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Informist, Monday, May 26, 2025

By Pratiksha

NEW DELHI – The rupee ended off its day's high against the dollar on Monday as banks persistently bought the greenback on behalf of oil marketing companies and other importers, dealers said. A rebound in the dollar index during European trade from the day's low also weighed on the Indian currency, they said. 

"After the initial rise in rupee, we thought it may go higher, but then it retraced like anything," said a dealer at a state-owned bank. "We had kept our stop at 85.20 (a dollar)." 

After rising past the psychologically-crucial level of 85-per-dollar for the first time in nearly two weeks to 84.7750 a dollar during the day, the Indian unit settled at 85.0850, against 85.2125 on Friday. However, with a gain of almost 0.2% against the dollar, the Indian currency was the second best performer among its emerging market peers, which fell 0.1-0.3%. The Malaysian ringgit was the best performer with a rise of 0.3%. 

The rupee started the day on a positive note as the dollar index slumped to an over one-month low in early trade after President Donald Trump on Monday backed down from his threat to impose 50% tariffs on imports from the European Union next month and restored a Jul. 9 deadline. Trump Friday threatened to impose 50% tariff on goods from the European Union starting Jun. 1.

Further, a jump in the offshore Chinese yuan to an over six-month high during early trade also supported the Indian unit, according to dealers. The offshore yuan hit a high of 7.16 a dollar during the day, its highest level since Nov. 8. 

Two hours into trade, the rupee got a further boost and rose past the 85-per-dollar mark as some foreign banks sold the greenback on behalf of overseas investors, looking to invest into the initial public offering of domestic companies, dealers said. Schloss Bangalore Ltd.'s public offer of INR 35 billion opened Monday with a price band of INR 413-INR 435 per equity share. The public offer of Aegis Vopak Terminals Ltd., a subsidiary of Aegis Logistics Ltd. also opened on Monday. 

A rise in domestic equities also lent support to the local currency, they said. Both the Nifty 50 and Sensex ended 0.6% higher on Monday.  

However, oil marketing companies and other importers stepped in to purchase the greeback above the 85-per-dollar mark, following which the local unit erased a significant portion of its gains, dealers said. "There was strong demand (for dollars) from importers once it (rupee) went to 84.80. These levels are lucrative," said a dealer at a private sector bank. 

Some dealers speculated that the Reserve Bank of India may also have bought the greenback to fill its foreign exchange reserves, which weighed on the Indian unit. "The buying (of dollars) could have been by nationalised banks who could have acted on behalf of RBI alongwith importers who bought considering the lower levels," Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP said in a note.

Meanwhile, volume in the currency market was lower than usual as markets in the US are shut Monday on account of US Memorial Day, dealers said. Lacklustre volume also exacerbated the movement in the Indian unit, they said. 

The dollar index recovered from the day's low during European trade as investors assessed Trump's volatile trade policies, which also weighed on the Indian unit and it touched the day's low of 85.1725 a dollar, dealers said. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.00 against 99.10 on Friday and 99.90 on Thursday. The dollar index had fallen to a low of 98.69 earlier in the day.

"The dollar has been volatile but mostly on the weaker side. The market is mostly looking at it on a session to session basis," said a dealer at a foreign bank. So far in May, the dollar index has declined 0.6%.  

FORWARDS

The one-year dollar/rupee forward premium ended at an over one-month low Monday as some exporters sold dollars for forward delivery on expectation of a further fall in premiums in the near term, dealers said. Premium has fallen over 25 basis points so far this month. 

Premiums also inched lower as liquidity in the banking system increased over the weekend. On Sunday, the Reserve Bank of India net absorbed INR 1.71 trillion from the banking system, similar to Friday's net absorption of INR 1.70 trillion from the banking system, but higher than Thursday, when the RBI net absorbed INR 991.23 billion.

