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Informist, Tuesday, May 27, 2025

By Sourabh Kumar

MUMBAI – The rupee ended the day sharply lower against the dollar as foreign banks continuously bought dollars for foreign fund outflows from domestic equities, dealers said. Some exporters sold the greenback at relatively higher dollar/rupee levels, which limited the fall of the Indian currency, dealers said.

"Buying was there the whole day for outflows from equities, including related to MSCI and FTSE reorganisation," a dealer with a foreign bank said. After moving in a range of around 30 paise, the rupee settled at 85.3300 a dollar, against 85.0850 a dollar Monday.

Some foreign banks bought dollars on behalf of overseas clients, who pulled out money from Indian stocks amid a fall in indices. The Nifty 50 and the BSE Sensex settled 0.7% and 0.8% lower, respectively, Tuesday. Other foreign investors bought the greenback as the FTSE Russell and MSCI readjusted their indices, reducing the weightage of Eternal, formerly Zomato.

The rupee started the day slightly lower as importers, who did not purchase dollars Monday due to the US market holiday, started buying the greenback since morning. After opening, the rupee's overall trajectory was on the lower side throughout the day, hitting a low of 85.4450 a dollar. Similar to Monday, oil marketing companies purchased the greenback, noting lucrative crude oil prices and dollar/rupee rates, dealers said. 

The July Brent Crude contract on the Intercontinental Exchange was at $64.95 per barrel at 1530 IST, slightly up from $64.74 per barrel Monday, and $64.78 per barrel Friday. Oil prices were little changed ahead of the meeting of the Organization of the Petroleum Exporting Countries and its allies.

Some importers also bought the greenback to meet their month-end payment obligations, which weighed on the rupee, dealers said. Soon, foreign banks started purchasing dollars, which put more pressure on the Indian currency, dealers said. They bought dollars after both the FTSE Russell and MSCI reduced the weightage of Eternal in their indices. They lowered Eternal's weightage after the company decided to reduce its foreign holding to 49.5% from 100%.

Due to a reduction in the weightage of Eternal by both MSCI and FTSE Russell, there were expectations of foreign fund outflows of around $800 million-$900 million. Some dealers said total foreign fund outflows from equities was well over $1 billion, which kept the rupee under pressure throughout the day.

While the dollar index was steady until about noon, it started gaining after the European markets opened, which eventually weighed on the Indian currency, dealers said. The dollar index gained mainly because the Japanese yen and the euro retreated against the US currency. The euro has a weightage of 57.6% and the yen, 13.6%, in the dollar index.

The dollar also strengthened as stock futures in the US gained Tuesday as US President Donald Trump Sunday delayed tariffs on the European Union to Jul. 9 from Jun. 1. The rise in stock futures indicated the improved risk appetite of investors.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 99.36 at 1530 IST, up from 98.93 Monday and 99.10 Friday. The index had hit an over-one-month low of 98.69 Monday.

While most overseas investors purchased dollars as they exited Indian equities, some did invest in currently open initial public offerings, for which they sold dollars, though not at a level comparable with the quantum of dollar purchases. The initial public offerings of Aegis Vopak Terminals Ltd. and Schloss Bangalore Ltd. opened Monday and will close Wednesday. The initial public offering of Prostarm Info Systems Ltd. opened Tuesday and will close Thursday.

Some exporters also sold dollars after the rupee fell below 85.40 a dollar, which limited the fall of the Indian currency, dealers said. "The IPO flows were very less, but exporters sold good amount above 40 (85.40 a dollar)," a dealer with a foreign bank said.

FORWARDS

The one-year dollar/rupee forward premium inched slightly higher due to a fall in the benchmark US Treasury yield, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the countries. The upward movement was capped by some banks selling dollars for forward delivery, dealers said.

At the close of the Indian market Tuesday, the 10-year benchmark US Treasury yield was trading at about 4.47% after having fallen three basis points to settle at 4.51% Friday. The US market was closed Monday.

A few importers also purchased forward dollars, which supported premiums, dealers said. Some dealers said they bought forward dollars as dollar/rupee forward premiums did not fall as much as they had expected. 

With the RBI's Monetary Policy Committee scheduled to meet from Jun. 4, dealers expect a 25-basis-point rate cut. Most dealers expect the one-year dollar/rupee forward premium to fall below 2.0% only after the rate-setting panel's decision next week. If the RBI cuts rate, the interest rate differential with the US will fall, pushing forward premiums lower.

The one-year dollar/rupee forward premium ended at 2.05%, down from 2.04% Monday. On an absolute basis, the premium was 175.33 paise, down from 173.67 paise Monday.

OUTLOOK

On Wednesday, the rupee may open slightly lower, should the dollar index continue to gain, dealers said. The Indian currency will also track the movement of the offshore Chinese yuan, dealers said. Market participants will be watchful of any developments related to Trump's tariff policies. 

