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Informist, Tuesday, Jun. 3, 2025

By Gowri Lakshmi 

MUMBAI – The rupee ended sharply down against the dollar Tuesday as public-sector banks purchased the greenback on behalf of oil marketing companies, dealers said. A few foreign banks bought the greenback on behalf of foreign porfolio investors, which also weighed on the rupee, dealers said. Volumes in the currency market remained lower-than-usual owing to lack of significant cues. 

"Volumes are really dull. Nobody is trading at these levels except for the oilers and FPIs. Market is mostly waiting for some triggers, which is now the RBI (Reserve Bank of India) monetary policy and the NFP (US non farm-payrolls data)," a currency trader at a brokerage firm said. 

After moving in a relatively narrow range of over 15 paise, the Indian currency settled at 85.5900 a dollar, significantly lower from its previous close of 85.3825. Foreign banks' dollar purchases likely for foreign fund outflows dragged the rupee to the day's low of 85.5950 a dollar just a few minutes before the domestic spot market closed. 

Asian currencies ended on a mixed note as investors continued to weigh the ongoing strained trade relations between the US and China and as tariff uncertainties resurface. The South Korean won was the worst hit amongst the regional currencies while the Indonesian rupiah gained the most.

The rupee opened nearly 15 paise lower against the lower at 85.5300 as oil marketing companies rushed to purchase the greenback, wary of a further rise in crude oil prices, dealers said. Oil prices advanced over 1% Tuesday as market participants were taken by shock after the Organization of the Petroleum Exporting Countries and its allies announced a lower-than-expected output hike in July. 

Oil prices also rose as production-side concerns arose after a wildfire erupted in Canada's oil-producing province Monday. The August Brent Crude contract on the Intercontinental Exchange rose to a high of $65.34 per barrel, up from the previous close of $64.663 per barrel and sharply higher from $63.90 per barrel Friday. 

A few foreign banks also purchased the greenback on behalf of overseas investors as they moved to other safe-haven assets and withdrew funds from the domestic stock market amid looming tariff uncertainties. Investor sentiment has been hit since Monday as the US and China began a verbal battle of accusations. Washington said Friday Beijing had violated the Geneva trade deal, which the latter refuted Monday saying that US was the one that breached the bilateral trade deal. This triggered concerns about the previously agreed 90-day pause by the US on majority of tariffs.

Both the benchmark equity indices, the Nifty 50 and the BSE Sensex ended lower by 0.7% and 0.8%, respectively. "The rupee was already a depreciating currency, the latest geopolitical tensions just added fuel to the fire," said the currency trader mentioned above. "Inflows are also weak now given the ongoing uncertainties. But until next week, we don't have to worry much about a sudden and sharp depreciation."

However, the rupee's fall was limited as the dollar index fell to a near six-month low in early trade. Dollar sales by some foreign banks also supported the Indian unit, dealers said. The dollar index weakened earlier in the day as the US currency began losing its safe-haven sheen due to rising worries over a recession in the US and an escalation in trade related tensions between the US and China. 

The dollar was also weighed down by the US Purchasing Managers' Index for May, whoch came below analysts' estimates. The Institute of Supply Management's manufacturing PMI contracted for the third consecutive month and slipped to a six-month low of 48.5 in May from 48.7 in April, data released Monday showed. Economists in a Reuters poll had estimated the PMI rising to 49.3. A PMI reading below 50 indicates contraction. 

The dollar index steadied during the European market hours ahead of the release of US Job Openings and Labour Turnover Survey data due later in the day. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.96, broadly steady from 98.71 Monday but down from 99.44 Friday. The index fell to a low of 98.58 Tuesday, the lowest level since Apr. 22. 

The rupee was also supported as a few banks sold the greenback in early trade at 85.56 a dollar to take advantage of the lucrative dollar/rupee levels, dealers said. 

Most market participants remained on the sidelines ahead of the US non-farm payrolls data and the decision by the Monetary Policy Committee of the Reserve Bank of India, both due Friday. The rate-setting panel of the RBI is widely anticipated to lower the repo rate by 25 basis points to 5.75%.  

