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Informist, Wednesday, May 28, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended steady against the dollar Wednesday as dollar sales, likely by the Reserve Bank of India and exporters, offset the downward pressure from foreign fund outflows, dealers said. The rupee was also supported as a few foreign banks sold the greenback, likely related to flows into initial public offerings of domestic companies, dealers said. 

After erasing most of the losses from early trade, the Indian unit settled at 85.3600 a dollar, broadly steady from its previous close of 85.3300. The rupee touched a low of 85.7075 a dollar earlier and moved in a range of over 37 paise during the day. 

"Buying pressure was there throughout the day, but RBI also sold dollars continuously, coupled with some exporters' dollar sales, supported the rupee later in the day," a dealer at a private sector bank said. "Some inflows into IPO also aided, even though the quantum may be comparatively less," he added. 

Most other Asian currencies rose against the dollar owing to a weaker dollar index during the European market hours. Other Asian currencies rose between 0.1%-0.4% against the greenback. The Thai baht was the best-performing currency amongst its regional peers, followed by the Malaysian ringgit.

The rupee started the day sharply lower at 85.6400 against the greenback as foreign banks persistently bought dollars, mostly likely for British American Tobacco's block deal, dealers said. The UK-based company, which currently holds a 25.4% stake in ITC, Tuesday said it intends to sell a 2.3% stake in ITC worth $1.4 billion. British American Tobacco is planning to sell up to 290 million shares in the deal at a floor price of INR 400. 

The rupee was also weighed down as importers rushed to purchase dollars to meet their month-end payment requirements, dealers said. Foreign fund outflows coupled with excessive dollar demand from importers pushed the rupee to the day's low of 85.7075 a dollar within the first hour. 

However, as soon as the rupee hit 85.70 a dollar, the RBI stepped in with dollar sales and prevented the rupee from falling further, dealers said. The central bank continued to sell dollars throughout the day, prompting exporters to sell dollars as well, dealers said. Noting the active intervention by the RBI, exporters sold the greenback at 85.68-85.70 a dollar, to take advantage of the lucrative dollar/rupee levels, dealers said. 

"The RBI is not going to let the 85.70 (a dollar) be breached very easily... even last week we saw this level was well guarded. So given the strong support, some exporters sold at whichever higher (dollar/rupee) levels to book their profits," a dealer at a private sector bank said.

Later in the day, the rupee was able to erase most of its losses from early trade as a few foreign banks also sold the greenback, likely on behalf of overseas investors, who wanted to invest in the IPOs of domestic companies, dealers said. The IPO of Aegis Vopak Terminals Ltd. and Schloss Bangalore Ltd. opened Monday and closed Wednesday. The initial public offering of Prostarm Info Systems Ltd. opened Tuesday and will close Thursday. However, dealers said the quantum of the inflows was not as high as expected. 

The dollar index remained broadly steady during the day after an initial rise in early trade, dealers said. The dollar remained stable against most major global currencies as investors assessed the ongoing US trade policy uncertainties. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.50, little changed from 99.56 Tuesday but sharply up from 98.93 Monday. 

Dealers said most market participants are now waiting for India's GDP data for Jan-Mar, due Friday. According to an Informist poll, economists estimate the Indian economy to have risen 6.8% in the last quarter of 2024-25 (Apr-Mar). Traders also fully priced in a 25 basis point rate cut by the Monetary Policy Committee of the RBI next month. The RBI's Monetary Policy Committee is scheduled to meet from Jun. 4-6.

"The broad range of 85.00-85.90 will hold and the bias is likely downward (for the rupee)," the dealer at the private bank said. "The rupee's direction will mostly be driven by the GDP figures and the upcoming MPC decisions." 

FORWARDS

The one-year exact-period dollar/rupee forward premium ended lower Wednesday as some banks sold forward dollars in anticipation of premiums falling further in the days to come, dealers said. However, forward dollar purchases by some banks on behalf of importers for their month-end payment needs limited the fall in premiums, dealers said. 

Forwards of a currency are reflective of the interest rate differential between two countries. The one-year dollar/rupee forward premium ended at 2.00%, down from 2.05% Tuesday. On an absolute basis, the premium was 172.05 paise, down from 175.33 paise Monday.

OUTLOOK 

On Thursday, the rupee is expected to trade lower against the dollar owing to continued dollar demand from importers to meet their month-end payment requirements, dealers said. Dealers also expect foreign fund outflows from the Indian stock market to continue, which is likely to put further pressure on the rupee. 

The rupee will also closely track movements in the dollar index and offshore Chinese yuan. Market participants will closely watch geopolitical developments and announcements by the US relating to trade and tariff policies, dealers said. However, dealers expect some overseas investors, looking to invest in the IPO of domestic companies, to sell dollars. This is likely to support the Indian currency. 

