India Rupee Review
At record closing low on dollar buys by FPIs, importers
This story was originally published at 18:58 IST on 19 November 2024
Register to read our real-time news.Informist, Tuesday, Nov. 19, 2024
By Gowri Lakshmi
MUMBAI – The rupee ended at a record closing low against the dollar on Tuesday as banks bought the greenback on behalf of foreign portfolio investors and importers, dealers said. However, the Reserve Bank of India's active dollar sales intervention limited losses in the local currency, they said.
The rupee settled at 84.4150 a dollar, after falling to a lifetime low of 84.4200 in the last leg of the trade. The rupee had closed at 84.3850 a dollar on Monday. The rupee moved in a tight range of 5 paise during the day.
"We expected the rupee to fall till 84.42 (a dollar). We were anticipating it for a week. It was sure they (the RBI) would only let it fall gradually. They (the RBI) will now be protecting 84.45 strongly," a dealer at a private bank said.
The rupee opened steady at 84.3875 a dollar. However, it came under pressure as banks stepped in to buy dollars on behalf of oil marketing companies, dealers said. Oil marketing companies purchased dollars, noting a 2% rise in oil prices on Monday, as they were wary that crude prices may surge in the coming days amid a potential escalation in the Russia-Ukraine war, dealers said.
The latest reports said that Russian President Vladimir Putin has approved an updated nuclear doctrine, where Russia could consider using nuclear weapons, in response to the decision by US President Joe Biden to allow Ukraine to fire American long-range missiles deep into Russia. At 1530 IST, the January Brent Crude contract on the Intercontinental Exchange was $72.86 per barrel against $73.30 a barrel on Monday. Crude prices rose as much as $73.53 per barrel during the day.
The rupee was also weighed by dollar purchases by other importers, dealers said. Importers bought the greenback, in fear that the rupee may depreciate more going ahead, they said. "It was the panic buying (of dollars) again, but importers buying (dollars) is an everyday norm now," a dealer at a private bank said.
Some banks also purchased dollars on behalf of foreign portfolio investors, looking to withdraw funds from the domestic equities market, dealers said. So far in November, FPIs have withdrawn $2.3 billion from domestic equities.
However, state-owned banks stepped in with dollar sales, likely on behalf of the RBI, which prevented the rupee from falling sharply and curbed sudden volatility, dealers said.
"A slow and steady up move is what RBI wants for the (dollar/rupee) pair. It has sold $30 billion from its reserves to ensure that the rupee stays well within the range and weakens gradually. Today FPI seemed to be the buyers (of dollars) while RBI continued to sell (dollars)," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
The rupee also found some support from a moderation in the dollar index after key economic data from the US last week drove the dollar index to over a year's high of 107.06. However, the dollar index found some strength later during the day on safe haven investment after Russian President Vladimir Putin updated the country's nuclear doctrine on Tuesday amid escalating tensions with the US over Ukraine. At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 106.46, against its previous close of 106.23 and 106.67 on Friday.
Market participants are now awaiting news on the appointment of the next RBI governor with incumbent Shaktikanta Das' term ending Dec. 10. News reports suggest that Das is likely to get an extension for at least a year and the announcement is likely later this week, after the Maharashtra elections due Wednesday.
If Das continues as the RBI governor for one more year, RBI's aggressive forex intervention should still continue for the time being, implying dollar/rupee volatility should still be capped, MUFG Bank said in a report.
| AT 1530 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 84.4150 | 84.3875 | 84.3875 | 84.4200 | 84.3850 |
| 1-year dlr/rupee fwd (paise) | 182.86 | 181.53 | 183.20 | 179.86 | 180.94 |
FORWARDS
The premium on the one-year dollar/rupee forward contract ended higher, tracking a fall in the benchmark 10-year US Treasury yield, dealers said. The US Treasury yield eased to 4.37% on Tuesday after closing at 4.42% on Monday. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
"Premiums have consolidated a bit and are now reacting to US yields. There is still uncertainty over the rate cut trajectory (of the Fed). We may see the current levels for some time," a dealer with a state-owned bank said.
With chances of an aggressive US Federal Reserve interest rate cut cycle decreasing after strong economic data and comments by Fed Chair Jerome Powell last week, the interest rate differential between India and the US may not widen as much as expected earlier, weighing on the premiums, dealers said. Investors are now waiting for the release of US weekly unemployment data and purchasing managers indices, due later this week, dealers said. Currently, the odds of the Fed going for a 25-basis-point rate cut in December were 61.6%, down from 65.3% seen a week ago, according to CME FedWatch Tool.
Volumes in the market were relatively lower on Tuesday as market participants waited for economic data from the US and as the markets would be shut on Wednesday due to the Maharashtra assembly elections.
At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 182.86 paise, against 180.94 paise Monday. On an annualised basis, the premium was 2.17%, against Monday's close of 2.14%.
OUTLOOK
On Wednesday, the currency market will be shut on account of Maharashtra state assembly elections. On Thursday, the rupee will take cues from movement in the dollar index and crude oil prices. Traders will also closely assess developments in the Russia-Ukraine war.
Dealers expect FPIs to keep pulling out money from Indian equities in the coming days, keeping the Indian currency under pressure. They also expect banks to continue buying dollars on behalf of importers, anticipating a further fall in the rupee.