FORWARDS

The dollar/rupee forward premium ended lower across the curve Tuesday, with the one-year premium ending at a 10-month low, as a few banks sold forward dollars in anticipation of a 50-bps rate cut on Friday by the Reserve Bank of India's Monetary Policy Committee, dealers said. After hitting a near 10-month low of 1.92%, the one-year exact period dollar/rupee forward premium is seen falling to at least 1.85% going ahead, a few dealers said.

The one-year exact-period dollar/rupee forward premium ended at 1.92%, down from 1.98% Monday and 1.96% Friday. On an absolute basis, the premium was 164.50 paise at 1530 IST, down from 169.10 paise Monday and 167.50 paise Friday. 

OUTLOOK

On Wednesday, the rupee will take cues from the movement in the dollar index and tracking crude oil prices, dealers said. The rupee may come under pressure as importers could purchase the greenback in large quantum, wary of a further fall in the rupee, dealers said. However, they expect the dollar index to remain weak, which may support the rupee or limit the losses in the Indian unit on account of importers' dollar demand and likely foreign fund outflows. 

Market participants will closely watch for developments on the geopolitical front and any news relating to US tariff and trade policies, dealers said. They expect the volume in the currency market to be in thin band and the rupee to trade in a range above the key level of 85.70 a dollar.

The rupee is seen trading in the range of 85.20-85.70 against the greenback. Dealers pegged strong technical support for the Indian unit at 85.70 a dollar. 

India Rupee - World FX: Dollar index steady ahead of US jobs data

MUMBAI – The dollar index was broadly steady Tuesday ahead of US Job Openings and Labour Turnover Survey due later in the day. The dollar index declined to a near six-month low Monday as investors moved to other safe haven currencies as tariff uncertainties resurface. The dollar was down in the early trade as the US manufacturing purchasing managers' index was lower than expected in May.

The Institute of Supply Management's manufacturing PMI contracted for the third consecutive month and slipped to a six-month low of 48.5 in May from 48.7 in April, data released Monday showed. Economists in a Reuters poll had estimated the PMI rising to 49.3. A PMI reading below 50 indicates contraction in the sector.

At 1441 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 98.94, broadly steady from 98.71 Monday but down from 99.44 Friday. The index fell to a six-week low of 98.58 in early trade.

The euro was down 0.2% against the greenback as the preliminary inflation data for the bloc eased to 1.9% in May from 2.2% the month prior. The Australian dollar was down 0.5% against the US currency. The minutes of the Reserve Bank of Australia's latest monetary policy meeting showed the policymakers debated maintaining status quo in May but saw a circumstance both domestically and globally for a rate cut to 3.85%. 

The New Zealand dollar was down 0.5% against the greenback after China's manufacturing activity contracted in May at its fastest pace in nearly three years, owing to the impact of the aggressive US tariffs. The Caixin/S&P Global manufacturing purchasing managers' index was at 48.3, below analysts' estimate of 50.6 in a Reuters poll and 50.4 in April. Any change in the Chinese economy directly impacts the New Zealand currency due to their close bilateral relations. 

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

India Rupee: Premium near 10-mo low on expectation of 50-bps cut by MPC Fri

MUMBAI – The dollar/rupee forward premium fell across the curve Tuesday, with the one-year premium falling to about a 10-month low, as a few banks sold forward dollars in anticipation of a 50-basis-point rate cut on Friday by the Reserve Bank of India's Monetary Policy Committee, dealers said. A poll by Informist, which had inputs from 14 economists and treasury officials, showed the market consensus was of a 25-bps cut.

After hitting a near 10-month low of 1.92%, the one-year exact period dollar/rupee forward premium is seen falling to at least 1.85% going ahead, a few dealers said. The one-year exact-period dollar/rupee forward premium was 1.92% at 1317 IST, down from 1.98% Monday and 1.96% Friday. On an absolute basis, the premium was 164.50 paise, down from 169.10 paise Monday and 167.50 paise Friday. 

