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Informist, Thursday, Jun. 5, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended higher against the dollar Thursday due to dollar sales by foreign banks for likely foreign fund inflows, dealers said. Dollar sales by exporters also supported the Indian unit, they added.

"Inflows of significant amount was there in the market today (Thursday). In the morning everyone expected rupee to go leftward (fall) but inflows and exporter sales supported the rupee," a currency trader at a brokerage firm said. 

After rising to a high of 85.6700 a dollar, the Indian unit came off highs and settled at 85.7900 against the greenback, up from its previous close of 85.9000. The Indian unit moved in a range of over 29 paise during the day. 

Most other Asian currencies also rose against the greenback on the back of a weakening dollar. These currencies gained 0.1-0.4% against the dollar.

The rupee opened slightly lower against the dollar at 85.8650 as a few importers rushed to purchase the greenback, anticipating a further fall in the rupee, dealers said. However, a fall in the dollar index prevented the rupee from falling sharply, they said. The dollar index declined Wednesday after a weaker-than-expected jobs data and a disappointing non-manufacturing Purchasing Managers' Index reinforced worries over the health and shape of the US labour market and the overall economy. 

The ADP National Employment Report, published Wednesday, showed US private payrolls rose by only 37,000 in May after a downwardly revised rise of 60,000 in April and far below analysts' forecast of 110,000 in a Reuters poll.

The dollar was also down as the Institute of Supply Management's non-manufacturing PMI data showed the US services sector activity declined to 49.9 in May from 51.6 the previous month, contracting for the first time in nearly 12 months. A reading below 50 indicates contraction in the sector.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.86, broadly steady from its previous close of 98.82 and 99.25 Tuesday. The rupee, however, shrugged off the impact of the fall in dollar index in contrast with other Asian currencies, dealers said. 

Volumes in the currency market was dull in early trade owing to lack to significant cues, dealers said. However, traction in volumes picked up after foreign banks began selling the greenback for likely foreign fund inflows and on behalf of exporters, dealers said.

Shortly after the market opened, the Indian currency was supported by dollar sales by foreign banks, including a UK-based one, for overseas investment likely linked to Adani Ports and Special Economic Zone, dealers said. Dealers estimate almost $1.25 billion was received through foreign fund inflows Thursday. Both the benchmark indices, the Nifty 50 and the BSE Sensex, ended 0.5% higher, each. 

Noting the unexpected appreciation of the rupee, exporters also began selling the dollar between 85.80-85.90 a dollar, to take advantage of the lucrative dollar/rupee levels. 

"Exporters were just waiting for the rupee to hit 86 (per dollar) again since the morning, but the flows were unexpected, so they had to sell it at the available profitable levels," a dealer at a state-owned bank said. Foreign fund inflows coupled with exporters' dollar sales pushed the rupee to the day's high of 85.6700 a dollar.

Importers and oil marketing companies started purchasing the greenback again when the Indian currency was trading around 85.67-85.75 a dollar, to take advantage of the relatively lower dollar/rupee levels, bringing the rupee down from the day's high, dealers said.

FORWARDS 

The one-year dollar/rupee forward premium ended higher due to a fall in the benchmark US 10-year Treasury yield. Forwards of a currency pair are reflective of the interest rate differential between the two countries. 

Banks sold forward dollars on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee premiums level, dealers said. Premium hit a high of 1.92% earlier in the day.

At 1530 IST, the one-year exact period dollar/rupee forward premium ended flat at 164.00 from its previous close. It was 1.91%, tad up from 1.89% Wednesday.

OUTLOOK

On Friday, the rupee market will closely assess the monetary policy decision by the Reserve Bank of India, dealers said. They said traders will likely refrain from placing dollar bets in large quantum ahead of the policy outcome. RBI's Monetary Policy Committee is widely expected to lower the repo rate by 25 basis points. Market participants will also closely watch for remarks and comments by RBI Governor Sanjay Malhotra pointing towards further rate cuts.

Traders will assess the monetary policy decision by the European Central Bank due later in the day, with the central bank expected to cut the benchmark rates by 25 bps. 

The rupee will also take cues from the movements in the dollar index and crude oil prices, dealers said. The rupee may come under pressure as importers could purchase the greenback, wary of a further fall of the rupee, dealers said. 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 86.10 against the dollar Friday. Dealers peg key technical support at 86.10 against the greenback. 

India Rupee - World FX: Euro steady ahead of ECB rate outcome Thu; dlr falls

MUMBAI – The dollar fell after a couple of weak economic data points from the US Wednesday. The Institute for Supply Management said the services Purchasing Managers' Index fell to 49.9 in May, against an expectation of 52.0. This was the first time in about a year that the US services sector had contracted. A reading below 50 indicates the sector is in contraction while a level above 50 shows expansion. The index fell from 51.6 in April.

