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Informist, Monday, Sep 2, 2024

By Pratiksha

NEW DELHI – The rupee ended slightly lower against the dollar today, in line with its Asian peers, due to dollar purchases on behalf of oil marketing companies and a broadly strong dollar index, dealers said. 

"There were strong bids (dollar buys) by oil importers. Crude has come down quite a bit, so this had to happen," a dealer at a state-owned bank said. 

After falling 0.1% against the dollar, the Indian currency settled at 83.9175 a dollar today. Other emerging market units fell between 0.1-0.7% against the dollar today, with the Malaysian ringgit being the worst performer. With a 0.1% fall, the Indian rupee and the South Korean won were the better performing Asian currencies today. 

The rupee opened largely steady at 83.8700 a dollar as the impact of a rise in the dollar index was offset by a fall in crude oil prices, dealers said.

The dollar index rose to a near two-week high in early trade today after economic data released on Friday indicated that the world's largest economy remained resilient, easing bets for an aggressive rate cut by the US Federal Reserve next month.

The US personal consumption expenditures price index for July was steady, in line with expectations, while consumer spending remained strong. Currently, the odds of the US central bank cutting interest rates by 50 basis points at its policy meeting this month are 31.0%, down from 33.5% on Friday, while the odds for a 25-bps rate cut are seen as having a 69.0% probability, as per the CME FedWatch Tool.

"If a 25 bps rate cut is the case, then I don't think we will see any sharp movement (in the rupee), all of that is completely priced in," a dealer at a foreign bank said. "Only a 50-bps cut will be market moving."

At 1530 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.65 compared with 101.73 on Friday, and 101.37 on Thursday. The index rose to a high of 101.80 earlier today, its highest level since Aug 20. 

Shortly after opening, the Indian unit touched the day's high of 83.8425 a dollar as foreign banks, including a US-based bank, sold dollars for foreign fund inflows into domestic equities. 

However, the Indian unit could not sustain above the 83.90-a-dollar level as state-owned banks stepped in to buy dollars for oil marketing companies, dealers said. Oil importers' dollar purchases were driven by a fall in crude oil prices, they said. 

Oil prices fell on expectations of higher production by the Organisation of the Petroleum Exporting Countries and allies from October, while signs of weak demand in China and the US raised concerns about future consumption growth.

At 1530 IST, the November Brent crude contract on the Intercontinental Exchange was at $76.80 per bbl, compared with Friday's close of $78.80 a bbl. On Thursday, it closed at $79.94 a bbl.

However, volume in the currency market remained subdued owing to the financial market in the US being closed today on account of Labour Day. "It was quite a dull day, with the US closing. That is why it (the rupee) was stuck in a range for so long, there was nothing happening for hours." The rupee moved in a range of 11 paise today.

Some dealers speculated that state-owned banks may have bought the greenback on behalf of the Reserve Bank of India at around 83.84 a dollar. Importers, however, did not aggressively buy dollars today as most of them are waiting for 83.80-83.75-a-dollar levels, according to dealers. "Nats (PSU banks) have actively been on bids, so it looks like all the upsides will be capped," another dealer at a private bank said.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended slightly higher as banks bought the greenback for forward delivery on the view that the differential between Indian and US yields may widen as the US Fed is expected to start cutting rates in September, dealers said. However, volumes in the dollar/rupee forward market were low today, as the US market is closed for Labor Day.

The one-year dollar/rupee forward contract touched a 15-month high of 2.15% during the day. However, it came off the level as banks rushed to sell the greenback for forward delivery to take advantage of the relatively higher levels, dealers said.

With the Fed likely to go for a rate cut this month, and no sight of a rate cut by the Reserve Bank of India yet, as viewed by the market, the interest rate differential between the US and India is likely to rise, driving dollar/rupee forward premiums higher. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. 

At 1530 IST, the premium on the one-year exact-period dollar/rupee contract was 179.33 paise, compared with 178.54 paise on Friday. On an annualised basis, the premium was 2.14%, against Friday's close of 2.13%.

OUTLOOK

On Tuesday, the rupee will take cues from the movement in the dollar index and crude oil prices, dealers said.

Market participants now await August's US non-farm payrolls report, scheduled to be released on Friday, for more cues on the likely size of the rate cut this month.

Dealers expect the Reserve Bank of India to continue to keep the Indian unit from falling beyond its psychologically-crucial level of 84-per-dollar through its dollar sales interventions. On the other hand, they expect the central bank to intervene through dollar purchases if the rupee rises above 83.80 a dollar.  

During the day, the rupee is seen in a range of 83.80-83.98 a dollar, with strong technical support pegged at 84.00. 

India Rupee: In thin range; volume dull as US mkt shut on Labour Day

MUMBAI – The rupee moved in a thin band against the dollar today as volume remained lacklustre owing to the financial market in the US being closed today on account of Labour Day. The rupee has moved in a range of only 7 paise so far today. 

"There is a US holiday, so not a lot is happening in the market," a dealer at a private bank said. "We are seeing some buying (of dollars) coming in but not that much."

Some banks bought the greenback for oil marketing companies, noting a fall in crude oil prices, which weighed on the rupee, dealers said. Crude oil prices declined as investors weighed the prospect of a rise in supplies by the Organization of the Petroleum Exporting Countries and allies in October.

