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Informist, Thursday, May 22, 2025

By Sourabh Kumar and Gowri Lakshmi 

MUMBAI – The rupee slumped and ended near a 6-week low against the dollar Thursday, as foreign banks persistently purchased the greenback, likely on behalf of overseas investors who pulled out their money from domestic equities, dealers said. However, the fall in the rupee was limited by the Reserve Bank of India's likely dollar sales, dealers said.

"Today, I enjoyed a lot," a dealer with a foreign bank said. "There was a lot of buying for outflows from equities, and later the central bank was there with some selling, so upside was capped." After moving in a range of almost 54 paise, the rupee ended at 86.0025 a dollar, sharply down from 85.6375 a dollar Wednesday.

The rupee opened higher at 85.5875 against the dollar, tracking a rise in its regional peers owing to weakness of the dollar index, dealers said. In early trade, the dollar index extended its losses for the fourth consecutive day as investors shifted their funds to other safe-haven currencies due to ballooning fiscal debt and as worries over a recession in the US loom.

The slight gains of the rupee were, however, short-lived as oil marketing companies and other importers purchased dollars. Oil marketing companies bought dollars as crude oil prices fell Thursday after Oman's foreign minister announced a fresh round of nuclear talks will begin between the US and Iran next week. Oil prices had risen on the previous days on reports that Israel was preparing to strike Iranian nuclear facilities. 

At 1530 IST, the July Brent Crude contract on the Intercontinental Exchange was at $63.80 per barrel, sharply down from $64.91 per barrel Wednesday and $65.38 per barrel Tuesday. Dealers said oil marketing companies did not buy dollars in large volumes as they expect oil prices to fall further in the near term. 

Volume in the currency market remained dull in early trade before picking up as foreign banks, including a US-based one, began purchasing dollars on behalf of FPIs, who withdrew funds from the domestic stock market. The benchmark indices, the Nifty 50 and the BSE Sensex, ended 0.8% each lower Thursday. The US-based bank is likely to have bought $1 billion-$1.50 billion on behalf of overseas investors. 

Dollar demand from overseas investors and importers pushed the rupee past 85.70 a dollar, upon which some banks sold the greenback, likely on behalf of the RBI, to limit a sharp fall of the rupee. A few exporters also sold dollars at the same levels, which provided some cushion. However, RBI dollar sales remained 'mild' in nature, which led to several stop-losses being triggered on short dollar bets at multiple levels below 85.80 a dollar. 

"RBI action seems very minimal today," a dealer at a private sector bank said. "It is almost like they were absent, but some exporters sold after 86.75 and above levels, which supported the rupee." 

Prime Minister Narendra Modi's statement Thursday that Pakistan will have to pay "a heavy price for playing with the blood of Indians" triggered panic, dealers said. This further pulled the rupee to fall past the key level of 86 per dollar mark, according to some dealers.

FORWARDS

The one-year dollar/rupee forward premium ended slightly higher Thursday as a few importers purchased forward dollars, noting a sharp fall in the rupee in the spot market, dealers said. Most market participants awaited economic data from the US to assess the trajectory of the interest rates in the world's largest economy, dealers said.

The day's movement in the dollar/rupee forward market was driven, on one side, by importers who purchased forward dollars, pushing premiums higher, dealers said. On the other hand, some banks sold forward dollars, taking advantage of relatively higher premiums, on the view that forward premiums will eventually fall in the coming weeks, dealers said. A fall in the banking system liquidity surplus also pushed dollar/rupee forward premiums higher, dealers said. 

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was at 179.73 paise, slightly higher than 179.30 paise Wednesday. On an annualised basis, the premium was at 2.09%, tad up from the previous close of 2.08%.

OUTLOOK

On Friday, the rupee will take cues from the movement of the dollar index and the offshore Chinese yuan, dealers said. Market participants await the US flash PMI for May and the weekly initial jobless insurance claims data for the week ended May 17, due later in the day. Dealers expect importers to purchase dollars, wary of a further fall in the rupee. However, dealers expect the Reserve Bank of India to intervene with dollar sales at 86.10 a dollar to prevent the rupee from falling sharply.