Further, data showed that layoffs in the US in April rose the most in nine months. Layoffs increased 196,000 in April, with the layoff rate rising to 1.1% from 1.0% in March. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 98.82 at 1504 IST, unchanged from 98.82 Wednesday and down from 99.25 Tuesday. Market participants now await the release of May's employment report, which is scheduled to be released Friday. A Reuters poll expects non-farm payrolls to increase by 130,000 in May, slower than the rise of 177,000 reported in April.

The euro was steady against the greenback ahead of the interest rate decision by the European Central Bank later in the day. The central bank is expected to cut the benchmark rate by 25 basis points. The pound sterling rose 0.1% against the greenback after a survey by the Bank of England showed fewer businesses in Britain expect to be directly affected by US tariffs.

The Japanese yen fell 0.3% against the dollar. The Australian dollar rose 0.3% against the greenback on account of weakness in the US dollar. The gains were, however, capped by data showing Australia's trade balance shrank more than expected in April as exports fell on weak demand. The trade balance fell to a surplus of around $3.52 billion, lower than the expectation of around $3.88 billion.

The Canadian dollar rose 0.1% against the greenback owing to a weak dollar. The Bank of Canada Wednesday held the benchmark rate steady amid the volatile US trade policy. However, the central bank said one more cut in interest rate might be necessary, should the economy weaken further. The Swiss franc fell 0.2% against the greenback as data showed Switzerland's unemployment rate increased to 2.9% on month in May, up from 2.8% in April.  (Sourabh Kumar)

India Rupee: Premiums steady; fall in US yield offsets exporters' fwd dollar sales

MUMBAI – The one-year dollar/rupee forward premium was steady as the impact of a fall in the benchmark US 10-year treasury yield was offset by exporters' dollar sales for forward delivery, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two couintries. 

The yield on the US 10-year Treasury note fell over 10 basis points to 4.36% Wednesday after weaker than expected jobs data. The ADP National Employment Report, published Wednesday, showed US private payrolls rose by only 37,000 in May after a downwardly revised rise of 60,000 in April and far below analysts' forecast of 110,000 in a Reuters poll. 

Meanwhile, banks sold forward dollars on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee premiums level, dealers said. Premium hit a high of 1.92% earlier in the day. The one-year forward premium has been declining since last month and hit an over 10-month low on Wednesday. 

A fall in the liquidity surplus in the banking system ia also likely to have supported premiums, according to some dealers. The RBI on Wednesday absorbed INR 2.86 trillion from the banking system, lower than the INR 3.01 billion Tuesday, central bank data showed. However, dealers expect the liquidity surplus to widen more in the near term, which will weigh on forward premiums going ahead.

Market participants now await the monetary policy decision by the Reserve Bank of India's Monetary Policy Committee on Friday, dealers said. The rate-setting panel of the RBI is widely expected to lower the repo rate by 25 bps. "Forwards movement is also happening because there is some volatility in the spot market ahead of the MPC (Monetary Policy Committee) decision."

Market participants expect forward premiums to fall further if RBI Governor Sanjay Malhotra's comments point towards further rate cuts. At 1426 IST, the one-year exact period dollar/rupee forward premium was at 164.00, unchanged from its previous close. It was 1.90%, little changed from 1.89% Wednesday.  (Gowri Lakshmi)

India Rupee: Sharply up on likely foreign fund inflows, exporters' dollar sales

MUMBAI – The rupee rose sharply against the dollar Thursday as foreign banks actively sold the greenback, likely for foreign fund inflows and exporters, dealers said. Volume in the currency market picked up from early trade owing to the flows, dealers said. Some dollar purchases by traders and importers, however, limited the rupee's rise, according to dealers.

"There are some inflows, but exporters also sold, though not as much," a dealer at a public sector bank said. "They were seeing 86 a dollar today but since it was not happening, many booked profits in early trade."

Foreign banks sold dollars, likely for overseas investment linked to Adani Ports, which supported the rupee, according to some dealers. The foreign fund inflows amounted to roughly $1 billion, pushing the rupee to a high of 85.7475 a dollar, dealers said. At 1230 IST, the benchmark indices, the Nifty 50 and the BSE Sensex, were up 0.9% and 0.8%, respectively. 

Noting the limited fall of the rupee in early trade, a few exporters sold the greenback at 85.90-85.80 a dollar, to take advantage of the relatively higher dollar/rupee levels.

However, the rupee was weighed down as a few traders purchased the greenback on speculation that the rupee might fall further after the Monetary Policy Committee's policy decision on Friday. The rate-setting panel of the Reserve Bank of India is widely expected to lower the benchmark repo rate by 25 basis points. Importers also purchased dollars, wary of a sharp fall of the rupee. 

The dollar index continued to be steady ahead of the non-farm payrolls data on Friday. Economists in a Dow Jones poll forecast non-farm payrolls to rise by 125,000. At 1230 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.88, broadly steady against the previous close of 98.82 and lower than 99.25 on Tuesday.

