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Informist, Thursday, Nov. 14, 2024

By Sourabh Kumar

MUMBAI – The rupee settled at a record closing low against the dollar owing to a surge in the dollar index, dealers said. While the Reserve Bank of India's intervention through dollar sales prevented a further fall in the rupee, it could not save the domestic unit from settling at a record closing low, they said.

"The dollar index is getting very strong now, and FPIs (foreign portfolio investors) are also exiting (from domestic equities), so the rupee is coming under pressure from both sides," a dealer with a state-owned bank said.

For the second consecutive trading day, the rupee touched its lifetime low of 84.41 a dollar during the day, after having fallen to this level Tuesday. With only 2-paise movement during the day, the Indian unit settled at 84.3950 a dollar Thursday. It had closed at 84.3775 a dollar Wednesday.

The rupee opened at a record opening low of 84.40 a dollar Thursday. As the Indian unit was near its lifetime low, the RBI swung into action and likely sold dollars through banks to prevent the rupee hitting another record low, dealers said.

A few dealers were also of the view that the central bank had intervened in the offshore non-deliverable forward market Thursday. "Before opening we saw the dollar/rupee was trading higher, but then public-sector action probably brought it down," a dealer with another state-owned bank said.

The central bank intervened as the rupee came under pressure from the surging dollar index. "I think the central bank sold somewhere around $1 billion today," a dealer with a broking firm said.

The dollar index has been rising sharply since Donald Trump won the US presidential election. The index, which measures the strength of the greenback against a basket of six major currencies, touched its highest point in over a year at 107.03 Thursday. It was at 106.89 at 1530 IST, against 106.48 Wednesday and 105.96 Tuesday. The index has surged on the growing view that US inflation may remain higher with Trump's expected policy of tax cuts and higher tariffs. This could warrant the US Federal Reserve not being aggressive with its rate cuts.

Apart from a sharp rise in the dollar index, the rupee also came under pressure as overseas investors continued to pull money out from domestic equities, dealers said. While the fall in the stock market was less steep than on Wednesday, both the Nifty 50 and BSE Sensex closed 0.1% lower Thursday. The rupee has been under extreme pressure from foreign fund outflows from the Indian stock market after Trump's victory, dealers said. So far in November, foreign investors have pulled out almost $2 billion from the stock market.

The rupee also came under pressure from importers' demand for the US currency, dealers said. They said importers and other market participants purchased dollars in anticipation that the rupee would fall further. "We were thinking the rupee may fall below 84.50 a dollar this week, but the central bank's action has kept it (rupee) at this level," the first dealer with a state-owned bank quoted earlier said.

Defending the central bank's intervention in the foreign exchange market, RBI Governor Shaktikanta Das Thursday said the intervention is "well articulated" and "consistent". He was speaking at CNBC-TV18's Global Leadership Summit in Mumbai. He said the central bank's intervention is to anchor market expectations and not to target a level.

Apart from the RBI's dollar sales, the rupee found support from a narrowing trade deficit in India in October, dealers said. The deficit narrowed to $27.14 billion last month from $30.43 billion a year ago.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended higher Thursday as US CPI inflation for October was on expected lines, strengthening the view that the US Federal Reserve will go for another 25-basis-point rate cut in December, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

While the forward premium rose across tenors Thursday, dealers were not hopeful that the rise in premiums would be sustained. They said the one-year dollar/rupee forward premium will remain lower on the expectation that the US may not go for aggressive rate cuts. Further, dealers said some banks sold dollars for forward delivery, noting a relatively higher forward premium.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 181.10 paise, against 175.51 paise Wednesday. On an annualised basis, the premium was 2.15%, up from Wednesday's close of 2.07%.

OUTLOOK

The market will remain closed Friday and Saturday. It is closed Friday for Guru Nanak Jayanti. On Monday, the rupee will take cues from movement in the dollar index, dealers said. They said the local unit will also take cues from any sharp movement in crude oil prices over the weekend.

Dealers expect overseas investors to keep pulling out their money from Indian equities in the coming days, keeping the Indian currency under pressure. Dealers also expect banks to continue buying dollars on behalf of importers, anticipating a further fall in the rupee. However, dealers also expect banks to continue to sell dollars on behalf of the RBI to prevent a sharp fall in the local unit and to curb sudden volatility in the market.

Traders will assess speeches by several Fed policymakers, including Chair Jerome Powell, who is set to speak late Thursday, to get more cues on the likely rate-cut trajectory of the US central bank. During the day, the rupee is seen in a range of 84.30-84.50 a dollar, with strong technical support pegged at 84.50.

India Rupee - World FX: Dlr index hits fresh 1-year high; yen near 4-month low

NEW DELHI – The dollar index touched a fresh over one-year high during European trade as investors anticipate that US president-elect Donald Trump's proposed policies of lower taxes and higher tariffs may fuel inflation and potentially slow the Federal Reserve's rate cut cycle in the long term. The dollar index has surged over 3% since Trump won the US elections. 

