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Informist, Monday, May 19, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended higher against the dollar for the second consecutive trading day Monday as the dollar index extended its fall during European trade as investors digested an unexpected downgrade in the US top sovereign credit rating by Moody's Friday, dealers said.

Importers remaining on the sidelines and refraining from buying dollars in large quantities around the current levels also supported the rupee, dealers said. "At these levels, almost all importers have hedged and booked profits...," a currency trader at a brokerage said. "Unless there is a sudden sharp move either way, importers will mostly remain passive." 

After touching a low of 85.6200 a dollar earlier in the day, the Indian currency erased all losses to settle at 85.4000 a dollar, against the previous close of 85.5050. The rupee moved in a range of 26 paise during the day.

The Indian currency gained 0.1% against the greenback Monday. Most other Asian currencies also rose against the greenback owing to the weakness in the dollar index, dealers said. Other Asian currencies rose 0.1-1.0%, with the Thai baht being the best performing currency in the region.

The rupee started the day higher against the dollar at 85.4400 as investors digested the news of Moody's cutting the American government's credit rating to 'Aa1' from 'Aaa', dealers said. The downgrade reflects the increase in government debt and interest payment ratios over the past decade, which have now ballooned to levels significantly higher than similarly rated countries.

The dollar was also weighed down as the weaker-than-expected consumer sentiment index reinforced hopes of more rate cuts by the US Federal Reserve, dealers said. On Friday, the consumer sentiment index dropped to 50.8 in May from 52.2 the previous month. Economists had forecast the index to rise to 53.4 in a Reuters poll. "Today's (rupee) movement is purely tracking the dollar index and the eventual strengthening of other Asian currencies," a dealer at a private-sector bank said.

The rupee also found support from a few traders continuing to trim their long positions in the dollar owing to sustained weakness in the greenback. "Activities in cross-currency have picked up since a couple of months now," the dealer said. "Traders continue to move towards the euro and GBP (pound sterling) or the yen. At least in the short term, the dollar is expected to remain weak."

However, the rupee was quickly pulled to the day's low as banks bought dollars for foreign fund outflows, possibly related to the Bharti Airtel block deal, dealers said. Singapore-based telecom company Singtel sold Bharti Airtel shares for around $1.4 billion Friday.

Dealers noted that most importers and exporters remained passive throughout the day, waiting for more cues regarding the India-US trade talks. An early indication of the progress of the talks is expected next week.

With importers refraining from buying dollars in large quantities, and the dollar index declining further during the European trading hours, the rupee pared all losses from early trade and moved to a high of 85.3525 against the greenback.

The dollar index extended its losses from earlier in the day as the euro surged almost 1% against the greenback. The dollar also weakened against other major global currencies, with the Japanese yen rising 0.5% and the pound sterling rising 0.8%. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.18, sharply down from 100.98 Friday and 100.81 Thursday.

FORWARDS

The one-year dollar/rupee forward premium ended lower after falling to a three-month low Monday due to a rise in the benchmark US Treasury yield, dealers said. The 10-year benchmark US Treasury rose to 4.54% after settling lower at 4.43% Friday. Forwards of a currency pair are reflective of the interest rate differential between the two countries.

The fall in the one-year dollar/rupee forward premium was limited as a few banks purchased forward dollars, taking advantage of relatively lower premiums, dealers said. They, however, said most market participants are likely to wait for the premium to fall more before purchasing forward dollars in larger quantities.

While some market participants think the one-year forward premium will fall further, likely below 2.0%, in the coming weeks, others said the premium may have already hit its lowest level.

At 1530 IST, the one-year exact-period dollar/rupee forward premium settled at 179.67 paise, down from 181.33 paise Friday. On an annualised basis, the premium ended at 2.10%, slightly down from Friday's 2.12%.

OUTLOOK

On Tuesday, the rupee will take cues from the movement of the dollar index and the movement of the offshore Chinese yuan, dealers said. Dealers expect the rupee to continue to move within the range of 85.20-85.70 a dollar, unless there is any development on the geopolitical front or in the India-US bilateral trade talks.

