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Informist, Thursday, May 29, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended lower against the dollar Thursday as banks persistently purchased the greenback on behalf of importers, dealers said. Some foreign portfolio investors also bought the greenback, which further weighed on the rupee, dealers said. However, some foreign banks sold dollars, likely for foreign fund inflows into the equity market, which limited the rupee's fall. 

"I think the IPOs (initial public offerings) attracted some good flows," a currency trader at a brokerage firm said. "But importers' dollar buys and some outflows made the inflows seem insignificant."

The rupee depreciated almost 0.2% against the US dollar and settled at 85.5075 to a dollar, down from the previous close of 85.3600. The Indian currency moved in a relatively narrow range of over 22 paise during the day. 

A rise in the dollar index weighed on most other Asian currencies, which slipped between 0.1%-0.4%, with the Malaysian ringgit and the Philippine peso being the worst hit.

The rupee started the day lower against the dollar at 85.5025 as the dollar index rose after a US-based court ruled that US President Donald Trump has overstepped his powers by imposing aggressive tariffs on nations, dealers said. The Manhattan-based Court of International Trade ruled Wednesday that the American Constitution gave Congress exclusive authority to regulate commerce with other countries that is not overridden by the president's emergency powers.

The dollar index rallied on the news and hit an over one-week high in early trade. The dollar index rose to a high of 100.54, the highest level since May 20, sharply rising from 99.88 Wednesday and 99.56 Tuesday. 

After the initial fall, the rupee stabilised for some time at 85.48-85.50 levels as foreign fund inflows into the equity market and IPOs offset the rise of the dollar index, dealers said. The initial public offerings of Astonea Labs Ltd. and Prostarm Info Systems Ltd., which opened for subscription Tuesday, will close Thursday. On Thursday, the benchmark stock indices, the Nifty 50 and the BSE Sensex, ended 0.3% and 0.4% higher, respectively.

Dealers said most importers remained on the sidelines initially, anticipating a rise in the rupee. However, noting the limited rise of the Indian currency owing to less-than-expected inflows and excessive dollar demand, some importers began purchasing the greenback to meet their month-end payment obligations, dealers said.

The rupee was pushed to the day's low of 85.6150 as oil marketing companies started buying dollars in large quantum, fearing a further rise in crude oil prices, dealers said. "It's silly to say it's just the crude prices that is prompting OMCs to buy (dollars)," a currency trader at a brokerage firm said. "They do bid at every level, which is now also coupled with some price and supply-side concerns." 

Oil prices rose over 2% Thursday as the Organization of Petroleum Exporting Countries and allies decided to maintain the status quo on output. The July Brent Crude contract on the Intercontinental Exchange rose to a high of $66.13 per barrel, surging from $64.90 per barrel Wednesday and $64.09 per barrel Tuesday. 

A few foreign banks also bought the greenback, likely on behalf of foreign portfolio investors, who exited the Indian stock market. This put the rupee under pressure throughout the day, dealers said. 

FORWARDS

Dollar/rupee forward premiums fell across the curve, with the one-year premium ending at a near-10-month low due to a rise in the benchmark US Treasury yield, dealers said. The expectation of the interest rate differential between the US and India narrowing also weighed on premiums, dealers said. Forwards of a currency pair are reflective of the interest rate differential between two countries.

While some banks purchased dollars for forward delivery at relatively lower levels, which limited the downward movement in premiums, dealers expect the one-year dollar/rupee forward premium to remain low. 

The one-year dollar/rupee forward premium ended at a 10-month low of 1.94%, down from 2.00% Wednesday. On an absolute basis, the premium was 164.98 paise, down from 172.05 paise Wednesday.

OUTLOOK

On Friday, the rupee will take cues from the movement in the dollar index and crude oil prices, dealers said. However, the rupee is expected to come under pressure as importers are likely to buy the greenback in large quantum to meet their month-end payment requirements. Dealers also expect the rupee to be supported as some overseas investors, who are looking to invest in the Indian equity market, may sell dollars. 

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. 

Market participants will closely watch geopolitical developments and announcements by the US relating to trade and tariff policies, dealers said. Traders also await India's Jan-Mar GDP data, due post-market hours Friday. 

India Rupee - World FX: Dlr up on trade optimism as US court blocks tariffs

MUMBAI – The US dollar rose Thursday as investor sentiment turned positive after a Manhattan-based court Wednesday ruled that US President Donald Trump had overstepped his authority, and blocked the aggressive tariffs from being imposed. The court said the American constitution provided exclusive authority to regulate trade with other countries that is not overriden by the president's emergency powers. 

"The court does not pass upon the wisdom or likely effectiveness of the President's use of tariffs as leverage. That use is impermissible not because it is unwise or ineffective, but because (federal law) does not allow it," a three-judge panel said. However, within minutes of the ruling, the Trump administration filed an appeal and questioned the authority of the court. 