Investors will also closely watch any geopolitical developments between India and Pakistan, which may trigger volatility in Indian financial markets. Dealers expect overseas investors to continue to exit the Indian stock market owing to the tension between India and Pakistan. 

Dealers also expect exporters to continue to sell dollars, which may support the rupee, dealers said. Dealers expect the rupee to move within the range of 85.80-86.30 a dollar. Dealers see strong technical support for the rupee at 86.15 a dollar.

India Rupee - World FX: Euro down on fall in Eurozone May flash PMI

MUMBAI – The euro fell 0.3% against the dollar after reports showed that the Euro area's flash services purchasing managers' index and new orders fell in May. The flash services PMI fell to a 16-month low of 48.9 in May from 50.1 last month. The seasonally adjusted flash composite PMI output index slipped to 49.5 in May, a six-month low, from 50.4 in April. However, losses in the currency were limited after the German Ifo business climate index, an early indicator of economic developments in Germany, climbed to 87.5 in May, higher than the analysts' forecast of 87.4.

The pound sterling was down 0.2% against the greenback as the UK flash composite PMI came weaker than expectations. The UK flash composite PMI in May rose to 49.4 from 48.5 last month, but was lower than the forecast of 50.8 in a Dow Jones poll. The UK flash services PMI rose to 50.2 in May, marginally higher than the analysts' forecast of 50.0 and up from 49.0 in April. The manufacturing PMI was 45.1, lower than the forecast of 46.1.

The Japanese yen was up 0.1% against the US currency as Japanese government officials said there was no concrete data that indicated a weakness in economic activity. However, gains in the Japanese currency were limited as data published earlier in the day showed Japan's May factory activity declined for the eleventh consecutive month, hit by the aggressive tariffs by the US. The au Jibun Bank manufacturing PMI rose to 49.0 in May from 48.7 last month but remained below 50.

The dollar index remained largely steady ahead of the US flash PMI for May and the weekly initial jobless insurance claims data for the week ended May 17. At 1602 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.80, slightly up from 99.69 Wednesday but down from 100.01 Tuesday.

The Canadian dollar was down 0.1% against the greenback ahead of the producer price index for May, due later in the day. The Swiss franc traded flat against the US currency. The New Zealand dollar fell 0.6% against the greenback. The Australian dollar was down 0.1% against the US dollar. The Australian manufacturing PMI remained unchanged at 51.7 in May, while the services PMI showed a modest rise in May, with the headline index at 50.5.  (Gowri Lakshmi)

India Rupee: Breaches past 86/$1 on FPI outflows; stop losses triggered

MUMBAI – The rupee fell past the psychologically crucial level of 86 per dollar due to persistent dollar purchases by foreign portfolio investors and importers, dealers said. Banks' dollar sales at 85.70 a dollar, likely on behalf of the Reserve Bank of India, could not prevent the rupee from falling sharply and led to stop-losses being triggered on short-dollar bets at multiple levels, dealers said. 

"We initially thought the rupee will be rangebound today as well," a dealer at a private sector bank said. "But there are significant outflows from equity and foreign banks have been buying since morning." Foreign banks, including a US-based one, purchased dollars on behalf of overseas investors, who wanted to withdraw funds from the domestic stock market, dealers said. At 1317 IST, the benchmark stock indices, the Nifty 50 and the BSE Sensex were down 1.1% each. 

Further, Prime Minister Narendra Modi said Thursday Pakistan will have to pay "a heavy price for playing with the blood of Indians". His statement comes amid a de-escalation of military hostilities between India and Pakistan. This triggered panic among investors, dealers said. 

Banks also purchased dollars on behalf of importers, who feared a sharp fall in the rupee, dealers said. This further pushed the rupee to the day's low of 86.0600 a dollar, its lowest level since Apr. 11. 

Noting the sharp fall in the rupee, a few exporters sold the greenback, which provided some cushion to the Indian currency, dealers said. Banks also continued to sell dollars likely for the RBI, which limited a further fall for the rupee, dealers said. However, the central bank's intervention was 'mild' in nature, according to some dealers. 

The dollar index remained largely steady Thursday. At 1326 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 99.63, little changed from 99.69 Wednesday and down from 100.01 Tuesday. 

