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Informist, Thursday, Jul. 3, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended at an over five-week closing high Thursday against the greenback on persistent foreign fund inflows into domestic financial markets, dealers said. Multiple stop-losses on long dollar bets were triggered, pushing the rupee to 85.1925 a dollar, its highest level in over 5 weeks, they said. However, dollar purchases by importers capped further rise of the Indian currency, dealers said. 

"Foreign banks were selling (dollars) since morning for inflows into the equity and government debt markets," a dealer at a private sector bank said. "The kind of rise was a shock to the market. We expected a rise till 45 (85.45), which is a crucial level, after which stop-losses got triggered and the rupee surged."

The Indian unit appreciated 0.5% and ended at 85.3100 against the greenback, sharply higher from its previous close of 85.7025. The Indian unit moved in a range of over 50 paise during the day. 

Other Asian currencies also rose against the greenback due to optimism among investors about trade negotiations with the US and sustained weakness in the dollar index, dealers said. Other Asian currencies rose between 0.1-0.6%, with the Taiwan dollar being the best-performing currency among regional peers.

The rupee opened slightly higher against the dollar at 85.6525 as foreign portfolio investors, looking to invest in domestic financial markets, sold dollars, dealers said. However, the rupee quickly stabilised at 85.69 a dollar as dollar purchases by importers offset the impact of FPI inflows, dealers said. 

The currency market remained quiet in early trade as most market participants awaited further cues on the rupee's direction, dealers said. A few importers purchased dollars early in the trade, fearing a sharp fall in the rupee, dealers said. The rupee was, however, supported by a sustained weakness in the dollar index after the US dollar began losing its safe-haven sheen amid heightened uncertainty around US President Donald Trump's trade policies, dealers said. 

The dollar index was also weighed down by weak jobs data, reinforcing the likelihood of an earlier-than-expected monetary policy easing by the US Federal Reserve and suggesting a softening labour market as fears of recession in the US loom, dealers said. The ADP employment report released Wednesday showed private sector payrolls fell 33,000 in June, the first decline since March 2023. A Dow Jones poll had projected an increase of 100,000 in payrolls.

According to the CME FedWatch tool, traders now see a 25.3% probability of the Fed cutting the benchmark rate by 25 basis points in July, up from 20.7% a week ago. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 96.77, unchanged from Wednesday and 96.65 Tuesday. The index had fallen to a low of 96.69 earlier in the day. 

Market participants now await the non-farm payrolls data and the initial jobless claims for the week ended Jun. 28, due later in the day.

Investor sentiment was also lifted after Trump announced late Wednesday a trade deal with Vietnam, dealers said. This supported the rupee, according to a few dealers.  Under the deal, the US will levy a 20% tariff on imports from Vietnam, while Hanoi will not charge any tariffs on imports from the US. The US had in April slapped a 46% reciprocal tariff on goods from Vietnam.

The rupee began surging after reports said that India and the US could sign an interim trade deal within the next two days, as negotiations are in the final stages. Media reports, citing sources, said India may not compromise on the interests of farmers and would not open the agriculture and dairy sectors completely.

The sale of dollars by foreign banks for overseas investors, who wanted to invest in the domestic financial market, especially equities, supported the rupee. Dealers said close to $1 billion would have been received, likely relating to the inflows. Some dealers also said a part of the inflows were likely into Adani companies.

As the rupee breached 85.40 a dollar, the Indian unit rose quickly as multiple stop-losses were triggered on long dollar bets, dealers said. This supported the rupee further, lifting it to the day's high of 85.1925. "Some nats (nationalised banks) sold (dollars) in the spot (market) once the rupee broke 85.40 (a dollar). Most of the banks cut their dollar positions as markets were heavily long," a currency trader at a brokerage firm said. 

Despite the surge in the rupee, most oil marketing companies and the Reserve Bank of India did not intervene in the market through aggressive dollar purchases, which aided the rupee to sustain its gains, dealers said. 

FORWARDS

The one-year dollar/rupee forward premium ended at an over six-week high Thursday, despite a rise in the US Treasury yields, as banks purchased dollars for forward delivery on behalf of importers, dealers said. On Wednesday, the yield on the 10-year benchmark US Treasury note inched up 4 basis points to end at 4.30%. 

An appreciation in the rupee in the spot market prompted importers to buy dollars for forward delivery, supporting the premiums, dealers said. Dealers said importers also bought dollars for forward delivery as they expect forward premiums to rise further in the coming days, as the interest rate differential between the US and India may widen with the US Fed likely to cut rates in September and no sight of a rate cut by the Reserve Bank of India for the rest of the year.