Minutes of the latest US Federal Open Market Committee meeting published Wednesday showed Federal Reserve officials were concerned about aggravated inflation as a result of tariffs, making it difficult to bring changes in interest rate policies. 

The dollar index, which measures the strength of the dollar against a basket of six major currencies, hit an over one-week high of 100.54 in early trade but steadied during European market hours. At 1530 IST, the index was at 99.90, little changed from 99.88 Wednesday and sharply higher than 99.56 Tuesday. The dollar index hit an over one-week high of 100.54 in early trade. 

The euro was down 0.1% against the greenback. The Japanese yen fell 0.2% against the US currency. However, losses in the currency were limited after data published earlier in the day showed Japan's seasonally adjusted consumer confidnce index rose to 32.8 in May, rising 1.6 points from the previous month. 

The pound sterling and the New Zealand dollar traded flat against the greenback, while the Canadian dollar rose 0.1%. The Swiss franc was down 0.3% against the US currency.

The Australian dollar rose 0.3% against the greenback. Data on Wednesday showed consumer inflation in Australia remained steady last month. The monthly consumer price index rose 2.4% in April, unchanged from March but slightly higher than analysts' estimate of 2.3% in a Reuters poll.  (Gowri Lakshmi)

India Rupee: Premium near 10-mo low on rise in US yld, hope of RBI rate cut

MUMBAI – Dollar/rupee forward premiums fell across the curve, with the one-year premium falling to a near-10-month low due to a rise in the benchmark US Treasury yield, dealers said. Expectations of a narrow interest rate differential between the US and India also weighed on premiums, dealers said.

The one-year exact-period dollar/rupee forward premium hit a near-10-month low of 1.94% Thursday. So far this month, forward premiums have fallen 36 basis points. During the same time, the benchmark 10-year US Treasury yield rose over 30 bps. Forwards of a currency pair are reflective of the interest rate differential between two countries.

The benchmark 10-year US Treasury yield rose in early European trade to 4.52% after settling at 4.47% Wednesday, which itself was four basis points higher from Tuesday. This pushed dollar/rupee forward premiums lower, dealers said.

"Month-end paying pressure has reduced now, and then US yields moved higher, so that is reflecting in premiums," a dealer with a foreign bank said. "It (one-year dollar/rupee forward premium) may fall more next week, if the RBI cuts rate."

While some banks purchased dollars for forward delivery at relatively lower levels, which limited the downward movement in premiums, dealers expect the one-year dollar/rupee forward premium to remain lower. This is especially since they expect the Reserve Bank of India to cut the repo rate by 25 basis points when the RBI's Monetary Policy Committee announces the policy decision on Jun. 6. A fall in India's interest rates, coupled with uncertainty about when or by how much the US Federal Reserve would slash rates, weighed on premiums, dealers said.

The one-year exact-period dollar/rupee forward premium was hovering near 2.0% for a few days, and touched that level Wednesday. However, it could not fall below this level due to importers' month-end dollar demand, dealers said.

Further, a rise in the liquidity surplus in the banking system also pushed forward premiums lower, dealers said. On Wednesday, the RBI had net absorbed INR 1.91 trillion from the banking system, slightly higher than INR 1.89 trillion Tuesday, central bank data showed. Market participants expect the liquidity to remain in a comfortable surplus, which could keep forward premiums lower, dealers said.

At 1306 IST, the one-year exact-period dollar/rupee forward premium was 1.95%, down from 2.01% Wednesday and 2.05% Tuesday. On an absolute basis, the premium was 166.50 paise, down from 172.05 paise Wednesday and 175.33 paise Tuesday.  (Sourabh Kumar)

India Rupee: Remains dn on importers' dlr buys, FX outflows from equity mkts

MUMBAI – The rupee was off the day's low but remained down against the dollar as banks purchased dollars for importers, dealers said. A few foreign banks also bought the greenback, likely for foreign-fund outflows from the domestic stock market, which further weighed on the rupee, dealers said. "There are oilers bidding and I think today's movement (in rupee) was also driven by rise in dollar index and outflows," a dealer at a state-owned bank said. 

The rupee was dragged to a low of 85.6150 a dollar as oil marketing companies and other importers purchased dollars, dealers said. Importers purchased the greenback to meet their month-end payment obligations while oil companies bought dollars, wary of a further rise in crude oil prices, dealers said. Oil prices rose almost 2% Thursday over supply-side concerns after the Organisation of Petroleum Exporting Countries and its allies decided to keep the output policy unchanged. 

At 1301 IST, the July Brent Crude contract on the Intercontinental Exchange was at $65.88 per barrel, sharply up from $64.90 per barrel Wednesday and $64.09 per barrel Tuesday. 

The dollar index remained broadly steady after the initial rise in early trade. At 1301 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.02, up from 99.88 Wednesday and 99.56 Tuesday. 