Should the rupee fall below the key level of 85.70 a dollar, dealers expect the RBI to actively intervene through dollar sales to limit the rupee's fall. The rupee is seen moving in a range of 85.20-85.80 a dollar. Dealers peg strong technical support for the Indian unit at 85.70 a dollar. 

India Rupee - World FX: New Zealand dlr up even as central bank cuts rates

MUMBAI – The New Zealand dollar was up 0.4% against the greenback even as the Reserve Bank of New Zealand lowered its benchmark rate by 25 basis points to 3.26% Wednesday, in line with market expectations, and hinted at a deeper monetary policy easing cycle due to rising economic risks from uncertain trade policies by the US. "Inflation is within the target band, and the (Monetary Policy) Committee is well placed to respond to domestic and international developments to maintain price stability over the medium term," the central bank said in a post-policy statement. 

Tracking the gains in the New Zealand dollar, the Australian dollar rose 0.1% against the US currency. Any change in the New Zealand economy directly impacts Australia's currency due to their close bilateral trade relations.

The dollar index remained stable as investors continue to assess the US trade policy flip-flops. However, risk sentiment among investors improved after US President Donald Trump Sunday paused the threatened 50% tariff on the European Union until Jul. 9. At 1523 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.51, slightly down from 99.56 Tuesday but up from 98.93 Monday. 

The euro traded flat against the US dollar. Data published earlier in the day showed unemployment in Germany, the largest economy in the bloc, jumped in May. Seasonally adjusted jobless claims rose by 34,000, accelerating from 6,000 in April, data from the Federal Employment Agency showed. 

The Swiss franc was up 0.1% while the Canadian dollar was down 0.1% against the greenback. The pound sterling traded flat against the US unit and the Japanese yen was down 0.2% against the greenback.  (Gowri Lakshmi)

India Rupee: Premium dn as banks sell fwd dlrs on view levels may fall more

MUMBAI – The one-year exact-period dollar/rupee forward premium fell Wednesday as some banks sold forward dollars in anticipation of premiums falling further in the days to come, dealers said. So far this month, the one-year forward premium has fallen around 26 basis points. 

However, some banks' forward dollar purchases on behalf of importers for their month-end payment needs limited the fall in premiums, dealers said. Such forward dollar purchases had a greater impact on shorter tenure premiums, driving forward premiums of most other tenures higher, dealers said.

"Forwards are moving sideways, there are paying and receiving both," a dealer with a state-owned bank said. The one-year dollar/rupee forward premium was down Wednesday as banks sold forward dollars at relatively higher premiums, as they expect it to fall below 2.0% in a few days, dealers said. At 1404 IST, the one-year dollar/rupee forward premium was 2.03% on an annualised basis, down from 2.05% Tuesday and 2.04% Monday. On an absolute basis, the premium was 174.55 paise, down from 175.33 paise Tuesday and slightly higher from 173.67 paise Monday.

The one-year forward premium fell as market participants expect the interest rate differential between India and the US to narrow in the coming days. This follows expectations of a cut in the policy repo rate by the Reserve Bank of India next week, while there is no clarity on when and by how much the US Federal Reserve will cut rates next, dealers said. The RBI's Monetary Policy Committee will decide on the interest rate on Jun. 6. Market participants expect it to cut the repo rate by 25 bps.

The 10-year benchmark US Treasury yield rose in European market hours from Tuesday's close of 4.43%. This pushed premiums lower, dealers said. The 10-year US Treasury yield was at around 4.47% in early European trade. Forwards of a currency are reflective of the interest rate differential between the two countries.  (Sourabh Kumar)

India Rupee: Erases some losses on likely RBI, exporter dollar sales

MUMBAI – The rupee erased some of the losses from early trade against the dollar as a few banks sold the greenback, likely on behalf of the Reserve Bank of India and exporters, dealers said. The rupee touched a low of 85.7075 a dollar earlier in the day and has moved over 26 paise so far. "The rupee has lately been trading in the broader range of 85.00-85.90," a dealer at a private sector bank said. "With the rupee holding the 68-70 (85.68-85.70 a dollar) levels, some exporters ' sales have come now."

The rupee came under pressure as importers purchased dollars to meet their month-end payment obligations, dealers said. A few foreign banks also persistently bought the greenback, likely for the foreign fund outflows from the domestic stock market, according to some dealers. "Outflows are continuing from yesterday (Tuesday) but inflows aren't much... so the rupee may be affected from that as well," another dealer at a state-owned bank said. 

