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Informist, Wednesday, Jun. 4, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended sharply lower at a one-week low against the dollar Wednesday, owing to persistent dollar demand for likely foreign fund outflows and importers, dealers said. A recovery in the dollar index also weighed on the rupee, they said. However, some banks sold the greenback on behalf of exporters at higher dollar/rupee levels, which limited the fall in the rupee, dealers said. 

After falling almost 0.4% against the greenback, the rupee ended at 85.9000, compared with the previous close of 85.5900 a dollar. The Indian currency moved in a range of over 28 paise during the day.

"Exporters were just waiting for the rupee to inch toward the figure (86 per dollar), as soon as the rupee was nearing 85.98, exporters rushed in," a dealer at a private sector bank said. "With continuous dollar demand and little to no intervention from the RBI (Reserve Bank of India), the rupee was bound to fall to 86." 

Most other Asian currencies fell marginally against the greenback due to the rise in the dollar index. However, the South Korean won rose almost 1% against the greenback, tracking gains in the domestic stock market. The won also rose after Lee Jae-myung took over as South Korea's new president, bringing to an end the political instability following the martial laws.

The rupee opened sharply lower at 85.7400 a dollar as the dollar index recovered from a near six-week low after upbeat US jobs data. The US Job Openings and Labour Turnover Survey showed the job openings rose 191,000 to 7.391 million in April. However, the overall health of the US labour market remained doubtful as layoffs increased by 196,000, the highest in nine months.

The dollar index had recovered from the six-week low of 98.58 on Tuesday. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.22, almost unchanged from the previous close of 99.25 and 98.71 Monday. 

Shortly after the market opened, the rupee came under pressure as oil marketing companies rushed to purchase the greenback, fearing a further rise in crude oil prices. Oil prices settled 1% higher Tuesday due to rising geopolitical tensions between Russia and Ukraine. A strife between Iran and the US also weighed on the crude prices on supply-side concerns.

At 1530 IST, the August Brent Crude contract on the Intercontinental Exchange was at $65.63 per barrel, steady from its previous close of $65.65 per barrel and $65.92 per barrel Monday. Earlier, crude oil prices had touched $65.95 per barrel, the highest since May 29.

The rupee was further weighed as some state-owned banks purchased the greenback ahead of the daily rate-fixing window, dealers said. A few foreign banks also persistently purchased the greenback likely for foreign-fund outflows from the domestic stock market, which weighed on the rupee, dealers said. Continuous dollar demand pulled the rupee to the day's low of 86.0225 a dollar and triggered multiple stop-losses on short dollar bets at 85.90 a dollar and lower, dealers said. 

"There is a sudden rumour in the market that the RBI may opt for a jumbo 50 basis points (cut) instead of the 25 bps. The rupee was also weighed by that," a dealer at a state-owned bank said. Volumes in the currency market were dull in early trade before picking up later in the day, dealers said. Noting the sharp fall in the rupee, some exporters also actively sold the greenback below 85.97 a dollar, limiting a sharp fall in the rupee.

Dealers remained divided on the RBI's intervention in the foreign exchange market Wednesday. While some dealers speculated the central bank sold the greenback to limit the rupee's fall, others said the RBI remained inactive and let the rupee fall past the psychologically crucial level of 86 per dollar. Market participants now await the decision of the RBI's Monetary Policy Committee due Friday. The rate-setting panel is widely expected to cut the repo rate by 25 bps. 

Dealers said the impact of increased US tariffs on steel and aluminium is likely to be minimal on dollar/rupee levels, as it has already been factored in. US President Donald Trump signed an order Tuesday doubling the tariff on steel and aluminium to 50% from 25%, which came into effect Wednesday. 

FORWARD

The dollar/rupee forward premium ended lower across the curve Wednesday, with the one-year exact period dollar/rupee forward premium at an over 10-month low due to an improvement in banking system liquidity, dealers said.

Some exporters sold forward dollars on the expectation that premiums will fall in the coming days, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

The one-year exact period dollar/rupee forward premium ended at 1.89% Wednesday, down from 1.92% Tuesday and 1.98% Monday. On an absolute basis, the premium was 164.00 paise, down from 164.50 paise Tuesday and 169.10 paise Monday. 

OUTLOOK 

On Thursday, the rupee will take cues from the movement in the dollar index and crude oil prices, dealers said. Market participants now await the Institute of Supply Management's Services Purchasing Managers' Index due later in the day. Traders will also keep a close watch on geopolitical and tariff-related developments. 

