Some buying (of dollars) have started coming in. In the morning, it was relatively calm and only PSUs bought, likely for RBI. Importers earlier were expecting a further rise but the RBI buying probably limited the rise so they have come in," a currency trader at a private bank said. 

The rupee rose to a high of 85.5050 a dollar earlier in the day, a level at which dealers said the RBI started purchasing dollars, which capped the rise in the Indian currency. The RBI is also said to have purchased dollars at multiple dollar/rupee levels. A few dealers said the rupee could have quickly gone to 85 a dollar, if it had risen above 85.5050 a dollar.

Initially, importers remained on the sidelines on expectations that the Indian currency may rise further during the day. However, when the rupee hit the day's high of 85.5050 a dollar, some Indian companies, including importers, purchased dollars, dealers said. 

Throughout the day, the Indian rupee was supported by a fall in the dollar index, dealers said. The dollar index fell in European trade as investors' sentiment continued to shift away from US dollar to other safe haven assets like gold, and currencies such as the Japanese yen and the Swiss franc.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 99.43 at 1345 IST, down from Tuesday's 100.10 and Monday's 99.64. The index had hit over a five-year low of 99.01 on Friday.

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

India Rupee: Technical levels for rupee - Apr 16

MUMBAI – At 1054 IST, the rupee was at 85.6750 per dollar. At 0900 IST, the rupee was at 85.6100 a dollar, against the previous close of 85.7725. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Gowri Lakshmi)

India Rupee: Sharply up on weak dollar, FX inflows; RBI dlr buys cap gains

MUMBAI – The rupee rose sharply against the dollar Wednesday as a few foreign banks sold dollars on behalf of foreign portfolio investors, who were looking to invest in the domestic stock market, dealers said. However, gains in the Indian currency were capped as some state-owned banks purchased the greenback, likely on behalf of the Reserve Bank of India, dealers said. 

"We can see a two-sided movement in the market today (Wednesday). The weakness in CNH (offshore Chinese yuan) is weighing on the rupee but the rupee may rise since it's a flow-based market now," a dealer at a state-owned bank said. A few banks also sold dollars for foreign fund inflows into the government bond market, which supported the rupee, dealers said.

Dealers expect the gains in the rupee to be capped due to weakness in the offshore Chinese yuan. While the yuan was a tad up earlier in the day after an upbeat GDP data for Jan-Mar, it quickly came under pressure due to uncertainties around global trade, especially the US-China trade relations. In the latest development, China has instructed its airlines to halt placing further orders of Boeing jets, and to seek approval before taking delivery of already ordered jets. 

Data released early Wednesday showed that China's GDP grew 5.4% for the quarter ended March, higher than the forecast of 5.1% in a Reuters poll, but the outlook remains bleak due to the ongoing tariff threats and impositions.

A fall in the dollar index also supported the Indian currency, dealers said. At 0930 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.72, down from 100.10 Tuesday and up from 99.64 Monday. 

Some traders continued to trim their existing long dollar positions due the sustained weakness in the dollar index, dealers said. This further supported the rupee. Despite a sharp rise in the rupee, importers did not place large bets, as they anticipated a further rise in the rupee, dealers said. "It's surprising how importers' demand is not there today, they are almost absent from the market. They are probably expecting a sharper fall... when it breaches 85.50 we may see some rush," a currency trader at the public-sector bank said.

Despite a weak demand for dollars from importers, the rupee reveresed some of the early gains as the RBI is likely to have purchased the greenback at relatively lower dollar/rupee levels to shore up its foreign exchange reserves, dealers said. 

During the day, the rupee is seen moving between 85.45 and 85.80 a dollar. Dealers see immediate technical resistance for the Indian unit at 85.50 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Mixed; China's Jan-Mar GDP expands more than expected

MUMBAI – Asian currencies were mixed on Wednesday as investors continued to assess the ongoing tariff flip-flops by the US. In the latest development, Beijing has ordered its airlines to pause further deliveries of Boeing jets, in response to Washington's decision to impose a sweeping 145% tariff on Chinese imports. 

The Chinese yuan was down 0.2% against the US dollar in early Asian trade due to the ongoing tariff threats and the uncertainties over it. However, losses in the currency were limited after latest data showed China's GDP grew 5.4% on year in the quarter ended March, higher than the forecast of 5.1% in a Reuters poll.

The South Korean won was 0.1% lower against the greenback, tracking losses in the domestic stock market. The benchmark index KOSPI was down 0.6% in early Asian trade. On Tuesday, South Korea unveiled a $8.4-billion supplementary budget plan, in a measure to boost the country's economy which has been hit by tariffs by the US. US Treasury Secretary Scott Bessent and South Korea's Finance Minister Choi Sang-mok are scheduled to meet next week to discuss trade issues. 

The Thai baht was up 0.7% against the US unit. Thailand's Finance Minsiter Pichai Chunhavajira is expected to hold talks with Bank of Thailand governor to discuss US tariffs ahead of his trip to Washington. He is expected to schedule a formal meeting with the governor on Wednesday or Thursday. 

The Taiwan dollar was flat against the US unit. Taiwan will initiate talks with Washington on tariffs on semiconductors and will assess its impact. US President Donald Trump's administration is probing the import of chips and pharmaceuticals on the grounds that extensive reliance on such imports is a national security threat.

The dollar index fell slightly in Asian trade. The index recovered slightly and rose above 100 on Tuesday due to a weak euro. At 0841 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies was at 99.79, down from 100.10 on Tuesday but up from 99.64 on Monday. 

The Malaysian ringgit was down 0.1%, and the Indonesian rupiah traded 0.2% lower against the greenback. The Philippine peso was up 0.3%.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Apr 16

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: 

(Sourabh Kumar and Pratiksha)

End

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

Edited by Rajeev Pai

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