Forwards of a currency pair are reflective of the interest rate differential between two countries. However, an increase in rupee liquidity in the banking system limited further rise in forward premiums, dealers said. The RBI Wednesday net absorbed INR 3.75 trillion from the banking system, a proxy for systemic liquidity conditions. On Tuesday, the RBI had absorbed INR 3.32 trillion.

The one-year exact period dollar/rupee forward premium was 176.22 paise at 1530 IST, up from 171.02 paise Wednesday. On an annualised basis, the premium was 2.07%, up from 2.00% Wednesday.

OUTLOOK

Friday, the rupee will take cues from the movement in crude oil prices and the dollar index, dealers said. Investors will closely assess the US jobs data, due later in the day, to get further clarity on the US labour market and the likelihood of a rate cut by the US Fed, dealers said. US financial markets are shut on Friday for Independence Day.

The rupee may find support from foreign investment flows into domestic financial markets, with some inflows likely in the initial public offerings of Indian companies, dealers said. Should the rupee rise sharply, dealers expect the RBI to purchase the greenback to shore up its foreign exchange reserves. 

During the day, the rupee is seen moving in a range of 85.15-85.60 against the greenback. Dealers see immediate technical resistance for the Indian currency at 85.15 a dollar.

India Rupee - World FX: Dollar inches up slightly ahead of US jobs report

MUMBAI – The dollar index inched up slightly ahead of the release of US employment report for June later in the day. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 96.79 at 1522 IST, against 96.77 Wednesday and 96.65 Tuesday. A poll by Dow Jones sees an increase of 110,000 non-farm payrolls in June and the unemployment rate at 4.3%, up from 4.2% in May. The weekly unemployment insurance claims report is also due later in the day. The ADP National Employment Report released Wednesday showed payrolls in the private sector fell by 33,000 in June.

The euro fell 0.1% against the dollar even as data showed that HCOB Eurozone services industry Purchasing Managers' Index rose to 50.5 in June from 49.7 in May. A reading above 50 indicates expansion while a figure below it suggests contraction. The Japanese yen was down 0.1% against the dollar. The fall was limited as data showed the country's services sector expanded slightly faster in June. The au Jibun Bank Japan Services PMI rose to 51.7 in June from 51.0 in May, the third consecutive month of growth. The pound sterling fell 0.3% against the greenback.

The Australian dollar was down 0.2% against the greenback, while the Canadian dollar was steady against the US currency. The Swiss Franc rose 0.1% against the dollar.  (Sourabh Kumar)

India Rupee: Premium at 6-wk high as importers buy fwd dlrs on rupee's rise

MUMBAI – The one-year dollar/rupee forward premium hit an over six-week high Thursday, despite a rise in the US Treasury yields, as banks purchased dollars for forward delivery on behalf of importers, dealers said. On Wednesday, the yield on the 10-year benchmark US Treasury note inched up 4 basis points to end at 4.30%. 

"Forwards are getting paid, the US jobs data came lower that's why," a currency trader at a brokerage firm said. The ADP employment report released Wednesday showed private sector payrolls fell 33,000, declining for the first time since March 2023. Economists had forecast an increase of 100,000 in a Dow Jones poll.

The jobs data adds to the slew of weaker than expected economic data from the US, pointing towards a softening labour market. This also raised hopes of the US Federal Reserve lowering the Federal Funds target range by 25 basis points to 4.00-4.25% at its Jul. 29-30 meeting. According to CME FedWatch tool, traders now see a 25.3% probability of the Fed cutting the benchmark rate by a quarter percentage points, from a 20.7% probability a week ago.

Further, an appreciation in the rupee in the spot market prompted importers to buy dollars for forward delivery, supporting the premiums, according to dealers. The rupee rose to a high of 85.20 a dollar earlier in the day due to strong foreign fund inflows, dealers said.

Dealers said importers also bought dollars for forward delivery as they expect forward premiums to rise further in the coming days as with the Fed likely to go for a rate cut in September, and no sight of a rate cut by the Reserve Bank of India for the rest of the year, the interest rate differential between the US and India may widen. Forwards of a currency pair are the interest rate differential between two countries. "There is sustained weakness in dollar and with all the weak data, the Fed will cut rates in July itself, market is pricing in for that. Forwards should stabilise around 2.00% levels," a dealer at a private sector bank said.

However, an increase in rupee liquidity in the banking system limited further rise of forward premiums, dealers said. The RBI Wednesday net absorbed INR 3.75 trillion from the banking system, which is a proxy for systemic liquidity surplus. On Tuesday, it had absorbed INR 3.32 trillion. The one-year exact period dollar/rupee forward premium was 176.22 paise at 1453 IST, up from 170.97 paise Wednesday. On an annualised basis, the premium was 2.07%, up from 2.04% Wednesday.  (Gowri Lakshmi)

India Rupee: Rises sharply on FX inflows; Stop-losses on long dlr bets hit

MUMBAI - The rupee rose sharply against the dollar Thursday because of dollar flows from foreign fund inflows, dealers said. This led to stop-losses on long dollar bets being triggered, lifting the rupee to an over one-month high of 85.2325 a dollar, dealers said. They said stop-losses on long dollar bets were likely triggered around 85.40 a dollar and above levels.