However, the rupee was slightly supported by foreign fund inflows, likely into the initial public offerings of domestic companies and into the Indian stock market, dealers said. "There are outflows and inflows, right now they are at a balance but by the end of the day outflows may weigh more than the inflows," said the dealer at the state-owned bank. 

For the rest of the day, the rupee is seen moving in a range of 85.30-85.70 a dollar. Dealers see immediate technical support for the Indian unit at 85.65 against the dollar.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - May 29

MUMBAI – At 1051 IST, the rupee was at 85.5950 per dollar. At 0900 IST, the rupee was at 85.5025 a dollar, against the previous close of 85.3600. 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 - Asia FX: Dn as dlr firm after US court blocks Trump's tariffs

MUMBAI – Most Asian currencies traded lower against the dollar Thursday as the latter strengthened after a US court blocked the imposition of President Donald Trump's reciprocal tariffs. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 100.25 at 0923 IST, up from 99.88 Wednesday and 99.56 Tuesday.

The Court of International Trade said the US Congress has the exclusive authority to regulate trade with other countries, and the president's emergency powers can't override this. Later, the Trump administration quickly filed an appeal against the court's order. Uncertain trade policies by Trump has made US assets, including the dollar, unattractive. Therefore, even a slight hint of some respite boosted the US currency.

"There were massive moves in markets on the back of this news, with the dollar strengthening, risk sentiment improving, while safe haven assets such as gold and Japanese yen underperforming," MUFG Bank Ltd. said in a report. "Asian currencies were also generally weaker against the dollar, mirroring the global dollar index shifts, but not as weak as the likes of yen."

The South Korean won was the worst hit due to a strong dollar and as the Bank of Korea cut its benchmark rates by 25 basis points early Thursday. The central bank's rate cut comes amid domestic political uncertainty and tariff worries with the US. The Bank of Korea also reduced its forecast for the current year GDP growth to 0.8% from its earlier projection of 1.5%. 

Further, exports from South Korea are likely to have fallen in May, as per a poll by the Wall Street Journal. It shows exports may have fallen 4.9% on year this month after rising 3.7% in April. 

The Taiwan dollar was down 0.3% due to a strong dollar. Taiwan reduced its GDP growth print in Jan-Mar to 1.76% on quarter from 2.33% earlier. However, on a yearly basis, the GDP growth was revised higher to 5.48% in Jan-Mar from 5.37% earlier. The Philippine peso and the Malaysian ringgit fell 0.5% and 0.4%, respectively, against the greenback. The Thai baht fell 0.4% and the Indonesian rupiah was down 0.2%. 

Market participants now await further clarity over the legal standing of Trump's tariffs on US' trading partners. "Our best sense right now for Asia foreign exchange markets is that the knee-jerk reaction seen today in Asian currencies weakening and dollar strengthening may not last," MUFG Bank Ltd. said in the report. "The crucial reasons are that the tariffs on Asia are likely to stay amidst the legal battle, coupled with the legal uncertainty also potentially crimping US growth and investment plans further." (Sourabh Kumar)

India Rupee: Dn on rise in dlr index; likely FX flows into stocks limit fall

MUMBAI – The rupee was down against the dollar Thursday as the dollar index rose after a US court blocked US President Donald Trump's tariffs from being imposed, dealers said. However, the rupee's fall was limited as a few foreign banks sold the greenback, likely on behalf of foreign portfolio investors, dealers said.

"I think it might be difficult to say who is on the sell-side this early but there is definitely some support coming," a dealer at a state-owned bank said. "There are flows from both FPIs and IPOs (initial public offerings)... both IPOs are half a billion each and the amount invested seems to be much more than that," another currency trader at a brokerage firm said. 

The dollar index surged to an over one-week high Thursday as investor sentiment turned positive after the Manhattan-based Court of International Trade said Wednesday that the US president had overstepped his authority by imposing tariffs across the board on nations that sell more to the US than buy from it. The court reiterated that the US Constitution gave exclusive authority to regulate international trade that is not overridden by the emergency powers of the US president. 

At 0937 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.28, up from 99.56 Wednesday and 99.93 Tuesday. The index hit a high of 100.54 in early trade, its highest level since May 20.

However, the rupee was supported by dollar sales by overseas investors, who were looking to invest in the domestic stock market and in public offerings of domestic companies, dealers said. The public offerings of Astonea Labs Ltd., and Prostarm Info Systems Ltd opened for subscription Tuesday and will close later in the day. At 0934 IST, the benchmark stock indices, the Nifty 50 and the BSE Sensex, were up 0.3% each. 

Dealers also said demand for dollars from importers was lower than usual in early trade as they anticipate a further rise of the rupee. "Given the kind of sell-off (of dollars) we see now, the rupee is expected to appreciate in the day. I think importers are waiting for a better level" the dealer at the state-owned bank said. 

During the day, the rupee is seen moving in a range of 85.25-85.60 a dollar. Dealers see immediate technical support for the Indian unit at 85.60 against the dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - May 29

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 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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