Data released on Wednesday showed that the US CPI rose 0.2% on month for the fourth straight month, in line with expectations of economists polled by Reuters. In the 12 months through October, the CPI advanced 2.6%, also matching forecasts, after climbing 2.4% in September. Now, traders are pricing in an 82.5% probability of the Fed cutting rates by 25 bps at its December meeting, up from 70% a day ago, while they see a 17.5% chance of the central bank maintaining status quo, according to CME FedWatch tool. 

At 1520 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 106.85, compared to its previous close of 106.48 on Wednesday and 105.96 on Tuesday. Investors now await Fed Chair Jerome Powell's speech and the US October producers price index, later in the day, for more cues on the US central bank's rate cut cycle. 

The Japanese yen was down 0.3% against the dollar, falling to a near four-month low. Takeshi Shina, the country's shadow finance minister from the opposition party, said on Thursday that the Bank of Japan should raise interest rates at least to 1% to roll back an "abnormally" huge stimulus that is causing unwelcome falls in the yen, reports said. 

The euro and pound sterling were down 0.2% and 0.3%, respectively, against the dollar. Investors await Eurozone Oct-Dec flash GDP estimate later in the day. Bank of England Governor Andrew Bailey and the European Central Bank President Christine Lagarde are also scheduled to speak later in the day. 

The Australian dollar was down 0.1% against the US unit after the country's unemployment rate remained unchanged at 4.1% for the third consecutive month in October, in line with expectations, data showed on Thursday. (Pratiksha) 

India Rupee: Premium up as Fed Dec rate cut view strengthens after US CPI

MUMBAI – The premium on the one-year dollar/rupee forward contract rose Thursday as US CPI inflation for October was on expected lines, strengthening the view that the US Federal Reserve will go for another 25-basis-point rate cut in December, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

"It was up today (Thursday) after rate cut expectations (by the Fed) rose, but we don't see it rising sustainably," a dealer with a state-owned bank said. After the release of the US CPI data, the odds of a 25 bps rate cut by the Fed in December rose to 83% from about 59% seen before the release of the data. Consumer prices in the US rose 0.2% on month in October, with the core CPI rising 0.3% on month. Annually, the headline inflation advanced 2.6%, with core CPI having risen 3.3%.

While the forward premium rose across tenors Thursday, dealers were not hopeful that the rise in premiums would sustain. They said the one-year dollar/rupee forward premium will remain relatively lower on the expectation that the US may not go for aggressive rate cuts going ahead. Before rising on Thursday, the premium on the one-year dollar/rupee forward contract had fallen after Donald Trump won the US Presidential elections, as expectations rose that the interest rate differential between the US and India may not widen as much as previously thought, dealers said.

Further, dealers said some banks sold dollars for forward delivery, noting a relatively higher forward premium. So far on Thursday, the forward premium rose to touch a high of 2.15% on an annualised basis, before falling slightly. Dealers expected the dollar/rupee forward premium to remain between 2.00% and 2.15%, at least till the upcoming Fed policy meeting.

At 1402 IST, the premium on the one-year exact-period dollar/rupee forward contract was 181.24 paise, against 175.51 paise Wednesday. On an annualised basis, the premium was 2.15%, up from Wednesday's close of 2.07%. (Sourabh Kumar)

India Rupee: In tight band; RBI's persistent dlr sales nullify FPI outflows

NEW DELHI – The rupee moved in a very tight range against the dollar as the Reserve Bank's tight grip on the currency nullified the impact of foreign outflows from local equities and a strengthening dollar, dealers said. The rupee has moved in a range of barely 2 paise so far on Thursday. 

Dealers said the central bank has been aggressively selling dollars to prevent the Indian unit from falling sharply and curb excessive volatility. The rupee, however, touched its lifetime low of 84.4100 a dollar, previously hit on Wednesday. 

"They are intervening on a daily basis. They are trying to cushion the blow. We need to see how long this Trump trade will continue," said Ritesh Bhansali, director, Mecklai Financial Services. "A lot of market movement has already happened. Probably 84.50-84.60 will be difficult to breach. Till the time something dramatic happens, I don't see it breaching easily."

Foreign banks continued to buy dollars on behalf of foreign portfolio investors, pulling out funds from domestic equities, which weighed on the Indian unit, dealers said. So far in November, FPIs have withdrawn $1.99 billion from Indian equities. "FPI outflows are there almost everyday now. That activity may continue for more days, I think. The Trump euphoria needs to settle down first," a dealer at a state-owned bank said. 

Dealers said most exporters are refraining from selling dollars and keeping to the sidelines as they expect the rupee to depreciate further to 84.50 a dollar in the coming days.  