"There is receiving across tenors as some people are expecting 50 bps cut," a dealer with a state-owned bank said. "There is heavy receiving in first three months." While there is a market consensus of a 25 bps repo rate cut, a few sections of the market expect a 50-bps cut on Friday; if not a 50-bps cut, they expect measures by the RBI to boost liquidity. They also said expectations of deeper rate cuts for the rest of the year were building up. In a report on Monday, State Bank of India said it expects a "50-basis point rate cut in June policy as jumbo rate cut could act as a counterbalance to uncertainty".

The fall in the dollar/rupee forward premium on Tuesday was also due to widening of domestic systemic liquidity. On Monday, the RBI had net absorbed INR 2.77 trillion from the banking system, higher than the INR 2.32 trillion Sunday, central bank data showed. Market participants expect the central bank to introduce measures to infuse liquidity into the banking system, which could push forward premiums lower, dealers said.  (Sourabh Kumar)

India Rupee: Stays dn on likely foreign fund outflows, oil cos' dollar buys

MUMBAI – The rupee remained slightly lower against the dollar Tuesday as foreign banks purchased the greenback likely for foreign fund outflows, dealers said. Oil marketing companies also purchased dollars, fearing a further rise in crude oil prices, dealers said. "There are outflows, FPIs (foreign portfolio investors) are definitely there due to negative sentiment because of ongoing tariff and geopolitical uncertainties," a currency trader at a brokerage firm said. 

Foreign banks purchased the greenback, likely for foreign fund outflows by overseas investors, dealers said. Investor sentiments were hit amid rising geopolitical tensions between Russia and Ukraine and as tariff uncertainties loom over the global economy. At 1253 IST, the benchmark indices, the Nifty 50 and the BSE Sensex, were down 0.8% each.

Oil marketing companies also bought dollars persistently since morning, wary of a further rise in crude oil prices owing to supply-side concerns, dealers said. The August Brent Crude contract on the Intercontiental Exchange rose to a high of $65.34 per barrel in early trade, up from previous close of $64.33 per barrel and sharply up from $63.90 per barrel Monday. 

However, dealers said a few banks also sold the greenback at higher dollar/rupee levels in early trade, which limited the fall in the Indian currency. The rupee touched a low of 85.5600 a dollar shortly after opening. "Some selling is always there, there is someone booking profits at current levels as well," the currency trader said. 

Dealers said most market participants refrained from placing bets in large quantum ahead of the US non-farm payrolls data and the decision by the Monetary Policy Committee of the Reserve Bank of India, both due Friday. The rate-setting panel of the RBI is widely anticipated to lower the repo rate by 25 basis points to 5.75%.  

For the rest of the day, the rupee is expected to move in a range of 85.30 and 85.60 a dollar. Dealers peg the key technical support for the rupee at 85.60 against the greenback.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - Jun 3

MUMBAI – At 1032 IST, the rupee was at 85.4625 per dollar. At 0900 IST, the rupee was at 85.5300 a dollar, against the previous close of 85.3825. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee: Asia FX:Mixed; yuan flat despite fall in China factory activity

MUMBAI – Asian currencies traded on a mixed note Tuesday as investors weighed the impact of escalation in trade tensions between the US and China over the weekend after Washington accused Beijing of violating the Geneva bilateral trade agreement. On Monday, Beijing refuted this and accused Washington of violating the temporary trade deal, sparking concerns about the previously agreed 90-day pause on majority of tariffs.

"Those steps seriously undermine the deal reached in Geneva," a Chinese commerce department spokesperson said. China pledged to take measures to safeguard its interests, if the US continued with action that "damage China's interests".

The Chinese yuan was flat against the dollar in early trade. Data published earlier in the day showed China's manufacturing activity contracted in May at its fastest pace in nearly three years, owing to the impact of the aggressive US tariffs. The Caixin/S&P Global manufacturing purchasing managers' index was at 48.3, below analysts' estimate of 50.6 in a Reuters poll and 50.4 in April. A PMI reading below 50 indicates contraction in the sector. 

