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Informist, Wednesday, May 7, 2025

By Sourabh Kumar

MUMBAI – The rupee slumped against the dollar, falling the most in about a month, as importers purchased the greenback on risk-off sentiment after India launched a military operation against terrorist infrastructure in Pakistan and Pakistan-occupied Kashmir early Wednesday, dealers said. Fall in the rupee was limited as exporters sold the greenback, taking advanatge of a relatively higher dollar/rupee levels, dealers said.

Falling 39 paise, the most since Apr. 9, the rupee settled at 84.8250 a dollar against Tuesday's 84.4325 per dollar. During the day, the Indian currency moved in a range of 46 paise.

"All day, the dollar/rupee was driven by India-Pakistan news," a dealer at a state-owned bank said. "After importers, foreign banks also came to buy dollars which pushed the rupee to above 90 levels."

Indian armed forces launched a military operation early Wednesday against nine sites in Pakistan and Pakistan-occupied Kashmir from where terrorists were suspected to be operating from, the Indian defence ministry said in a statement. "No Pakistani military facilities have been targeted. India has demonstrated considerable restraint in selection of targets and method of execution", the ministry said. This move came after the terrorist attack in Pahalgam in which 25 Indians and one Nepali citizen were killed.

In a press briefing Wednesday, Foreign Secretary Vikram Misri said intelligence inputs indicated more attacks on India were likely, and the strikes on nine "terrorist camps" in Pakistan and Pakistan-occupied Kashmir were carried out to prevent and deter more such cross-border terrorism. 

The rupee opened sharply lower at 84.6250 a dollar, and continued to fall due to dollar purchases by importers who anticipated relations between India and Pakistan could worsen further. During the press briefing, the rupee fell further as market participants feared a response from Pakistan in the coming days, which could further deteriorate relations between both the countries, dealers said.

Some dealers said foreign fund outflows from Indian financial markets also weighed on the rupee. In the last one and a half hour of trade, market participants increased their dollar purchases, which led the rupee to hit 84.9300 a dollar, the lowest since Apr. 30. 

During the day, a news item was circulated about Pakistan Prime Minister authorising the armed forces to undertake 'corresponding action' after India's military operation early Wednesday. This weighed on the rupee as a few foreign banks purchased the greenback likely on behalf of overseas investors, who exited Indian financial markets fearing worsening relations between the two neighbours, dealers said.

So far in May, foreign investors have net invested $1.02 billion in Indian stock market. In April, they had a net investment of $1.27 billion in equities. Wednesday, the Nifty 50 and BSE Sensex closed 0.1% higher each.

Exporters sold the greenback at lucrative levels, which limited the fall in the Indian currency, dealers said. Some dealers also speculated that the rupee did not fall beyond 84.9300 a dollar due to support from the Reserve Bank of India. "I think they (RBI) sold first near 84.85-84.88 a dollar and then around 84.94 a dollar," a dealer with another state-owned bank said. "But I don't think it was purely them, exporters also sold quite a bit."

FORWARDS

The one-year dollar/rupee forward premium ended slightly higher Wednesday, tracking a fall in the benchmark US Treasury yield, dealers said. Market participants await the outcome of the US Federal Open Market Committee meeting, due later in the day, dealers said. Forwards of a currency pair are reflective of the interst rate differential between the two countries.

Market participants await US Federal Reserve Chair Jerome Powell's speech after the FOMC rate decision, to assess the health of the US economy and the trajectory of rate cuts, dealers said. The FOMC is expected to keep the benchmark rate steady later in the day.

At 1530 IST, the one-year exact-period dollar/rupee forward premium was 2.20%, against 2.19% Tuesday. On absolute basis, the premium was 187.98 paise, against 184.48 paise Tuesday.

OUTLOOK

On Thursday, the rupee will take cues from Chinese yuan and any news about India-Pakistan relations, dealers said. A slight rise in crude oil prices may weigh on the Indian currency, dealers said. 

"If it (India-Pakistan conflict) continues, FIIs (Foreign institutional investors) may not come to India, and the support to the rupee will be lost," a dealer with a state-owned bank said.