The rupee rose sharply as a few foreign banks sold the greenback for overseas investors, who wanted to invest in the domestic financial market, especially equities, dealers said. At 1314 IST, both the benchmark share indices were up 0.2% each. Dealers said over $500 million has been received so far, likely related to inflows into domestic stock market.

The rupee was also supported by increasing optimism around India-US trade deal, dealers said. Earlier in the day, reports said that India and US will likely sign an interim trade deal within the next two days as negotiations between India and the US were in their final stage. New Delhi will likely not compromise on interest of farmers and not open the agriculture and dairy sectors completely, CNBC reported, citing sources.

However, dollar demand from importers prevented the rupee from rising further, dealers said. "Importers are on a hunt," a dealer at a private sector bank said. "Even at 46 (85.46) levels, they were actively hedging". Dealers expect oil marketing companies to purchase the greenback aggressively from now, due to the lucrative dollar/rupee levels. Dealers also expect the Reserve Bank of India to likely purchase dollars to shore up its dollar reserves. "It's highly likely oilers and RBI will bid aggressively below 85.50 (a dollar)," a currency trader at a brokerage firm said.

A weak dollar index continued to support the rupee, dealers said. The US dollar is slowly losing its safe haven sheen and has not been able to gain traction as investors continue to assess the mixed economic data from the US and are waiting for further data points to get more cues on the US economy amid heightened uncertainty around US President Donald Trump's tariff policies, dealers said.

At 1329 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 96.76, little changed from 96.78 Wednesday and 96.65 Tuesday. Market participants now await the non-farm payrolls data and the initial jobless claims for the week ended Jun. 28, due later in the day.

For the rest of the day, the rupee is seen moving in a range of 85.10-85.70 against the dollar. Dealers peg key technical resistance for the Indian unit at 85.10 a dollar.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - Jul 3

NEW DELHI – At 1058 IST, the rupee was at 85.5850 per dollar. At 0900 IST, the rupee was at 85.6525 a dollar, against the previous close of 85.7025. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Pratiksha and Gowri Lakshmi)

India Rupee: Steady tracking dollar index; some importers' dlr buys weigh

India Rupee: Steady tracking dollar index; some importers' dlr buys weigh

MUMBAI – The rupee was steady against the dollar Thursday tracking the dollar index, which remained little changed in early trade, dealers said. The Indian unit opened slightly higher at 85.6525 a dollar, before being pulled towards its previous close. "Nothing major is happening in the market today (Thursday) also. Mostly, it (rupee) is range bound and some importers are purchasing dollars, otherwise it's quiet and within range," said a dealer at a private sector bank. 

Banks purchased the greenback on behalf of importers who wished to take advantage of the relatively lower dollar/rupee levels, dealers said. Importers fear a sharp fall in the rupee amid heightened global uncertainty over West Asia tensions and US trade deals, dealers said. 

However, a fall in the rupee was prevented owing to the continued weakness in the dollar, dealers said. The dollar index was weighed down slightly on Wednesday by data that showed private payrolls in the US had contracted unexpectedly in June, with 33,000 jobs lost, according to the ADP employment change report. Economists had forecast an increase of 100,000 jobs in a Dow Jones poll.

Nevertheless, investor sentiment turned positive after US President Donald Trump announced late Wednesday the trade deal between the US and Vietnam, dealers said. The US will levy a 20% tariff on imports from Vietnam under the new trade deal. Hanoi was slapped with a sweeping 46% import duty by Washington as reciprocal tariff in April. Under the new deal, Vietnam won't charge tariffs on imports from the US.

At 0934 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 96.85, broadly steady from 96.78 Wednesday and 96.65 Tuesday. Market participants now await the non-farm payrolls data and the initial jobless claims for the week ended Jun. 28, due later in the day.

Meanwhile, an interim trade deal between New Delhi and Washington could be signed within the next two days, CNBC reported Thursday. Negotiations for concluding an interim trade deal with Washington are in the final stages, and it is likely that India may not compromise on interest of farmers and would not open the agriculture and dairy sectors completely, CNBC reported, citing sources.

During the day, the rupee is seen moving in a range of 85.30-85.80 against the dollar. Dealers peg key technical resistance for the Indian unit at 85.30 a dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Jul 3

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 Saji George Titus

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