The rupee may come under pressure as importers could purchase the greenback in large quantities, 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 from dollar sales by importers and likely foreign fund outflows. 

Should the rupee fall below 86.10 a dollar, dealers expect the RBI to intervene through dollar sales, to prevent the rupee from falling sharply, dealers said. The rupee is expected to trade between 85.50 and 86.25 against the dollar Thursday. Dealers peg key technical support at 86.10 against the greenback. 

India Rupee: World FX: Dlr index recovers from 6-wk low on upbeat jobs data

India Rupee: World FX: Dollar index recovers from 6-week low on upbeat jobs data

MUMBAI – The dollar index recovered from a near-six-week low after the US jobs data took the market by surprise. The US Job Openings and Labour Turnover Survey Tuesday showed job openings in the US increased 191,000 to 7.391 million in April. However, investors remain cautious as the health of the labour market remains doubtful as layoffs in April rose by 196,000, hitting a nine-month high.

Market participants now await the Institute of Supply Management Services Purchasing Managers' Index 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 99.20, broadly steady from its previous close of 99.25 Tuesday and 98.71 Monday.

US President Donald Trump signed an order raising the import duty on steel and aluminium for the second time since March. The increase in duty to 50% from 25% came into effect Wednesday. However, the UK was exempted from the raised tariff amid continuing bilateral trade talks between London and Washington. The pound sterling was up 0.2% against the greenback.

Bank of England Governor Andrew Bailey said Tuesday he stands firm about a "gradual and careful" approach in the monetary policy easing cycle as global trade policy chaos and geopolitical turmoil increasingly loom over economic growth. The Bank of England had lowered the interest rate in May to 4.25% amid heightened tariff uncertainties. "I think the path (for interest rates) remains downwards, but how far and how quickly is now shrouded in a lot more uncertainty," Bailey said. 

The euro rose 0.3% against the greenback ahead of the monetary policy decision by the European Central Bank Friday. The ECB is largely expected to lower the rates by 25 basis points. The gains of the currency were, however, capped as the bloc's Composite Purchasing Managers' Index fell to a three-month low of 50.2 in May, from 50.4 the previous month. The Services Purchasing Managers' Index in Germany, the bloc's largest economy, also recorded the sharpest drop in over two years to 47.1 last month, down from 49.0 in April. 

A reading below 50 indicates contraction in the sector.

The Japanese yen rose slightly by 0.1% against the greenback after data published Wednesday showed Japan's services sector continued to rise in May. The au Jibun Bank revised the Services Purchasing Managers' Index to 51.0 from the previously estimated 50.8.

The Australian dollar rose 0.2% against the US currency even as the country logged muted economic growth in Jan-Mar. Australia's GDP expanded 0.2% on quarter in Jan-Mar, signalling the need for an interest-rate cut to revive consumption. Analysts had estimated a GDP rise of 0.4% in a Reuters poll. Real GDP rose 0.2% in the March quarter, slowing from an increase of 0.6% in the previous quarter. Annual growth remained stagnant at 1.3% while analysts forecast a rise of 1.5% in a Reuters poll. 

Tracking the rise in the Australian currency, the New Zealand dollar was up 0.3% against the greenback. The Canadian dollar rose 0.1% against the dollar ahead of the monetary policy decision by the Bank of Canada due later in the day. Canada's central bank is widely expected to hold the interest rate steady at 2.75% as policymakers are likely to wait for further data points for a clearer picture of the economy. 

The Swiss franc was up 0.2% against the greenback. However, its gains were capped after inflation in Switzerland fell to the lowest level since the COVID-19 pandemic. Data published Tuesday showed consumer prices fell by 0.1% in May on year, the lowest reading since March 2021. The easing inflation puts pressure on the Swiss central bank to opt for a deeper interest rate-cut cycle. The Swiss National Bank is scheduled to meet Jun. 19. The central bank is expected to lower rates by 25 bps, bringing the benchmark rates to 0%.

Meanwhile, a senior official of the Swiss National Bank said the central bank will not be influenced to lower the rates looking at just the inflation print. "We're focused on the medium term," governing board member Petra Tschudin said Tuesday, referring to the latest inflation figures and highlighted that "this is just one data point".  (Gowri Lakshmi)

India Rupee: One-year forward premium at over 10-month low as liquidity improves

MUMBAI – The dollar/rupee forward premium fell across the curve Wednesday, with the one-year exact period dollar/rupee forward premium at an over 10-month low due to an improvement in banking system liquidity, dealers said. The liquidity surplus rose above INR 3 trillion Tuesday. 