The RBI's central board of directors on Friday approved the transfer of a record INR 2.69 trillion as surplus to the government for 2024-25 (Apr-Mar), which is expected to further improve system liquidity. This may weigh further on forward premiums, especially near tenors, dealers said.

However, a fall in forward premiums was limited as the benchmark 10-year US Treasury yield fell 3 basis points on Friday to close at 4.51%. Forwards of a currency pair are reflective of the interst rate differential between the two countries. 

The overall volume in the market was low as the US market is shut on Monday, dealers said. After hitting a low of 2.03% during the day, on an annualised basis, the one-year dollar/rupee forward premium ended at 2.04%, against 2.05% Friday. On an absolute basis, the premium was 173.67 paise, down from 174.50 paise Friday. 

OUTLOOK

On Tuesday, the rupee will take cues from movement in the dollar index and the offshore Chinese yuan, dealers said. Market participants will be watchful of any developments related to Trump's tariff policies. 

"A series of key US economic data lined up this week including durable goods orders, FOMC (Federal Open Market Committee) meeting minutes, Q1 GDP, and the core PCE price index are expected to keep USDINR (dollar/rupee) volatility elevated. The rupee is likely to remain within a range of 84.50 to 85.25 in the near term," Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities, said in a note.  

Foreign banks may continue to sell dollars on behalf of overseas investors looking to invest in public offers of Indian companies, which may support the Indian unit, dealers said. Some dealers expect the central bank to intervene through dollars purchases in case the Indian unit appreciates sharply above 84.50 a dollar. 

Dealers expect the rupee to move within the range of 84.70-85.30 a dollar. They see strong technical resistance for the rupee at 84.70 a dollar.

India Rupee - World FX: Euro up as Trump delays EU tariffs; US, UK mkts shut

MUMBAI – The euro was up 0.2% against the dollar after US President Donald Trump delayed the implementation of 50% tariffs on the goods importers from the European Union till Jul. 9 from the earlier proposed date of Jun. 1. 

The Japanese yen was down 0.2% against the greenback at 1436 IST, after rising in early trade. Japan's chief trade negotiator Ryosei Akazawa indicated Monday that they may reach a trade deal with the US by June. The Australian dollar was up 0.4%, and the Canadian dollar rose 0.2% against the greenback. 

The pound sterling rose 0.2% against the greenback. Financial markets in the UK were shut Monday for the late-May bank holiday. Data from the UK released Friday showed retail sales were strong in April, rising 5% on year and 1.2% on month. The print was higher than the 4.4% on-year and 0.3% on-month rise expected by Dow Jones.

Markets in the US are also shut Monday on account of Memorial Day. The US currency gained slightly from earlier in the day, but was still weaker than Friday. The dollar index, which measures the strength of the dollar against a basket of six major currencies, was 98.96 at 1418 IST, down from Friday's 99.10 and 99.90 on Thursday. The dollar index had fallen to a low of 98.69 earlier in the day.

The US currency weakened after Trump threatened to impose 50% tariffs on the EU. This dampened market sentiment towards US assets. Further, Trump's threat to impose 25% tariffs on Apple iPhones not manufactured in the US also weighed on sentiment. Market participants remained cautious of further such announcements by Trump.

Moreover, data released Friday showed that new home sales in April rose 10.9% to a seasonally adjusted annual rate of 743,000 units in April from 670,000 in March. It was expected to come in at 695,000, according to economists polled by The Wall Street Journal.  (Sourabh Kumar)

India Rupee: 1-yr fwd premium hits over 1-mo low; volume low as US mkt shut

MUMBAI – The one-year dollar/rupee forward premium hit an over one-month low Monday as some exporters sold dollars for forward delivery, anticipating further fall in premiums in the coming days, dealers said. The overall volume in the market was low as the US market is shut on the first day of the week, dealers said. 

