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Informist, Tuesday, Oct. 15, 2024

By Gowri Laksmi 

MUMBAI – The rupee ended largely steady against the dollar on Tuesday as persistent dollar sales by banks, likely on behalf of the Reserve Bank of India and some exporters, offset the impact of a strong dollar index, dealers said.

"There was some aggressive selling (of dollars) for 3-4 paise in the end, most likely for RBI," said a dealer at a private bank. The local unit settled at 84.0375 a dollar after touching a record low of 84.0750 during the day. The Indian unit moved in a thin band of 5 paise during the day. The rupee closed at 84.0600 a dollar on Monday. 

The Indian currency emerged as the best performer amongst its peers on Tuesday. Other Asian currencies were down 0.1-0.7% against the greenback, with the Philippines peso being the worst performer.  

The rupee opened steady at 84.0550 a dollar on Tuesday as falling crude oil prices offset the impact of a rise in the dollar index, dealers said. The dollar index rose to an over two-month high on Monday as recent US economic data and comments from US Federal Reserve officials indicated that the US central bank may not proceed with large rate cuts at its upcoming meetings.

Traders have priced in an 86.8% probability of a 25-basis-point rate cut by the US Federal Reserve in November, as compared to a 13.2% probability of maintaining the status quo, according to the CME FedWatch tool. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.01, compared to 103.21 on Monday and 102.92 on Friday. The dollar index rose to an over two-month high of 103.36 on Monday.

The rupee came under pressure shortly after opening, tracking the rise in the dollar index. However, banks stepped in through dollar sales, likely for the RBI, as soon as the rupee touched the record low of 84.0750 it hit on Monday, which prevented further losses in the Indian unit, dealers said.  

Banks also purchased greenback on behalf of importers in anticipation of a sharp fall in the Indian unit going ahead, which weighed on the rupee, dealers said. However, the Indian unit got support from dollar sales by foreign banks on behalf of overseas investors looking to invest in the initial public offering of Hyundai Motor India Ltd. The INR 278.70-billion IPO, the biggest equity public offering yet in the country, opened for subscription Tuesday and will close Thursday. The company has set a price band for its IPO of 142.19 million shares at INR 1,865-1,960 per share.

The rupee was also aided by exporters, who sold the greenback to take advantage of the relatively higher dollar/rupee levels, they said. "The rupee is steady now, mostly because there is a tug of war between the bulls and bears. Importers are buying, wary of further depreciation, and exporters are selling as the rupee breached the key level (of 84 a dollar)," a dealer at another private bank said.

Further, an over 3% fall in crude oil prices also aided the domestic currency, dealers said. Crude prices fell sharply after the International Energy Agency on Tuesday reassured it would be ready to cover if a supply-side disruption is caused by any escalation in the geopolitical tensions in West Asia.

Prices also slumped as the outlook for global oil demand growth for 2024 and 2025 was lowered by the Organization of Petroleum Exporting Countries and as reports suggested that Israel may likely attack the Iranian military rather than an anticipated attack on oil or nuclear infrastructure. 

At 1530 IST, the December Brent Crude contract on the Intercontinental Exchange was at $74.21 per barrel, compared with $77.46 per barrel on Monday and $79.04 per barrel on Friday. 

FORWARDS

Premium on the one-year dollar/rupee forward contract settled at its lowest level in nearly six weeks on Tuesday, as banks sold dollars for forward delivery on expectations that the forward premiums may fall further going ahead, dealers said.

The one-year dollar/rupee forward premium has slumped over 20 bps so far this month as banks sold dollars for forward delivery on the view that the interest rate differential between the US and India may widen less than previously thought. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

Recent economic data in the US and comments from US Fed officials suggested that the US central bank may not opt for aggressive rate cuts. On Monday, Fed Governor Michael Waller called for "more caution" on interest rates ahead, citing the recent rise in inflation and a stronger labour market and economy. "Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year," Waller said.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 183.96 paise, against 185.88 paise Monday. On an annualised basis, the premium was at 2.19%, against the previous close of 2.21%.

OUTLOOK

On Wednesday, the rupee will take cues from movement in the dollar index and crude oil prices. Market participants now await US retail sales and jobless claims data and the European Central Bank's policy review on Thursday. The ECB is expected to cut its deposit rate by 25 bps to 3.25%, as per a poll by Reuters.

Dealers expect the RBI to continue selling dollars to keep the Indian unit from falling sharply. "The next key level is at 84.10-84.20 (a dollar) for the rupee, which will be heavily protected by the RBI," a dealer at a private bank said.

They also expect the rupee to be supported by continued dollar sales by foreign banks on behalf of overseas investors looking to invest in the ongoing IPO of Hyundai Motor India.

During the day, the rupee is seen in a range of 84.00-84.15 a dollar, with strong technical support pegged at 84.10.

India Rupee - World FX: Sterling up after UK Aug unemployment rate falls

MUMBAI – The pound sterling was up 0.2% against the US dollar, after data released Tuesday showed UK's unemployment rate fell to 4.0% in August from 4.1% in July. The gains were capped gains as media reports said that though UK's unemployment rate has been falling the past few months, lack of robust wage growth may push Bank of England to cut interest rates. Bank of England is due to announce its rate decision on Nov. 7.