At 1405 IST, the October Brent crude contract on the Intercontinental Exchange was at $76.77 per bbl, compared with Friday's close of $78.80 a bbl. On Thursday, it closed at $79.94 a bbl. 

Meanwhile, the dollar index eased slightly during European trade from the near two-week high it hit earlier today, which also supported the Indian unit, dealers said. The dollar index, which measures the strength of the dollar against a basket of six major currencies, was 101.60 at 1405 IST, compared to 101.73 on Friday and 101.37 on Thursday. The index rose to 101.80 earlier today, its highest level since Aug 20.  

Market participants now await the US non-farm payrolls due Friday, for more cues on the likely size of the rate cut by the US Federal Reserve this month.

For the rest of the day, the rupee is seen at 83.80-83.98 against the dollar, dealers said. They peg key technical support for the Indian currency at 84.00 a dollar. (Pratiksha) 

India Rupee: Technical Levels for rupee - Sep 2

MUMBAI – At 0900 IST, the rupee was at 83.8700 a dollar, against the previous close of 83.8625. At 1112 IST, the rupee was at 83.8700 per dollar. The following are key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi)

India Rupee - Asia FX: Dn as dlr index near 2-wk high post econ data

MUMBAI – Asian currencies fell against the dollar today, with the Indonesian rupiah falling 0.5%, as the dollar index rose to a near-two-week high after economic data released on Friday prompted traders to pare bets of an aggressive rate cut by the US Federal Reserve this month.

Annually, the July personal consumption expenditure, the preferred inflation measure of the US Federal Reserve, remained unchanged on month at 2.5%. In the 12 months through July, core personal consumption expenditure was at 2.6%, unchanged from the rise in June. 

Consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.5% in July after rising by an unrevised 0.3% in June, indicating that the world's largest economy remained resilient. 

Currently, the odds of a 50 basis point rate cut by the Fed this month is 31.0%, while the odds of a 25 bps rate cut are 69.0%, according to the CME FedWatch tool. Market participants now await the key US non-farm payrolls data due Friday. The dollar index, which measures the strength of the dollar against six major currencies, was 101.65 at 0918 IST, compared to 101.73 on Friday and 101.37 on Thursday.

The Thai baht was down 0.4% against the dollar. Thailand's central bank chief and finance minister are expected to meet this month for discussions on the inflation target for 2025, as the government seeks a new goal with an eye on a rate cut that it has pushed for months, reports said. "A review of the 1-3% inflation target range, which has been in place since 2020, could raise the chance of a rate cut", Srettha Thavisin, former Prime Minister said in June. 

The Malaysian ringgit was down 0.3% against the dollar. Data released today showed that the country's seasonally adjusted August Manufacturing Purchasing Manager's Index remained unchanged at 49.7. Manufacturing and production remained muted since demand was generally weak and the survey suggests conditions will remain unchanged in the coming months. 

The Chinese yuan was down 0.2% against the greenback. Data released today showed China’s Caixin PMI Manufacturing rose slightly in August, reaching 50.4 from July’s 49.8, signalling a modest return to expansion. (Gowri Lakshmi)

India Rupee: Largely steady as fall in crude offsets dlr index rise

NEW DELHI – The rupee was largely steady against the dollar today as the impact of a rise in the dollar index was offset by a fall in crude oil prices, dealers said. 

The dollar index rose to a near two-week high in early trade after economic data released on Friday indicated that the world's largest economy remained resilient, easing bets for an aggressive rate cut by the US Federal Reserve this month. The US personal consumption expenditures price index for July was steady, in line with expectations, while consumer spending remained strong. 

Currently, the odds of the US central bank cutting interest rates by 50 basis points at its policy meeting this month are 31.0%, down from 33.5% on Friday, while the odds for a 25-bps rate cut are seen as having a 69.0% probability, as per the CME FedWatch Tool. At 0945 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 101.74 compared with 101.73 on Friday, and 101.37 on Thursday. 

Crude oil prices declined as investors weighed the prospect of a rise in supplies by the Organization of the Petroleum Exporting Countries and allies in October. A fall in crude oil prices decreases India's import bill, which subsequently supports the Indian unit.

At 0945 IST, the October Brent crude contract on the Intercontinental Exchange was at $76.31 per bbl, compared with Friday's close of $78.80 a bbl. On Thursday, it closed at $79.94 a bbl.

Most Asian units fell against the US unit, due to a rise in the dollar index, which also weighed on the Indian unit, dealers said. However, some foreign banks sold dollars for foreign fund inflows into domestic equities, which aided the Indian unit, they said. 

"Unless there are good inflows in the market, we will continue to see these levels (for rupee) only," a dealer at a private bank said. "But 83.80 will not break easily, I think."

Traders now await August's US non-farm payrolls report, scheduled to be released on Friday, for more cues on the likely size of the rate cut this month.

For the rest of the day, the rupee is seen at 83.80-83.97 against the dollar, dealers said. They peg key technical support for the Indian currency at 84.00 a dollar.  (Pratiksha)

India Rupee : Expected range for rupee - Sep 2

MUMBAI – Following are the expected support and resistance levels for the rupee today, 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 Vidhi Verma

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