Dealers expect the rupee to rise on expectations of sustained weakness in the dollar index. Should the rupee rise above 85.30 a dollar, dealers expect importers to step in and buy the greenback to take advantage of the lucrative dollar/rupee levels. This may cap the rise of the Indian currency. "I think they (the Reserve Bank of India) are going to continue to intervene from both sides...," a currency trader at a broking firm said. "Until the talks are on, they (RBI) would opt for a stable currency."

The rupee may also take cues from movement in crude oil prices. A further fall in crude oil prices may prompt oil-marketing companies to buy dollars, which may weigh on the rupee. Dealers see strong technical resistance for the rupee at 85.30 a dollar.

India Rupee - World FX: Dlr drops after Moody's cuts US ratings; euro surges

MUMBAI – The dollar index extended fall from early trade after the European market opened as investors noted Moody's downgrading the US long-term issuer and senior unsecured ratings to 'Aa1' from 'Aaa' on Friday. The downgrade reflects the increase in government debt and interest payment ratios over the last decade, which have now ballooned to levels significantly higher than similarly rated countries, a Moody's press release said.

The dollar was also weighed down as the US consumer sentiment index, published Friday, fell to 50.8 in May against analysts' estimate of a rise to 53.4 in a Reuters poll. The index was at 52.2 in April. Moreover, a disappointing US consumer sentiment reading Friday added to the recent slew of weaker-than-expected economic data from the world's largest economy, reinforcing expectations of more rate-cuts by the US Federal Reserve. 

At 1509 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.24, down from 100.98 Friday and 100.81 Thursday. 

Following the drop in the dollar index, the euro surged and strengthened almost 1% against the greenback Monday. The pound sterling was was up 0.8% against the US currency. The Swiss franc rose 0.5% while the Canadian dollar was up 0.2% against the US unit. 

The Japanese yen was up 0.5% against the greenback after Bank of Japan deputy governor Shinichi Uchida said the Japanese central bank will continue to hike interest rates if the economy revives from the likely impact of higher US tariffs. "If our forecast materialises, we will continue to raise our policy rate," Uchida said. "But there is extremely high uncertainty over the outlook for each country's trade policy and its fallout. As such, we will determine without pre-conception whether the economy and prices move in line with our forecast."

The Australian dollar was up 0.5% against the greenback ahead of policy announcement by the Reserve Bank of Australia due Tuesday, where the central bank is widely expected to lower the interest rates by 25 basis points. The New Zealand dollar rose 0.5% against the US currency following the upbeat economic data from China. 

China's retail sales rose 5.1% from a year ago in April while industrial output grew 6.1% on year last month, higher than the analysts' estimate of 5.5% rise. Separate data on Monday showed the urban survey-based unemployment rate in April eased to 5.1% from 5.2% a month ago. Any change in the Chinese economy directly impacts the New Zealand currency due to their close bilateral trade relations.  (Gowri Lakshmi)

India Rupee: One-year premium hits 3-week low on rise in US Treasury yields

MUMBAI – The one-year dollar/rupee forward premium fell to an over three-week low Monday due to a rise in the benchmark US Treasury yield, dealers said. The benchmark 10-year US Treasury rose to 4.54%, after it settled lower at 4.43% Friday. 

"There is no major movement in forwards today (Monday), but largely it is tracking UST (US Treasury yield)," a dealer with a state-owned bank said. US Treasury yields rose sharply in early European market hours as investors assessed Moody's move on Friday to downgrade the US long-term issuer and senior unsecured ratings to 'Aa1' to 'Aaa'.

Consequently, the one-year dollar/rupee forward premium fell to 2.09%, on an annualised basis, the lowest since Apr. 25. Forwards of a currency pair are reflective of the interest rate differential between the two countries. On Friday, the premium was 2.12%, which was already down from Thursday's 2.13%. On an absolute basis, the premium, at 1430 IST, was 179.68 paise, down from Friday's 181.33 paise and 182.48 paise Thursday.