The one-year exact period dollar/rupee forward premium fell to 1.88% Wednesday, the lowest since Aug. 2. At 1432 IST, the premium was 1.90%, down from 1.92% Tuesday and 1.98% Monday. On an absolute basis, the premium was 163.84 paise, down from 164.50 paise Tuesday and 169.10 paise Monday. 

"There is good liquidity surplus and then (US) yields are also high, hence the fall in premiums," a dealer with a foreign bank said. "I think we can expect premiums to remain lower, and I am expecting one-year to fall to around 1.65% when UST (US Treasury yield) is above 4%. There is no reason for it (one-year dollar/rupee forward premium) to be above 2.0% now."

The benchmark 10-year US Treasury yield settled steady Tuesday at 4.46%. Forwards of a currency pair are reflective of the interest rate differential between the two couintries. 

On Tuesday, the RBI had net absorbed INR 3.01 trillion from the banking system, higher than the INR 2.77 trillion Monday, central bank data showed. The rise in liquidity surplus pushed premiums down, dealers said. Dealers expect liquidity surplus to widen more, which could keep forward premiums lower going ahead.

A few dealers also hoped for liquidity support on Friday, when the Reserve Bank of India's Monetary Policy Committee announces its rate decision. While the market-wide consensus is that the MPC will cut rates by 25 basis points, some expect a 50 bps cut, which also drove forward premiums lower.

Some exporters sold forward dollars, taking advantage of relatively higher premiums, dealers said. They sold forward dollars on expectation that premiums will fall in the coming days, dealers said.  (Sourabh Kumar)

India Rupee: Slips to 2-wk low on FX outflows; exporter dlr sales limit fall

MUMBAI – The rupee slumped to a near two-week low against the dollar Wednesday as foreign banks persistently bought the greenback for likely foreign-fund outflows, dealers said. Continuous dollar demand from oil marketing companies led to stop-losses on short dollar bets being triggered at 85.90 per dollar, dealers said. However, they said a few exporters sold the greenback at higher dollar/rupee levels, which limited the fall in the rupee. 

The rupee came under pressure as the dollar index recovered from multi-week lows after upbeat jobs data, which signalled at a better-than-expected health of the US labour market. Data released Tuesday showed the job openings in the US increased by 191,000 to 7.391 million in April. However, investors continue to weigh the jobs data as a nine-month rise in layoffs triggered a bleak economic and labour market outlook. At 1257 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies was little changed at 99.16 from its previous close of 99.25 and 98.71 Monday.

Oil marketing companies also rushed to purchase the greenback, fearing a further rise in crude oil prices amid esclating geopolitical tensions, dealers said. At 1300 IST, the August Brent Crude contract on the Intercontinental Exchange was at $65.49 per barrel, broadly steady from the previous close of $65.63 per barrel Tuesday and up from $64.63 per barrel Monday.

A few state-owned banks also purchased dollars during the exchange rate fixing window, dealers said. Thus, pulling the rupee to 86.0225 a dollar, the lowest level since May 23. 

Noting the sharp fall in the rupee, a few exporters stepped in with dollar sales, which limited the fall in the rupee, dealers said. Dealers noted that despite the slump in the rupee against the dollar, the Reserve Bank of India remained inactive. "RBI was protecting rupee at 85.70 all these weeks, but they cannot protect all levels," a dealer at a private sector bank said. "86 will be guarded now, today's closing will likely be 85.80 if the RBI decides to intervene later."

Dealers said the rupee was also weighed down as a few market participants now expect the RBI's rate-setting panel to cut the repo-rate by a jumbo 50 basis points. In an Informist poll, 13 out of 14 economists expects the Monetary Policy Committee to lower the repo rate by 25 bps, while State Bank of India was the sole outlier in the poll, expecting the larger rate cut of 50 bps. The MPC will announce the monetary policy decision Friday. 

For the rest of the day, the rupee is seen moving in a range of 85.70-86.00 against the dollar. Dealers peg key technical support for the Indian currency at 86.10 a dollar.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - Jun 4

MUMBAI – At 1046 IST, the rupee was at 85.8225 per dollar. At 0900 IST, the rupee was at 85.7400 a dollar, against the previous close of 85.5900. 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; South Korean won up as domestic shares rise

MUMBAI – Asian currencies traded on a mixed note Wednesday as investors weighed the bleak US economic growth. The Organisation of Economic Cooperation and Development Tuesday downgraded the economic growth outlook of the US to 1.6% from 2.2% for 2025. The organisation also downgraded the economic growth forecast to 1.5% for next year. 