For the rest of the day, the rupee is seen moving between 85.80 and 86.15 a dollar. Dealers peg immediate technical support at 86.10 a dollar.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - May 22

MUMBAI – At 1123 IST, the rupee was at 85.6675 per dollar. At 0900 IST, the rupee was at 85.5875 a dollar, against the previous close of 85.6375. 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 - Asia FX: Mixed; Taiwan dollar up 0.7%, won slips 0.6%

MUMBAI – Asian currencies traded mixed against the US dollar on Thursday as investors await more details from the ongoing bilateral trade talks between the US and several Asian countries. The Taiwan dollar rose 0.7% against the greenback, supported by a decline in the dollar index.

Taiwanese central bank Deputy Governor Yen Tsung-ta said on Tuesday that the central bank had strategically allowed the Taiwanese dollar to strengthen against the US dollar earlier this month to let market expectations unfold, Bloomberg reported. "It's a tactic, we can cool down the market expectations by doing this," Yen Tsung-ta said. "We had used similar tactics before."

South Korean won slipped 0.6% in early trade, the worst hit among its regional peers, tracking a fall in its domestic stock market. At 1022 IST, the benchmark index, KOSPI was down 1.2%. The South Korean currency fell after having risen sharply Tuesday on reports that the US urged South Korea to take measures for a stronger won.

The dollar extended its losses as investors continue to move to other safe-haven currencies due to growing fears of a recession in the US and a ballooning US fiscal debt. At 1059 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.57, down from 99.69 Wednesday and 100.01 Tuesday.

The Indonesian rupiah rose 0.4% against the greenback. Bank Indonesia cut its benchmark interest rate Wednesday, in line with market expectations, to support the sluggish economy after pressure on local currency receded. The benchmark 7-day reverse repo rate was reduced by 25 basis points to 5.50%. "This decision is consistent with the forecast of low and manageable inflation in 2025 and 2026 within the target to maintain the stability of the rupiah in accordance with its fundamentals, and to contribute to economic growth," Bank Indonesia Governor Perry Warjio said. 

The Malaysian ringgit was up 0.3% against the greenback. Malaysia's consumer price remained steady in April, data published earlier in the day showed. The consumer price index rose 1.4% on year in April, in line with the analysts' forecast in a Dow Jones poll. 

The Chinese yuan and the Philippine peso traded flat against the US currency. The Thai baht rose 0.3% against the greenback. Thailand's Cabinet approved a 157-billion-baht economic stimulus plan to address the changing global trade frictions and market changes.  (Gowri Lakshmi)

India Rupee: Steady; importers' dlr buys offset fall in dlr, crude oil price

MUMBAI – The rupee was steady against the dollar Thursday as dollar purchases by banks for importers offset a fall in the dollar index and crude oil prices, dealers said. "Volumes are dull, some importer buying is there... but again not any large orders," a dealer at a state-owned bank said. Importers purchased the greenback, wary of the rupee's fall in the near term, dealers said. 

A fall in domestic equities in early trade weighed on the rupee, dealers said. At 0944 IST, the benchmark stock indices, the Nifty 50 and the BSE Sensex, were down 0.9% each. 

The rupee was supported by a fall in the dollar index as concerns about a recession in the US loom, owing to rising fiscal debt and the impact of aggressive trade policies of US President Donald Trump on the US economy. Investors continue to move to other safe-haven assets as the dollar logged its fourth consecutive day of loss. 

At 0946 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.54, down from 99.69 Wednesday and sharply lower than 100.01 Tuesday. "Nobody is going long (on dollars) anymore, traders are especially moving to euro and the (Swiss) franc," the dealer said. 

Crude prices also eased in early trade Thursday after Oman's minister Wednesday said a fresh round of US-Iran nuclear talks would begin next week. At 0949 IST, the July Brent Crude prices on the Intercontinental Exchange was at $64.88 per barrel, broadly unchanged from $64.91 per barrel Wednesday and sharply down from $65.38 per barrel Tuesday. A fall in crude oil prices did not prompt oil marketing companies to place large orders as they expect crude prices to fall further, dealers said. 

During the day, the rupee is seen moving in a range of 85.30 and 85.75 a dollar. Dealers see immediate technical support at 85.70 against the dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - May 22

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

(Gowri Lakshmi, Sourabh Kumar 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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