The Japanese yen was up 0.4% against the US dollar, recovering slightly from Monday's fall. The market is divided on whether Bank of Japan will raise rates further this calendar year. A poll by Reuters shows just 25 of 49 economists expect Bank of Japan to keep rates steady. Bank of Japan's next monetary policy decision on Oct.31.

The Australian dollar was down 0.3% against the US dollar, tracking a fall in the Chinese yuan. The yuan was down as investors remained unimpressed with the economic stimulus package by the Chinese government to boost its sluggish economy. The New Zealand dollar was also down 0.1% against the greenback. Any change in the economic policies of China affects commodity-linked currencies of Australia and New Zealand due to their close bi-lateral trade relations. Market participants will keenly wait for a speech by Reserve Bank of Australia Deputy Governor Sarah Hunter's on Wednesday.

The Canadian dollar was down 0.1% against the greenback due to a fall in crude oil prices. Canada is a major exporter of crude oil to the US. Crude prices have been falling since Monday, after concerns over supply eased on reports that Israel may not attack Iran's oil sites, which could have led to a sharp escalation in the conflict in West Asia.

The euro was flat against the greenback as traders remain cautious ahead of the European Central Bank's policy outcome on Thursday. Meanwhile, the Eurozone ZEW economic sentiment index rose to 20.1 in October, higher than the forecast of 16.9. The index was at 9.3 in September. The ZEW economic sentiment index of Germany, the largest economy in the Eurozone, too climbed to 13.1 in October, from 3.6 in September. The ZEW Economic Sentiment Index is a leading indicator of the economy.

The dollar index hovered near the two-month-high touched Monday. The index had surged on Monday as expectations of a 50-basis-point rate cut at the upcoming meeting of the US Federal Reserve declined. Traders have priced in 86.8% chance of a 25-bps rate cut and 13.2% chance of a status quo by the Fed in November, according to the CME FedWatch tool.

At 1513 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.11, compared to 103.21 on Monday and 102.92 on Friday. The dollar index rose to an over two-month-high of 103.36 on Monday.  (Gowri Lakshmi)

India Rupee: Premium tad down as banks sell fwd dollars; mkt eyes more cues

MUMBAI – Premium on the one-year dollar/rupee forward contract was slightly down on Tuesday, as banks continued selling dollars for forward delivery in anticipation that the forward premium may fall further going ahead, dealers said. However, the majority of market participants waited for strong cues before placing any large bets, which reduced the overall volumes in the market, they said.

"People are still receiving, but it (dollar/rupee forward premium) is expected to remain range-bound," a dealer with a private bank said. "Unless some clear direction is received from the UST (US Treasury), I don't think we can see any significant movement. Also, now the only thing to watch is the next Fed policy meet."

After multiple data from the US, especially the non-farm payrolls, suggested an underlying strength in the US economy, the forward premiums started to decline, dealers said. With strong economic data in the US reducing the chances of a larger rate cut by the US Federal Reserve in its upcoming meetings, dealers see the interest rate differential between the US and India not rising as much as previously thought. This weighed on the dollar/rupee forward premiums. Premiums were down across tenures Tuesday. As of Tuesday, the odds of a 25-basis-point rate cut by the Fed at its next meeting in November were 86.8%, with no chance seen for a 50-bps cut. The remaining odds were in favour of keeping the rates steady.

"I think we may see the one-year go down to 2.15% now," a dealer at a brokerage firm said. "If there is even a hint of one pause in either of the Fed's remaining two meetings this (calendar) year, we may see the one-year forward going below 2.0%."

The dollar/rupee forward premium also came under pressure when the Reserve Bank of India changed its monetary policy stance to 'neutral' from 'withdrawal of accommodation' last week. Compared to a day before the Monetary Policy Committe's decision, the one-year dollar/rupee forward premium has fallen over 8 bps.

At 1501 IST, the premium on the one-year exact-period dollar/rupee forward contract was 184.46 paise, against 185.88 paise Monday. On an annualised basis, the premium was at 2.19%, against the close of 2.21% on Monday. (Sourabh Kumar)

India Rupee: Touches record low; RBI's likely dollar sales limit fall

MUMBAI – The rupee touched a record low as banks purchased the greenback, likely on behalf of importers, dealers said. However, the Reserve Bank of India intervened in the domestic spot market through dollar sales, which prevented the rupee from falling sharply, they said. The rupee has traded in a tight range of just 2 paise so far on Tuesday. The rupee touched the record low of 84.0750 a dollar, which it hit on Monday.

"Nats (state-owned banks) are seen at 84.08 a dollar," a dealer at a state-owned bank said. "It (rupee) will be a gradual depreciation after all," he added. Further, some exporters sold the greenback, taking advantage of relatively higher dollar/rupee levels, which limited the fall in the domestic currency. 