For the rest of the day, the rupee is seen moving in a range between 85.60 and 86.00 a dollar. Dealers peg key technical resistance at 85.60 against the greenback.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - Jun 5

MUMBAI – At 1110 IST, the rupee was at 85.8525 per dollar. At 0900 IST, the rupee was at 85.8650 a dollar, against the previous close of 85.9000. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Pratiksha)

India Rupee - Asia FX: Most up; dollar slips after weaker-than-view US economic data

MUMBAI – Most Asian currencies rose against the dollar Thursday as the dollar index fell after a weaker-than-expected US economic data. The dollar was heavily weighed down as the ADP National Employment Report, published Wednesday, showed US private payrolls rose by only 37,000 in May, after a downwardly revised rise of 60,000 the previous month. Economists in a Dow Jones poll had estimated employment to rise by 110,000.

Following the jobs data, US President Donald Trump called for an interest rate cut by the US Federal Reserve. "ADP number out. 'Too Late' Powell must now lower the rate. He is unbelievable. Europe has lowered nine times," Trump posted on his Truth Social media handle.

The Institute of Supply Management's services Purchasing Managers' Index also added to the slew of weaker than expected recent economic data from the US. The non-manufacturing Purchasing Managers' Index contracted for the first time in nearly a year to 49.9 in May, against 51.6 in April. A reading below 50 indicates contraction in the sector. 

At 1004 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 98.88, broadly steady against the previous close of 98.82 and lower than 99.25 on Tuesday. Market participants now await US non-farm payrolls data on Friday for more cues about the health of the US labour market. In a poll by Dow Jones, economists forecast non-farm payrolls to rise by 125,000.

The Malaysian ringgit was up 0.2% against the greenback and the Taiwan dollar was up 0.3%. The South Korean won rose 0.4% against the greenback. However, gains in the currency were capped after data showed the South Korean economy contracted 0.2% in the March quarter owing to the domestic polical turmoil and global trade uncertainties. 

The Thai baht was up 0.2% against the US currency and the Indonesian rupiah rose 0.1%. The Organization for Economic Cooperation and Development lowered its forecast for Indonesia's economic growth down to 4.7%, from previously estimated 4.9%. 

The Philippine peso was up 0.4% against the greenback. However, the rise in the currency was limited after inflation in the Philippines eased further in May. The consumer price index rose 1.3% on year, down from 1.4% seen in April, logging the lowest inflation rate since November 2019. The inflation print provided room for the central bank to cut interest rates further. The Philippine central bank is scheduled to meet for its next monetary policy meeting on Jun. 19. 

Bucking the trend, the Chinese yuan fell 0.1% against the greenback after the OECD downgraded China's GDP growth forecast for 2026. The organisation now estimates 4.3% growth next year, down 0.1 from the earlier projections. It kept the economic projection unchanged at 4.7 for 2025. 

However, losses were limited as data showed China's services activity expanded at a faster pace in May. The Caixin S&P Global services Purchasing Managers' Index rose to 51.1 last month, from 50.7 in April.  (Gowri Lakshmi)

India Rupee: Tad down on importer dollar buys, FX outflows; fall in dlr support

MUMBAI – The rupee was slightly down against the dollar Thursday as foreign banks purchased the greenback likely for foreign fund outflows and importers, dealers said. However, a fall in the dollar index supported the rupee, dealers said. Volumes in the currency market was thin in early trade, they said. 

"There is some traction in early trade from dollar demands, foreign banks on the buy side," a dealer at a state-owned bank said. "Probably for outflows and some importer buying is there. During the day, pressure will be there on the rupee, we expect the rupee to fall 86 (per dollar) and below."

The rupee came under slight pressure as foreign banks purchased the greenback for overseas investors, who withdrew funds from the domestic financial markets to deploy their funds elsewhere amid rising tariff uncertainties, dealers said. Importers also purchased the greenback, fearing a further fall in the rupee, dealers said. 

However, dealers said the fall in the dollar index supported the rupee from falling sharply, dealers said. The dollar index slipped Wednesday after ADP National Employment Report showed US private payrolls rose by only 37,000 in May after a downwardly revised rise of 60,000 in April and far below analysts' forecast of 110,000 in a Reuters poll.

The dollar was also weighed as the Institute of Supply Managment's non-manufacturing Purchasing Managers' Index dropped to 49.9 in May from 51.6 the previous month, contracting for the first time in nearly a year last month. A reading below 50 indicates contraction in the sector. At 0938 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 98.89, broadly steady against the previous close of 98.82 and lower than 99.25 on Tuesday.

Dealers expect exporters to step in with dollar sales if the rupee inches toward the pscyhologically crucial 86 per dollar mark, which may limit a further fall of the rupee. 

During the day, the rupee is seen moving in a range of 85.70-86.10 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 5

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)

End

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

Edited by Tanima Banerjee

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