Market participants await the US FOMC outcome, and the movement of the dollar index thereafter, dealers said. Dealers expect banks to continue selling dollars for exporters, supporting the local unit.

During the day, the rupee is seen moving in a range of 84.40 and 85.25 a dollar. They peg immediate technical support for the rupee at 85.25 a dollar.

India Rupee - World FX: Dollar index slightly up ahead of US FOMC decision

MUMBAI – The dollar index inched up slightly ahead of the US Federal Open Market Committee's meeting decision, due late Wednesday. While the Federal Reserve is widely expected to keep the benchmark rate unchanged at 4.25-4.5%, market participants look forward to Fed Chair Jerome Powell's speech.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 99.53 at 1527 IST, up from 99.40 Tuesday, but down from 99.78 Monday. Market participants also look forward to trade talks between the US and China, when officials of both the countries meet in Switzerland in the coming days. 

Meanwhile, data released Tuesday showed that the US trade deficit hit a fresh high in March. Imports jumped 4.4% after consumers and businesses sought to get ahead of tariffs, with the trade deficit rising 14% on month to $140.5 billion.

The euro was down 0.1% on fears of political instability in Germany, the largest economy of the bloc, after Friedrich Merz received the majority support needed to become a chancellor only in the second round of voting. This indicated the fragility in the majority support to Merz.

Data released earlier in the day showed that manufacturing orders in Germany rose in March, before US tariffs came into effect. Manufacturing orders in the country rose 3.6% on month in March, much higher than the 1.0% uptick expected in a Wall Street Journal poll. However, retail sales in the eurozone rose 1.5% on year in March, down from expected 1.6%.

The pound sterling fell 0.2% against the greenback. Market participants await the Bank of England's monetary policy decision Thursday. The UK central bank is expected to cut the benchmark rate. The Japanese yen was down 0.6% against the US unit. The Australian dollar fell 0.4% and the Canadian dollar was down 0.1% against the greenback.  (Sourabh Kumar)

India Rupee: Premium tad up on fall in US yield; mkt awaits US FOMC decision

MUMBAI – The one-year dollar/rupee forward premium rose slightly Wednesday, tracking a fall in the benchmark US Treasury yield, dealers said. Market participants await the outcome of the US Federal Open Market Committee meeting, due later in the day, dealers said.

"There is some paying, but there is low participation before US FOMC," a dealer with a state-owned bank said. The rise in the one-year dollar/rupee forward premium was capped as some exporters sold forward dollars taking advantage of relatively higher levels, dealers said. They expect forward premiums to fall in the coming days, dealers said.

The one-year exact-period dollar/rupee forward premium was 188.07 paise at 1356 IST, up from 184.48 paise Tuesday. It was at 2.21%, up from Tuesday's 2.19%. The 10-year benchmark US Treasury yield settled 6 basis points lower at 4.30% Tuesday. Forwards of a currency pair are reflective of the interst rate differential between the two countries.

Market participants await US Federal Reserve Chair Jerome Powell's speech after the FOMC rate decision, to assess the health of the US economy and the trajectory of rate cuts, dealers said. The FOMC is expected to keep the benchmark rate steady later in the day.

Further, the market will keep an eye on the upcoming trade talks between the US and China, when their officials meet in Switzerland Thursday. Officials from both counries have confirmed the meeting.  (Sourabh Kumar)

India Rupee: Exporter dlr sales erase some losses; India-Pak tension in focus

MUMBAI – The rupee erased some losses as exporters sold dollars, taking advantage of the relatively higher dollar/rupee levels, dealers said. A few dealers also speculated that the Reserve Bank of India sold dollars to prevent a sharp fall in the Indian currency, dealers said.

"The market is very volatile, and we have instruction from the management that it will remain volatile for a few days, so will have to be careful in taking positions," a dealer with a state-owned bank said. "Some exporter selling was seen in the morning."

The rupee fell to the day's low of 84.7725 a dollar, minutes before the Ministry Of Defence's media briefing on 'Operation Sindoor' at 1030 IST. Importers bought dollars on the view that India-Pakistan relations will deteriorate further. India launched a military operation against terrorist infrastructure in Pakistan and Pakistan-occupied Kashmir early Wednesday.