"Recent foreign inflow trends have been mixed, adding to the cautious sentiment," Jateen Trivedi, vice-president of commodity and currency research at LKP Securities, said in a note. "With key US data releases lined up this week, including the FOMC (Federal Open Market Committee) meeting minutes, Jan-Mar GDP, and core personal consumption expenditures price index, volatility in dollar/rupee is expected to remain high."

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. A fall in domestic equities may prompt foreign fund outflows, which could weigh on the Indian currency, dealers said. Dealers expect the rupee to move within the range of 85.00-85.50 a dollar. They see strong technical support for the rupee at 84.50 a dollar.

India Rupee - World FX: Yen slumps on report Japan to trim long bond issues

NEW DELHI – The Japanese yen slumped 0.8% against the dollar after Reuters reported, citing sources Tuesday, that Japan will consider trimming issuance of super-long bonds amid the recent sharp rise in yields for the notes. Long-dated Japanese government bond yields also fell sharply after the report. 

Japanese Finance Minister Katsunobu Kato said on Tuesday the government was closely monitoring the bond market ahead of the auction of super-long debt this week. Bank of Japan Governor Kazuo Ueda on the same day said the central bank must be vigilant on rising consumer prices in Japan, pointing towards its readiness to keep increasing interest rates.

The dollar index rose during European trade, tracking a decline in the yen. At 1555 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 99.39, against 98.93 Monday and 99.10 Friday.

The dollar index also gained as investors weighed US President Donald Trump's decision to delay higher tariffs on the European Union. Trump on Sunday restored a Jul. 9 deadline to allow for talks between Washington and the European Union. The euro, meanwhile, fell 0.3% against the greenback, reversing its gains from Monday.   

The pound sterling was down 0.2% against the US unit after data Tuesday showed confidence among the country's retail consumers fell at the sharpest pace in five years in May. The Confederation of British Industry's quarterly gauge of business sentiment plummuted to -29% in May from -19% in February. It was the lowest reading since May 2020.

Both the Australian dollar and the New Zealand dollar declined 0.6% and 0.7% against the greenback, respectively.  (Pratiksha) 

India Rupee: Premium steady as banks' fwd dollar sales offset fall in US yld

MUMBAI – The one-year dollar/rupee forward premium was largely steady Tuesday as some banks sold dollars for forward delivery, which offset the upward push received from a fall in the benchmark US Treasury yield, dealers said. The benchmark 10-year US Treasury yield was around 4.46% in early European trade after having already fallen three basis points to settle at 4.51% Friday. The US market was closed Monday.

"There is some receiving on the higher side, but then traders are also taking advantage of the arbitrage--they pay so levels go higher, and then they receive at such higher levels," a dealer with a state-owned bank said. A fall in the 10-year US Treasury yield supported forward premiums, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

A few importers also purchased forward dollars, which supported premiums, dealers said. Some dealers said they bought forward dollars as dollar/rupee forward premiums did not fall as much as they had expected. Market participants had earlier expected the one-year exact-period dollar/rupee forward premium to fall below 2.0% by the end of this month, most dealers said. Some importers do not see that happening and, therefore, bought forward dollars, a dealer with a state-owned bank said. 

With the Reserve Bank of India's Monetary Policy Committee scheduled to meet from Jun. 4, dealers expect a 25-basis-point rate cut. Most dealers think the one-year dollar/rupee forward premium will fall below 2.0% only after the MPC decision next week. If RBI cuts rate, the interest rate differential with the US will fall, pushing forward premiums lower.

At 1402 IST, it was 2.05%, only slightly up from 2.04% Monday and unchanged from 2.05% Friday. On an absolute basis, the premium was 174.83 paise, slightly higher from 173.67 paise Monday and 174.50 paise Friday.  (Sourabh Kumar)

India Rupee: Slumps on FX outflows from equities, importers' dollar buys

MUMBAI – The rupee slumped against the dollar due to continuous foreign fund outflows from domestic equities, dealers said. While overseas investors pulled money out of the Indian market, there were some who invested in the initial public offerings currently open, for which some foreign banks sold dollars, limiting the fall of the rupee, dealers said. However, the quantity of such dollar sales was not enough to offset the demand for dollars, dealers said.

The initial public offerings of Aegis Vopak Terminals Ltd. and Schloss Bangalore Ltd. are currently open, and will close on Wednesday. The initial public offering of Prostarm Info Systems Ltd. opened Tuesday, and will close Thursday. 

"This are outflows related to MSCI rebalancing and importer demand has been there," a dealer with a state-owned bank said. "I think so far, foreign banks have bought more than $1 billion. It can move the levels around 15 paise amid normal volume."

After opening at 85.1500 a dollar, the rupee remained down against the greenback. Both FTSE Russell and MSCI readjusted their index, with a reduced weightage to Eternal, formerly known as Zomato. Foreign fund outflows of around $400 million are expected on account of FTSE Russell's readjustment, which took effect Tuesday, as per dealers. MSCI's index review scheduled for May could lead to foreign fund outflow of around $460 million, as per reports. A fall in domestic equities also weighed on the rupee, dealers said. Both the Nifty 50 and BSE Sensex were down 0.6% at 1238 IST. 