Meanwhile, the dollar index hit a fresh over one-year high due to expectations that US president-elect Donald Trump's proposed policies of lower taxes and higher tariffs will stoke inflation and reduce the US Federal Reserve's scope to ease interest rates. This also weighed on the Indian currency, according to dealers.

At 1330 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 106.63, compared to its previous close of 106.48 on Wednesday and 105.96 on Tuesday. The index surged to 106.78 during the day, its highest level since Nov. 1, 2023. 

Dealers expect the RBI to continue intervening through dollar sales in the spot market for the rest of the day, and keep the rupee in a tight range of 84.35-84.45 against the dollar. They see strong immediate technical support for the Indian unit at 84.45 a dollar. (Pratiksha) 

India Rupee: Steady as likely dlr sales by RBI offset surge in dollar index

NEW DELHI – The rupee was largely steady against the dollar on Thursday as the impact of a strong dollar index was counteracted by dollar sales by banks, likely on behalf of the Reserve Bank of India, both in the offshore non-deliverable forwards and domestic spot market, dealers said. 

"Seems like the 84.50 (a dollar) level will not be hit easily. It may take some time. They (RBI) are letting it (rupee) move very slowly," said a dealer at a private bank. The rupee was trading around 84.44 a dollar in the offshore NDF market 15 minutes before the domestic spot market opened at 0900 IST, when it opened at 84.4000 a dollar, as the central bank likely intervened through dollar sales in the segment. Further, the central bank likely sold the greenback at around 84.40 a dollar in the spot market as well, which supported the Indian unit, dealers said. 

The dollar index soared to an over one-year high due to expectations that US president-elect Donald Trump's proposed policies of lower taxes and higher tariffs may stoke inflation and reduce the US Federal Reserve's scope to ease interest rates. The dollar index has jumped over 3% since Trump's win in the US elections. 

Meanwhile, data released on Wednesday showed that the US consumer price index rose 0.2% for the fourth straight month, in line with expectations of economists polled by Reuters. In the 12 months through October, the CPI advanced 2.6%, also matching forecasts, after climbing 2.4% in September.

Now, traders are pricing in an 82.3% probability of the Fed cutting rates by 25 bps at its December meeting, up from 70% a day ago, while they see a 17.2% chance of the central bank maintaining status quo, according to CME FedWatch tool. At 0935 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 106.67, compared to its previous close of 106.48 on Wednesday and 105.96 on Tuesday.  

A fall in other Asian currencies, tracking a surge in the dollar index, also weighed on the Indian unit, dealers said. Asian currencies fell 0.1-0.9% against the dollar, with the Malaysian ringgit being the worst hit. 

Dealers expect the RBI to continue intervening through dollar sales in the spot market for the rest of the day, and keep the rupee in a tight range of 84.35-84.45 against the dollar. They see strong immediate technical support for the Indian unit at 84.45 a dollar. (Pratiksha) 

India Rupee - Asia FX: Most dn, dlr at 1-yr high on Trump's likely policies

MUMBAI - Most Asian currencies were down against the dollar Thursday as the greenback rose to a one-year high on expectations of inflationary tariffs by US President-elect Donald Trump. The dollar began surging after Republican candidate Trump won the US presidential elections last week.

Trump's victory has led to speculation that he will raise tariffs on major trading partners and lower corporate taxes. His Republican Party is expected to hold the majority in both chambers of Congress when he assumes office in January, Edison Research projected on Wednesday. 

Investors now await Fed Chair Jerome Powell's speech on Thursday. At 0913 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 106.63, compared to its previous close of 106.48 on Wednesday and 105.96 on Tuesday.

The Indonesian rupiah led the losses and was down 0.6% against the dollar. Indonesia's economic expansion and portfolio investments may be adversely affected if the proposed policies of Trump interfere with global trade and complicate efforts to reduce interest rates, according to statements made by bankers from state-owned financial institutions during a parliamentary hearing on Wednesday, Reuters reported.

The Taiwan dollar was down 0.3% against the dollar. Taiwan's central bank issued a cautionary statement on Wednesday regarding the potential risks associated with the trade policies anticipated from the incoming administration in the US. In a report prepared for parliament, prior to Governor Yang Chin-long's scheduled inquiries from legislators on Thursday, the central bank indicated that if Trump implements his proposed policy measures, it could lead to heightened trade tensions globally and hinder competition within the technology sector.

The Malaysian ringgit was down 0.6% against the dollar ahead of the release of the region's GDP data on Friday. The Thai Baht was down 0.3% against the dollar whereas the Philippines peso was down 0.1%. (Kabir Sharma)

India Rupee: Expected range for rupee - Nov 14

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: 

(Kabir Sharma)

End

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

Edited by Rajeev Pai

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