Dealers remain cautious of any news related to India and Pakistan having a bearing on their relations, as it has the potential to affect the currency market. In case of relations deteriorating further, domestic assets may be less desirable for overseas investors, putting pressure on the domestic currency, dealers said. 

Meanwhile, the dollar index did not change much ahead of the US Federal Open Market Committee's meeting decision, later in the day. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 99.54 at 0923 IST, slightly up from 99.40 Tuesday, but down from 99.78 Monday.

During the day, the rupee is seen moving between 84.40 and 84.80 against the dollar. Dealers see strong technical support at 84.80 a dollar.  (Sourabh Kumar)

India Rupee - Asia FX: Most down; Thai baht falls on lower inflation

MUMBAI – Most Asian currencies were down against the dollar early Wednesday, with the South Korean won falling the most by 1.5%, as the dollar index inched up slightly ahead of the US Federal Open Market Committee's meeting decision later in the day. The FOMC is expected to keep the benchmark interest rate steady at 4.25-4.50%. However, market participants would look forward to the guidance provided by Fed Chair Jerome Powell during the meeting.

The dollar index, which measures the strength of the dollar against a basket of six major currencies, was 99.53 at 1044 IST, up from 99.40 Tuesday, but down from 99.78 Monday. 

Market participants also keenly await any outcome from trade talks between the US and China, for which officials from both the countries will travel to Switzerland Thursday. A few Chinese officials will visit Switzerland from Friday to Monday, and will hold discussions with their US counterparts, China's foreign ministry said in a statement. The US Treasury Department also confirmed about the meeting.

The Taiwan dollar was down 0.2% against the greenback. The Indonesian rupiah fell 0.5% against the US currency. A Reuters report citing a senior official said that Indonesia's central bank is focussed on supporting economic growth while maintaining price stability. The Malaysian ringgit was down 0.1% against the greenback.

The Thai baht fell 0.3% against the US currency after the country's inflation fell to 0.2% in April on an annual basis from 0.8% in March. The government also revised its economic growth forecast for this year to 2.1% from 3% due to impact from US tariffs. Bucking the trend, the Philippines peso rose 0.4% against the dollar, supported by a rise in its equities.  (Sourabh Kumar)

India Rupee: Falls on risk-off sentiment as India hits Pakistan terror bases

MUMBAI - The rupee was down against the dollar early Wednesday as investors turned risk averse after India launched a military operation against terrorist infrastructure in Pakistan and Pakistan-occupied Kashmir early Wednesday, dealers said. "After opening lower, the levels have stabilised for now, with some exporters selling near 85.63 a dollar," a dealer with a foreign bank said. "Now we know that Pakistan will also retaliate, but the rupee won't slump as much till there is some news about that retaliation."

India launched 'Operation Sindoor' early Wednesday, under which nine terrorist sites were targeted, the Ministry of Defence said in a press statement. "Our actions have been focused, measured and non-escalatory in nature. No Pakistani military facilities have been targeted. India has demonstrated considerable restraint in selection of targets and method of execution", the ministry said.

The ministry will brief the media on 'Operation Sindoor' shortly. This moves comes in the aftermath of the terrorist attack in Pahalgam in which 25 Indians and one Nepali citizen were killed. Market participants are keenly looking forward to the press briefing.

While importers' dollar purchases pushed the rupee to fall to a week's low of 84.6600 a dollar, the rupee did not sustain at those levels because of exporters' dollar sales, dealers said. Exporters sold the greenback, noting relatively higher dollar/rupee levels, dealers said.

Meanwhile, the dollar index was little unchanged ahead of the US Federal Open Market Committee meeting decision. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 99.54 at 0923 IST, slightly up from 99.40 Tuesday, but down from 99.78 Monday.

During the day, the rupee is seen moving between 84.30 and 84.70 against the dollar. Dealers see strong technical support at 84.70 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - May 7

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 Gowri Lakshmi)

End

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

Edited by Akul Nishant Akhoury

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