The rupee was trading in a thin band as foreign banks sold dollars on behalf of overseas investors looking to invest in the initial public offerings of domestic companies, which offset the impact of a strong dollar index, dealers said. The dollar index rose to over a 2-month-high Monday on reduced expectations of a 50-basis-point rate cut at the upcoming meeting of the US Federal Reserve.

Currently, traders have priced in an 86.8% probability of a 25-bps rate cut by the Fed in November, as compared to a 13.2% probability of the Fed maintaining the status quo, according to the CME FedWatch tool. At 1311 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.24, compared to 103.21 on Monday and 102.92 on Friday. The dollar index rose to an over two-month-high of 103.36 on Monday.

For the rest of the day, the rupee is seen in the range of 84.00-84.15 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.10 a dollar.  (Gowri Lakshmi)

 India Rupee: Steady as RBI's likely dollar sales offset rise in dollar index

MUMBAI – The rupee was largely steady against the dollar on Tuesday as state-owned banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset the downward pressure from a surge in the dollar index, dealers said. The dollar index rose to an over two-month high on Monday as a recent rise in inflation and a strong labour market boosted investors' confidence that the US Federal Reserve may not cut rates by another 50 basis points at its upcoming policy meetings.  

"The rupee is expected to be range-bound despite the rise in the dollar (index). It will be 84.04 at the higher end and 84.08 at the lower end," a dealer at a state-owned bank said. On Monday, US Fed Governor Christopher Waller in a speech called for "more caution" on interest rates ahead, citing the recent rise in inflation and a stronger labour market and economy. This strengthened the dollar index. At 1010 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 103.31, compared to 103.21 on Monday and 102.92 on Friday. The dollar index rose to an over two-month high of 103.36 on Monday.

Currently, traders have priced in an 86.8% probability of a 25-basis-point rate cut by the Fed in November, as compared to a 13.2% probability of the Fed maintaining the status quo, according to the CME FedWatch tool. Traders do not see any chance of a 50-bps rate cut. "The dollar index has also weakened other Asian currencies, which will deter the rupee here," a dealer at a private bank said. The offshore Chinese yuan weakened 0.3% against the greenback as China's finance ministry failed to provide clarity on the economic stimulus package at its briefing on Saturday. 

However, dealers expect foreign banks to sell dollars, likely on behalf of overseas investors looking to invest in the initial public offering of Hyundai Motor India Ltd., which opened for subscription Tuesday and will close Thursday. It is expected to support the rupee, dealers said. For the rest of the day, the rupee is seen in the range of 83.90-84.10 against the dollar, dealers said. They see strong technical support for the Indian currency at 84.10 a dollar. (Gowri Lakshmi)

India Rupee - Asia FX: Most down as dollar index surges to over 2-month high

MUMBAI – Most Asian currencies traded lower against the dollar as the dollar index rose to over a 2-month-high on Monday. The dollar index surged as recent US economic data and comments from Federal Reserve officials suggested that the US Federal Reserve may not likely proceed with a 50-basis-point rate cut at its upcoming meetings and go with small rate cuts. 

On Monday, Fed Governor Michael Waller called for "more caution" on interest rates ahead, citing the recent rise in inflation and a stronger labour market and economy. "Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year," Waller said. Currently, traders have priced in an 86.8% probability of a 25 bps rate cut by the Fed in November from a 13.2% probability of the Fed maintaining the status quo, according to the CME FedWatch tool.

At 0748 IST, the dollar index, which measures the strength in the dollar against six major currencies, was 103.19, compared with 103.21 on Monday and 102.92 on Friday. The dollar index surged to an over a 2-month high of 103.36 on Monday.

The Thai baht was down 0.5% against the greenback, the most among its peers, ahead of the country's monetary policy decision on Wednesday, where the central bank is expected to maintain interest rates unchanged. 

The South Korean won was down 0.1% against the dollar. Bank of Korea Governor Rhee Chang-yong, on Monday, reiterated that the central bank may not cut interest rates faster to boost consumption, hinting that the bank will be cautious in its rate-cut trajectory. Market participants expect the Bank of Korea to slash its benchmark rates by 25 bps to 3.25% at its next policy meeting on Friday. 

The Chinese yuan was down 0.2% against the dollar, extending its losses from Monday as the Finance Ministry failed to provide clarity on the economic stimulus package at its briefing on Saturday. 

The Philippine peso was down 0.3% against the dollar ahead of the Bangko Sentral ng Pilipinas' policy decision on Wednesday. All 23 economists in a Reuters poll expect the central bank to cut its overnight borrowing rate by 25 bps to 6.00% on Wednesday. The Malaysian ringgit was down 0.1% against the greenback. 

Bucking the trend, the Indonesian rupiah was flat against the dollar ahead of the central bank's monetary policy decision on Wednesday. Bank Indonesia is expected to leave its interest rates unchanged at 6%, despite inflation falling to the lowest level in 3 years. Over 75% of economists in a Reuters poll forecast the central bank to maintain the status quo on its benchmark interest rate. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Oct 15

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 Saji George Titus

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