The one-year exact period dollar/rupee forward premium fell to 2.03% on an annualised basis, the lowest since Apr. 23. At 1338 IST, it was 2.04%, slightly lower than 2.05% Friday and 2.09% Thursday. On an absolute basis, the premium was 173.67 paise, down from 174.50 paise Friday and 179.73 paise Thursday.

"There is less movement today because US is shut, but some receiving is there from exporters," a dealer with a state-owned bank said. "I think it may go to around 1.95% in a few days, where there is some good support."

The fall in forward premiums was limited as the benchmark 10-year US Treasury yield fell 3 basis points on Friday to close at 4.51%. Forwards of a currency pair are reflective of the interst rate differential between the two countries. 

Forward premiums also inched lower as liquidity in the banking system increased over the weekend. On Sunday, the Reserve Bank of India net absorbed INR 1.71 trillion from the banking system, similar to Friday's net absorption of INR 1.70 trillion from the banking system. But it was higher than on Thursday, when the surplus had fallen to INR 991.23 billion.

Further, after the RBI's central board of directors decided Friday to transfer a record surplus of INR 2.69 trillion to the government for 2024-25 (Apr-Mar), market participants expect forward premiums, especially of near tenors, to come down. The surplus transfer is likely to lead to an increase in banking system liquidity, which may push premiums down, dealers said. 

However, the one-month forward premium rose Monday, when premiums of most other tenors fell. This is because a few banks purchased forward dollars of one-month tenor, as they took advantage of arbitrage between the onshore forward and offshore non-deliverable forward premium rates, dealers said. "So, the one-month is up because of the arbitrage between one-month NDF and onshore forwards, and usually, it goes up because of that," a dealer with another state-owned bank said.  (Sourabh Kumar)

India Rupee: Surges on foreign banks' dlr sales for IPO, fall in dlr index

MUMBAI – The rupee surged against the dollar after opening sharply higher, as some foreign banks sold the greenback on behalf of their clients who wanted to invest in the inital public offering of Schloss Bangalore Ltd., which owns the hotel chain 'The Leela', dealers said.

"There is good selling (of dollars) since morning for Leela IPO, and most of the market is on selling side," a dealer with a foreign bank said. "I think 80 (84.80 a dollar) is a very crucial level, and if it breaks, then we may see a very quick movement towards 84.50 a dollar." 

It is the first day of Schloss Bangalore Ltd.'s INR 35-billion IPO, which will close on Wednesday. A rise in domestic equities also supported the rupee, dealers said. Both the Nifty 50 and BSE Sensex were up 0.5% at 1103 IST.

After opening higher at 85.0500 a dollar due to a fall in the dollar index, the rupee erased some gains and hit 85.1325 a dollar. But soon, banks sold dollars in considerably large quantum, which drove the Indian currency higher to 84.7925 a dollar, about a two-week high, dealers said. "I thought, it (dollar/rupee) will go higher to about 20, but then some foreign banks hit so hard, they took it (rupee) to below 80 (84.80 a dollar) also," said the dealer quoted earlier.

The dollar index fell, which supported the rupee, dealers said. The dollar weakened after US President Donald Trump Friday threatened to impose 50% tariff on goods from the European Union, though he later extended the deadline. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 98.79 at 1055 IST, down from 99.10 Friday and 99.90 Thursday.

Since the overall volume in the currency market is low Monday due to a holiday in the US, even a slight rise in buying or selling of dollars led to excessive movments in the dollar/rupee, dealers said. For the rest of the day, dealers expect the rupee to move in a range of 84.80-85.20 a dollar. They expect key technical resistance at 84.75 a dollar.  (Sourabh Kumar)

India Rupee: Technical levels for rupee - May 26

MUMBAI – At 1033 IST, the rupee was at 84.8575 per dollar. At 0900 IST, the rupee was at 85.0500 a dollar, against the previous close of 85.2125. 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 dlr index falls on worries of tariff war

MUMBAI – Most Asian currencies rose against the dollar Monday as the dollar index retreated on renewed fears of a tariff war after US President Donald Trump Friday threatened to impose tariffs on goods from the European Union. He also warned of 25% tariff on imports of Apple iPhones to the US. 