On the tariff front, US President Donald Trump signed an order doubling the tariff on steel and aluminium to 50% from 25% for the second time since March and it came into effect Wednesday. The UK was the only exception, where import duties on steel and aluminium were left at 25%, a move signalling progress in the ongoing bilateral trade discussions between Washington and London. 

However, the dollar index recovered from its multi-week low after a better-than-expected US jobs data. The US Job Openings and Labour Turnover Survey showed job openings rose 191,000 to 7.391 million in April. However, market participants weighed the layoffs print, which rose by 196,000, the highest in nine months.  

At 1003 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was flat against the previous close of 99.25 and up from 98.71 Monday. The index fell to 98.58 Tuesday, the lowest level since Apr. 22. 

The South Korean won was up 0.3% against the greenback tracking a gains in domestic stock market. At 0942 IST, the benchmark stock index, KOSPI rose to 2.5%. Lee Jae-myung took charge Wednesday as South Korea's new president and pledged to raise the country from the political turmoil following the martial law crisis and revive the sluggish economy. 

"The first mission is to decisively overcome insurrection and to ensure there will never be another military coup with guns and swords turned against the people," Lee said in a speech after his sweeping victory in the snap election. However, gains in the South Korean currency were capped after the country's headline inflation cooled to a five-month low of 1.9% in May, from 2.1% rise the month prior, data published Wednesday showed. Core inflation rose 2.0% on year and inched up marginally by 0.2% from April.

The Malaysian ringgit fell 0.1% against the greenback while the Indonesian rupiah, the offshore Chinese yuan and Taiwan dollar, all traded flat. The Philippine peso was down 0.1% against the US currency. 

The Thai baht was up 0.2% against the greenback after Thailand's Manufacturing Purchasing Managers' Index hit a three-month high. The manufacturing PMI rose to 51.2 in May from 49.5 in April, hinting at initial signs of expansion in factory activities since February. A PMI reading above 50 indicates expansion in the sector while a reading below 50 denotes contraction.  (Gowri Lakshmi)

India Rupee: Slumps on dollar recovery, dollar purchases by oil cos

MUMBAI – The rupee slumped against the dollar Wednesday as the dollar pared losses and recovered from a near six-week low hit against major global currencies on Tuesday, dealers said. The rupee was dragged to a low of 85.8800 a dollar soon after the market opened as oil marketing companies rushed to purchase the greenback, dealers said. 

"The gap-up at the opening level is driven by the recovery in dollar index, which rose from 98 levels after the US jobs data," a dealer at a state-owned bank said. "The jobs data came out very well and was better than expected. Moreover, there is renewed dollar demand from oilers after crude prices rose. We may even see figure (86.00 per dollar) today."

The dollar index inched up Tuesday after the US Job Openings and Labor Turnover Survey showed a rise in job openings in April. Job openings in the US rose 191,000 to 7.391 million in April. However, market participants assessed the bleak outlook of the US labour market as the data also showed layoffs rising by 196,000, the highest in nine months. 

At 0935 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 99.28, little changed from the previous close of 99.25 and up from 98.71 Monday. The index fell to 98.58 Tuesday, the lowest level since Apr. 22. 

The rupee also came under pressure as oil marketing companies purchased dollars, fearing further rise in crude oil prices, dealers said. Crude oil prices settled 1% higher Tuesday owing to rising supply concerns due to escalating geopolitical tensions. Crude prices were weighed down by a strife between Russia and Ukraine. Rising tensions between the US and Iran also weighed on crude oil prices as sanctions on Iran and Russia are now in place for longer than expected. 

At 0935 IST, the August Brent Crude contract on the Intercontinental Exchange was at $65.41 per barrel, broadly steady from the previous close of $65.63 per barrel, but sharply higher than $64.63 per barrel Monday.

Dealers said the impact of increased US tariffs on steel and aluminium is likely to be minimal on dollar/rupee levels, and that too has been factored in. US President Donald Trump signed an order Tuesday doubling the tariff on steel and aluminium to 50% from 25%, which came into effect Wednesday. 

During the day, the rupee is seen moving in a range of 85.50-86.00 a dollar. Dealers peg key technical support for the rupee at 86.00 against the greenback.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Jun 4

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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