Fall in the one-year dollar/rupee forward premium was limited as a few banks purchased forward dollars, taking advantage of relatively lower premiums, dealers said. They, however, said most market participants are likely to wait for the premium to fall more before purchasing forward dollars in large quantum.

Since May 9, when the one-year dollar/rupee forward premium had touched a near four-month high of 2.42%, it has been continuously coming down. During this time, the premium fell 34 basis points. During the same time, the 10-year US Treasury yield went up about 17 bps.

While some market participants think the one-year forward premium will fall lower, likely below 2.0% in coming weeks, others said the premium may have already hit the bottom. "I think 2.05-2.10% is the lowest it is going to go for now, but we will have to see how the view on US rate cut changes," a dealer with another bank said.  (Sourabh Kumar)

India Rupee: Pares losses, rises as dollar index declines in European trade

MUMBAI – The rupee erased all losses from early trade and rose against the dollar Monday, because of a further decline in the dollar index during European market hours, dealers said. The rupee had hit a low of 85.6200 a dollar earlier in the day, owing to likely foreign fund outflows, dealers said.

"Pretty quite day, importers are not in action and there is no significant exporter selling (of dollars) either," a dealer at a private-sector bank said. The rupee rose to high of 85.3525 a dollar as the dollar weakened on a slew of weaker-than-expected economic data, reinforcing hopes of more rate cuts by the US Federal Reserve. The US currency also weakened as investors took note of Moody's move to downgrade the US long-term issuer and senior unsecured ratings to 'Aa1' to 'Aaa' on Friday.

The US consumer sentiment index, published Friday, fell to 50.8 in May against analysts' estimate of a rise to 53.4 in a Reuters poll. The index was at 52.2 in April. At 1327 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.38, down from 100.98 Friday and 100.81 Thursday. 

Dealers expected importers to purchase the greenback around 85.40 a dollar, however most of them refrained from buying large quantum of dollars, waiting for the rupee to rise above 85.30 a dollar. "I think traders and everyone are keenly waiting for some cues..." a dealer at the private-sector bank said. "The most important cue being the India-US trade deal that could determine the rupee's sharp move." India-US trade deal is likely to take place next week, according to multiple media reports. 

For the rest of the day, the rupee is expected to move in the range of 85.30–85.60, with strong technical resistance seen at 85.30 per dollar.  (Gowri Lakshmi) 

India Rupee: Technical levels for rupee - May 19

MUMBAI – At 1057 IST, the rupee was at 85.4875 per dollar. At 0900 IST, the rupee was at 85.4400 a dollar, against the previous close of 85.5050. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar, Gowri Lakshmi, and Pratiksha) 

India Rupee - Asia FX: Mixed trend; dlr index falls as Moody's cuts US rtg

MUMBAI - Asian currencies traded on a mixed note on Monday as investors continued to assess the weaker-than-expected data from the US. The dollar index fell after Moody's downgraded the US long-term issuer and senior unsecured ratings to 'Aa1' from 'Aaa' on Friday. The downgrade signals the rise in government debt and interest payment ratios over the last decade, which have now surged to levels higher than similarly rated countries, Moody's said in a press release.

Further, the dollar index also declined after investors took note of another weaker-than-expected economic data from the world's largest economy. Data published on Friday showed the Consumer Confidence Index fell to 50.8 in May from 52.2 the previous month. Economists had forecast the index to rise to 53.4 in a Reuters poll. The one-year inflation expectations surged as households remained worried over the impact of aggressive tariff policies by US President Donald Trump. 

At 1051 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.78, down from 100.98 Friday and marginally up from 100.81 Thursday.

The South Korean won rose 0.1% against the greenback ahead of tariff talks with Washington this week. The second round of the bilateral trade talks between South Korea and the US is scheduled to take place later this week, with an aim to finalise a deal by Jul. 8. South Korean Industry Minister Ahn Duk-geun met US trade representative Jamieson Greer on Friday on the sidelines of the Asia-Pacific Economic Cooperation summit. 