While Trump later pushed back the date of 50% tariff on EU goods to Jul. 9, market participants remained cautious of tariff wars. He extended the deadline after the EU executive body head said they needed more time to reach a good deal with the US. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 98.77 at 0836 IST, down from 99.10 Friday and 99.90 Thursday.

On Friday, US data on new home sales in April was released. The data showed a rise of 10.9% in new home sales to a seasonally adjusted annual rate of 743,000 units in April, against 670,000 in March, the Commerce Department's Census Bureau data showed. Sales had been estimated at 695,000, according to economists polled by The Wall Street Journal.

The Taiwan dollar and the Malaysian ringgit were down 0.3% and 0.7%, respectively, against the dollar due to a fall of the dollar index. The South Korean won rose 0.2% against the greenback due to weakness in the US currency. Gains in the South Korean won were limited as market participants expect the Bank of Korea to cut the benchmark rate by 25 basis points Thursday. Reports also indicated that the central bank could lower its forecast for economic growth to below 1% from its latest projection of 1.5%.

The Philippines peso was down against the greenback as a fall in the country's domestic equities weighed on its currency. The benchmark PSEi was down 0.4% in early trade Monday, which offset the positive impact of a weak dollar index on the Philippines peso. The Indonesian rupiah and the Thai baht were up 0.2% each against the greenback due to a fall in the dollar index.  (Sourabh Kumar)

India Rupee: Sharply up as dlr weakens after Trump threatens tariffs on EU

MUMBAI – The rupee was sharply higher against the dollar early Monday due to weakness in the dollar index, dealers said. The US currency weakened after US President Donald Trump Friday threatened to impose 50% tariff on goods from the European Union.

"The (dollar/rupee) levels have come down because Trump announced that there may be 50% tariff on EU, so the dollar has weakened," a dealer with a state-owned bank said. "So, on one hand there is a weak dollar and at the same time there is this announcement that India has become the fourth-largest economy, so it is positive for the rupee."

While Trump later extended the starting date for tariffs on goods from the EU to Jul. 9, market participants remained cautious of more tariffs. The dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.81 at 0913 IST, down from 99.10 Friday and 99.90 Thursday. Trump had also announced a 25% tariff on imports of Apple iPhones to the US. 

The overall volume in the foreign exchange market remained low, and is not expected to pick up during the day due to a holiday in the US. Since overall volumes are expected to remain low, the dollar/rupee may see some excessive moves even if a few market participants buy or sell dollars in relatively larger volumes, dealers said.

Noting a relatively higher rupee, a few importers purchased the greenback, which limited the upside movement of the Indian currency, dealers said. The Indian unit touched 84.9700 a dollar early Monday, the highest in about two weeks. Almost all exporters remained on the sildelines, not selling dollars in considerable quantum, as they waited for the rupee to fall, dealers said.

Apart from a weak dollar index, market participants said there was optimism around the rupee after NITI Aayog Chief Executive Officer B.V.R Subrahmanyam said over the weekend that India overtook Japan to become the fourth-largest economy in the world. "We are the fourth-largest economy as I speak. We are a $4-trillion economy, and this is not my data – it's IMF data. India today is larger than Japan," Subrahmanyam said.

For the rest of the day, the rupee is seen moving in a range of 84.95-85.20 a dollar. Dealers see immediate technical resistance for the rupee at 84.95. The rupee may move above 84.95 if there are considerable foreign fund inflows, dealers said, with expectation of a fall in the rupee below 85.20, should there be an increase in dollar purchases by importers.  (Sourabh Kumar)

India Rupee: Expected range for rupee - May 26

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:

(Sourabh Kumar)

End

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

Edited by Akul Nishant Akhoury

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