However, as soon as the rupee was dragged to the day's low, the RBI likely stepped in with dollar sales to limit the rupee's fall, dealers said. Noting the active central bank intervention, a few exporters sold dollars at 85.68-85.70 a dollar, to take advantage of the relatively higher dollar/rupee levels, dealers said. This likely supported the rupee in erasing the early losses. 

"There is strong support at 70 (85.70), the rupee has been stabilised at that level since morning and is not moving past it. So some exporters just sold, seeing the rupee is not going to fall further," the dealer at the private sector bank said. 

Market participants currently await India's GDP print for Jan-Mar due Friday. India's economy is seen expanding 6.8% in the last quarter of 2024-25 (Apr-Mar), according to an Informist poll. "The rupee is likely to hold the current (low) levels in the run up to GDP figures...after which the rupee will take cues depending on how the figures show," the dealer at the private sector bank said. Most traders anticipate the GDP data to be lower than expected. 

For the rest of the day, dealers expect the rupee to move in a range of 85.20-85.75 a dollar. Dealers peg key technical resistance at 85.25 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX: Mixed; dollar index rises on easing trade tensions

MUMBAI – Asian currencies traded on a mixed note against the dollar Wednesday as investors continue to assess US trade policy flip-flops. Over the weekend, US President Donald Trump threatened the European Union that Washington would impose a 50% tariff. On Sunday, however, he paused the tariff on the bloc until Jul. 9. 

The dollar index inched up Wednesday on easing trade tensions. At 1013 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.79, up from 99.56 Tuesday and sharply higher than 98.93 Monday. 

The Malaysian ringgit was down 0.2% against the dollar, the worst hit among its regional peers in early trade. The Indonesian rupiah fell 0.1%, while the Philippine peso rose 0.1% against the greenback, tracking gains in the domestic stock market. At 1015 IST, the benchmark Philippine stock index, the PSEi Index, was up 1.4%. 

The Taiwan dollar slipped 0.2% after a fall in the country's consumer confidence index. Data released Tuesday showed Taiwan's consumer confidence fell to its lowest level in over a year due to rising global trade uncertainties and tariff risks which loom over Taiwan's economy. The index dropped to 64.3 this month from 68.21 in April. 

The South Korean won traded flat against the dollar. Data published earlier in the day showed South Korea's business survey index reading for the manufacturing sector rose to 73 in May from 68 the previous month. The Thai baht traded 0.1% higher against the greenback while the offshore Chinese yuan was flat. Chinese Premier Li Qiang Tuesday urged Southeast Asian and West Asian countries to remove trade barriers amid rising global trade uncertainties, and reinforced that Beijing was confident of stabilising its economy in the wake of tariff and trade policy challenges. 

"Facing rising protectionism and unilateralism in some places of the world, we must be committed to expanding opening up and removing barriers," Li said. "Economic globalisation is currently experiencing an unprecedented major impact."  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - May 28

MUMBAI – At 1031 IST, the rupee was at 85.6225 per dollar. At 0900 IST, the rupee was at 85.6400 a dollar, against the previous close of 85.3300. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Gowri Lakshmi)

India Rupee: Sharply down on FX outflows; likely RBI dlr sales limit fall

MUMBAI – The rupee was sharply down against the dollar Wednesday as a few foreign banks purchased the greenback for foreign fund outflows, dealers said. Excessive dollar demand from importers to meet their month-end payment requirements also weighed on the rupee, dealers said. However, they said some banks sold dollars, likely on behalf of the Reserve Bank of India, which prevented a further fall of the rupee.

"There is huge month-end demand from importers and there are outflows," a dealer at a state-owned bank said. "Corporates have started going long (on dollars) as well. But at 70 (85.70), the rupee has stabilised, and some support is seen at that level."

The rupee came under pressure as a few foreign banks purchased the greenback, likely for British American Tobacco's block trade deal, dealers said. British American Tobacco Tuesday said it plans to sell a 2.3% stake in ITC worth $1.4 billion. The UK-based firm is selling up to 290 million shares in the deal, at a floor price of INR 400. Currently, British American Tobacco holds a 25.4% stake in ITC through three entities.

A slight rise in the dollar index also weighed on the rupee in early trade, according to some dealers. "The DXY (dollar index) has risen in the morning, which is being reflected in rupee levels. Going ahead, the dollar is only expected to appreciate during the day and the rupee may see 85.90 and below levels," the dealer said. 

At 0947 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.74, slightly higher than 99.56 Tuesday and sharply higher than 98.93 Monday.

During the day, the rupee is seen moving in a range of 85.50 and 85.95 a dollar. Dealers peg strong technical support at 85.80 a dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - May 28

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:

(Gowri Lakshmi and Sourabh Kumar)

End

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

Edited by Saji George Titus

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