Further, on Sunday, South Korea's presidential candidates clashed in their first debate as the country prepares for a snap election on Jun. 3. The main focus of the debate was reviving the struggling economy and the rising trade issues with Washington. 

The Indonesian rupiah was down 0.1% against the greenback while the Malaysian ringgit fell 0.4%. Data released Friday showed Malaysia's economy expanded 4.4% on annual basis in the quarter ended March. However, the gross domestic product reading was below the analysts' forecast of 4.5% in a Reuters poll. 

The offshore Chinese yuan traded flat against the US currency in early trade. China's April retail sales, published earlier in the day, showed a rise of 5.1% but missed the market consensus as consumption worries continue to persist. China's retail sales rose 5.1% from a year ago in April, lower than the forecast of 5.5% increase in a Reuters poll. Industrial output grew 6.1% on year last month, slowing from 7.7% in March but higher than the analysts' estimate of 5.5% rise. Separate data on Monday showed the urban survey-based unemployment rate in April eased to 5.1% from 5.2% a month ago. 

The Thai baht rose 0.3% against the greenback after the Thai government said it plans new economic stimulus measures. The government decided to reallocate more than 150 billion Thai baht towards a new economic stimulus plan. The decision comes in the midst of escalating global economic uncertainties stemming from aggressive trade and tariff policies by the US. The Economic Stimulus Policy Committee, chaired by Prime Minister Paetongtarn Shinawatra, is scheduled to meet Monday.  (Gowri Lakshmi) 

India Rupee: Tad down on FX outflows; slight drop in dlr index limits fall

MUMBAI – The rupee was slightly down against the dollar in early trade Monday as banks purchased dollars, likely for foreign fund outflows, dealers said. A slight fall of the dollar index and the subsequent rise of other Asian currencies supported the rupee, dealers said.

"The rupee opened higher against the dollar but has starting moving downwards..." a dealer at a public-sector bank said. "The buying is most likely for outflows; the rupee is expected to fall as much as 85.70 after which the fall may be limited."

Foreign fund outflows for which banks purchased dollars were likely related to the Bharti Airtel block deal, dealers said. Singapore-based telecom company Singtel sold Bharti Airtel shares for around $1.4 billion on Friday. "The rupee will mostly be rangebound within 85.50-85.90. But much buying (from importers) isn't there for now," another dealer at a private sector bank said. 

The dollar index fell slightly on Monday as Moody's downgraded the US government's credit rating to 'Aa1' from 'Aaa' Friday. The downgrade was amid ongoing trade and tariff policy worries. The downgrade reflects the increase in the US government's debt and interest payment ratios over the last decade, which have now ballooned to levels significantly higher than similarly rated countries.

Moreover, data released Friday showed US consumer sentiment slumped further in May, while one-year inflation expectations rose as the impact of aggressive tariffs by the US continue to worry households. The University of Michigan's Consumer Sentiment Index dropped to 50.8 this month against analysts' estimate of a rise to 53.4 in a Reuters poll. The index was at 52.2 in April.

At 0929 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.83, down from 100.98 Friday and little changed from 100.81 Thursday.

Despite a slight fall of the rupee, importers did not purchase dollars in large quantum and will likely be more active when rupee rises to at least 85.40 a dollar, dealers said. Dealers also expect exporters to sell dollars below 85.70 a dollar, which may limit the fall of the Indian currency. Should the rupee fall below 85.75 a dollar, state-owned banks may step in with dollar sales, likely on behalf of the Reserve Bank of India, to prevent a sharp fall of the Indian unit, dealers said. 

During the day, the rupee is seen moving between 85.50 and 85.70 against the dollar. Dealers see strong technical support for the rupee at 85.70 against the greenback.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - May 19

MUMBAI – Following are the expected support and resistance levels for the rupee on Monday, as forecast by leading banks and brokerages in an Informist poll:

(Gowri Lakshmi and Sourabh Kumar)

End

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

Edited by Rajeev Pai

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