The dollar index weakened Tuesday as investors weighed the impact of the ongoing trade and tariff uncertainties. The dollar was also weighed down as manufacturing activity in the US failed to meet analysts; expectations. Data released Monday showed the Institute of Supply Management's manufacturing PMI contracted for the third consecutive month and slipped to a six-month low of 48.5 in May from 48.7 in April. Economists in a Reuters poll had estimated the PMI rising to 49.3. 

At 1006 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.89, broadly steady from 98.71 Monday and 99.44 Friday. The index fell to 98.58 in early trade, the lowest level since Apr. 22. The Thai baht was down 0.3%.

The Malaysisan ringgit was up 0.2% against the greenback and the Philippine peso was up 0.1%. The Taiwan dollar traded 0.1% lower against the US unit. Markets in South Korea are shut for polling day. After six months of political turmoil following martial law imposed by a former leader, South Korea is set to elect its new president. Pre-election surveys suggested Lee Jae-myung as the front-runner in the snap election. 

The Indonesian rupiah was down 0.1% against the greenback. Indonesia logged a trade surplus of $160 million in April, the lowest in four years amid a surge in imports, data on Monday showed. Analysts in a Reuters poll predicted a trade surplus of $3.04 billion.  (Gowri Lakshmi)

India Rupee: Down as oil cos buy dollars; risk-off sentiment weighs

MUMBAI – The rupee was lower against the dollar Tuesday as oil marketing companies rushed to purchase the greenback, wary of a further rise in crude oil prices, dealers said. A few foreign banks also bought the greenback, likely on behalf of foreign portfolio investors, which weighed on the rupee, dealers said. Volumes in the currency market continue to remain lower-than-usual due to lack of significant cues, they said. 

"The rupee was pushed likely because of the oil scenario and US-China relations are putting a pressure on Asian currencies as well," a dealer at a state-owned bank said. 

The rupee hit a low of 85.5600 in early trade as oil marketing companies purchased the greenback, dealers said. Oil prices began advancing Monday as the Organization of the Petroleum Exporting Countries and its allies' output hike for July was below the market's expectations. On Tuesday, oil prices were boosted by production-side concerns after a wildfire broke out in the oil producing province of Canada. 

At 0933 IST, the August Brent crude contract on the Intercontinental Exchange was at $64.91 per barrel, up from $64.63 per barrel Monday and $63.90 per barrel Friday. Crude prices hit a high of $65.34 per barrel in early trade. 

The rupee was also weighed by likely foreign fund outflows, dealers said. A few foreign banks purchased the greenback on behalf of overseas investors, looking to withdraw funds from Indian financial markets and move to other safe haven assets, dealers said. Investor sentiment was hit as the US-China trade relations began deteriorating again. 

Washington Friday said Beijing violated the Geneva trade deal. On Monday, Beijing refuted this, and accused Washington of violating the bilateral trade agreement, sparking concerns about the previously agreed 90-day pause on majority of tariffs.

However, a fall in the dollar index limited the rupee's fall, dealers said. The dollar index weakened as concerns over uncertain tariff policy resurface and as fears of recession loom over the US economy. The dollar was also weighed as the purchasing managers' index for May came below analyst estimates. The Institute of Supply Management's manufacturing PMI contracted for the third consecutive month and slipped to a six-month low of 48.5 in May from 48.7 in April, data released Monday showed. Economists in a Reuters poll had estimated the PMI rising to 49.3. 

At 1000 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.84, broadly steady from 98.71 Monday but down from 99.44 Friday. The index fell to a six-week low of 98.58 in early trade

During the day, the rupee is expected to trade in the range of 85.30-85.75 a dollar. Dealers peg key technical support for the Indian unit at 85.70 against the greenback.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Jun 3

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 Gowri Lakshmi)

End

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

Edited by Tanima Banerjee

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