Some importers also demanded dollars to meet their month-end payment obligations, which further weighed on the rupee, dealers said. Importers, who did not buy dollars Monday as the US market was shut, also purchased the greenback, putting further pressure on the Indian rupee, dealers said.

The dollar index inched slightly higher in early European trade, which weighed on the Indian currency, dealers said. The index, which measures the strength of the greenback against a basket of six major currencies, was at 99.19 at 1241 IST, up from 98.93 Monday and 99.10 Friday. For the rest of the day, dealers expect the rupee to move in a range of 85.15-85.45 a dollar. They expect key technical support at 85.45 a dollar.  (Sourabh Kumar)

India Rupee: Technical levels for rupee - May 27

MUMBAI – At 1054 IST, the rupee was at 85.2950 per dollar. At 0900 IST, the rupee was at 85.1500 a dollar, against the previous close of 85.0850. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar)

India Rupee - Asia FX: Most up as dollar index remains weak; Thai baht down

MUMBAI – Most Asian currencies were higher against the dollar Tuesday as the dollar index remained weak after it fell Friday and then declined further on Monday. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 98.89 at 0953 IST, down from 98.93 Monday and 99.10 Friday. 

The dollar weakened in the past two trading days as US President Donald Trump threatened to impose tariffs on the European Union over the weekend. Such tariff threats renewed fear among investors of a prolonged tariff war, which hurt the US currency's strength.

European Central Bank President Christine Lagarde said Monday that the euro could replace the dollar to become the global standard currency for international trade. She highlighted the recent undermining of the dollar on account of the uncertain tariff and economic policy of the US, which has led investors to seek other alternative investment avenues.

She called for a more integrated euro area capital market and development of a liquid, widely available safe asset for investors. "Economic logic tells us that public goods need to be jointly financed. And this joint financing could provide the basis for Europe to gradually increase its supply of safe assets," Lagarde said. 

The Taiwan dollar was up 0.3% against the greenback due to a weakness in the US currency. The South Korean won rose 0.2% against the greenback ahead of the Bank of Korea's rate decision Thursday, where it is expected to cut the benchmark rate by 25 basis points. The Philippines peso was steady 0.1% against the greenback. 

The Thai baht was down 0.2% against the greenback. A fall in its domestic equities weighed on the Thai currency. The benchmark SET index fell over 1% on Tuesday. The Malaysian ringgit was up 0.2% while the Indonesian rupiah was steady against the greenback.  (Sourabh Kumar)

India Rupee: Down sharply on importers' dlr buys, FX outflows from equities

MUMBAI – The rupee fell sharply against the dollar in early trade Tuesday due to demand for the greenback from importers and foreign fund outflows from equities, dealers said. Such importers who did not buy dollars Monday due to a US market holiday rushed to the foreign exchange market early Tuesday to take advantage of relatively lower dollar/rupee levels, dealers said.

"I am expecting some more outflows due to MSCI rebalancing will be there in the day, and buying is there from importers because yesterday was US holiday," a dealer with a foreign bank said. 

In addition to importers, dollar demand was higher in early trade as banks purchased the greenback for foreign fund outflows from Eternal, earlier known as Zomato, after MSCI and FTSE Russel both cut its weightage in their index. The decision was made after the overseas ownership limit in the company was reduced to 49.5%.

FTSE Russell's readjustment, which took effect Tuesday, is expected to lead to outflows of around $380 million, while MSCI's index review scheduled for May could result in outflows worth $460 million, as per reports. A fall in domestic equities also weighed on the rupee, dealers said. Both the Nifty 50 and BSE Sensex were down 0.8% at 0921 IST. 

Meanwhile, the dollar index remained steady after having fallen in the past two trading days, which supported the rupee. The US currency had already weakened Friday and fell further Monday to over a month-low after US President Donald Trump threatened to impose tariffs on the European Union over the weekend. Such tariff threats renewed fears among investors of a prolonged tariff war, which hurt the US currency's strength.

The dollar index, which measures the strenth of the dollar against a basket of six major currencies, was at 98.91 at 0923 IST, slightly lower than 98.93 Monday and 99.10 Friday. The dollar index had hit over a month-low of 98.69 Monday. 

Most exporters, on the other hand, remained on the sidelines, waiting for the rupee to fall further before selling dollars in large quantums, dealers said. "I think it will go below 40 (85.40 a dollar), after which we may see some exporters coming in," the dealer with the foreign bank quoted earlier said. 

Dealers also expect some foreign fund inflows into the initial public offerings currently open, which may limit the fall of the rupee. The initial public offerings of Aegis Vopak Terminals Ltd. and Schloss Bangalore Ltd. opened Monday, and will close on Wednesday.

For the rest of the day, dealers expect the rupee to move in a range of 85.00-85.50 a dollar. They expect key technical support at 85.40 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - May 27

MUMBAI – Following are the expected support and resistance levels for the rupee on Tuesday, 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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