However, the domestic unit will continue to get support from dollar sales by the RBI. The RBI's intervention is expected to keep the Indian unit from falling sharply and avert excessive volatility.
During the day, the rupee is seen in a range of 84.35-84.45 a dollar, with strong technical support pegged at 84.45.
India Rupee - World FX: Yen up 0.6% after Russia updates nuclear doctrine
| AT 1630 IST | HIGH | LOW | PREVIOUS | |
| GBP/USD | 1.2626 | 1.2689 | 1.2613 | 1.2677 |
| EUR/USD | 1.0545 | 1.0603 | 1.0524 | 1.0597 |
| NZD/USD | 0.5881 | 0.5901 | 0.5875 | 0.5893 |
| AUD/USD | 0.6489 | 0.6524 | 0.6484 | 0.6507 |
| USD/JPY | 153.7040 | 154.7350 | 153.2850 | 154.6600 |
| USD/CAD | 1.4030 | 1.4037 | 1.4004 | 1.4013 |
| EUR/JPY | 162.0780 | 164.0081 | 161.4960 | 163.9000 |
| CHF/USD | 1.1310 | 1.1333 | 1.1304 | 1.1319 |
| EUR/CHF | 0.9318 | 0.9375 | 0.9305 | 0.9358 |
MUMBAI – The yen surged 0.6% against the dollar as investors flocked to the safe haven unit after Russian President Vladimir Putin updated the country's nuclear doctrine on Tuesday amid escalating tensions with the US over Ukraine. Putin said Russia could consider using nuclear weapons if it was subject to a conventional missile assault supported by nuclear power, after the US allowed Ukraine to fire American-made long-range missiles deep into Russia.
The Japanese yen was also boosted by comments from Japanese Finance Minister Katsunobu Kato on Tuesday that the government would "respond appropriately to excessive moves" in the yen exchange rate. The dollar index also edged slightly higher owing to safe haven bets. At 1630 IST, the dollar index, which measures the strength of the dollar against six major currencies, was 106.43, against its previous close of 106.23 and 106.67 on Friday. Market participants are now waiting for the speech by Federal Reserve Bank of Kansas City President Jeffery Schmid later in the day.
The euro fell 0.4% against the greenback after European Central Bank Governing Council member Gabriel Makhlouf said that significant evidence is required for a 50 basis point rate cut in December. "I believe in a cautious and prudent approach, believe the policy is working," he added.
The Australian dollar was down 0.3% against the greenback. The minutes of the Reserve Bank of Australia's latest monetary policy meeting showed that the central bank does not have any immediate reason to change interest rates. "Returning inflation to target remains the board’s highest priority, and it will do what is necessary to achieve that outcome," the minutes said. Tracking losses in the Australian currency, the New Zealand dollar was down 0.3% against the US unit.
The pound sterling fell 0.2% against the US currency. Bank of England Governor Andrew Bailey and Monetary Policy Committee members will respond to questions from the UK Treasury Select Committee later Tuesday. (Gowri Lakshmi)
India Rupee: In thin band amid dull trade; RBI's likely dlr sales limit fall
| AT 1420 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 84.4075 | 84.3875 | 84.3875 | 84.4100 | 84.3850 |
MUMBAI – The rupee remained in a thin band against the dollar Tuesday amid dull trade as dollar purchases by banks on behalf of importers and foreign portfolio investors were offset by the Reserve Bank of India's persistent dollar sales, dealers said. The rupee has moved in a range of just 4 paise throughout the day.
Banks bought dollars on behalf of oil marketing companies and other importers, in anticipation of a further fall in the rupee in the near term, which weighed on the local unit, dealers said. Further, some foreign banks bought dollars on behalf of FPIs looking to pull out money from domestic equities, which further exerted pressure on the Indian unit, they said.
While the rupee touched its lifetime low of 84.4100 a dollar earlier in the day, previously hit on Thursday, the central bank actively intervened through dollar sales, which prevented the currency from falling further, dealers said.
Meanwhile, dealers said volume in the currency market was lower than usual as market participants remained on the sidelines owing to lack of fresh cues. "The rupee is going to remain the same for the week, we no longer have any data coming up to anticipate or assess," a dealer at a private bank said.
A rise in domestic equities also supported the rupee, dealers said. At 1420 IST, both the benchmark indices were up 1.1%. Dealers expect some banks to sell the dollars on behalf of overseas investors looking to invest in the initial public offering of domestic companies. NTPC Green Energy Ltd.'s IPO opened for subscription on Tuesday and will close on Friday.
Dealers expect the RBI to continue intervening through dollar sales in the spot market for the rest of the day. The rupee is likely to move in a range of 84.35-84.45 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.45 a dollar. (Gowri Lakshmi)
India Rupee: Premium up as US yld falls in European trade; US econ data eyed
| AT 1420 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 84.4050 | 84.3875 | 84.3875 | 84.4100 | 84.3850 |
| 1-year dlr/rupee fwd (paise) | 183.03 | 181.53 | 183.20 | 179.86 | 180.94 |
MUMBAI – The premium on the one-year dollar/rupee forward contract rose Tuesday, tracking a fall in the benchmark 10-year US Treasury yield, dealers said. The US Treasury yield eased to 4.37% in European trade Tuesday after closing at 4.42% on Monday.
"There has been paying, and traders are reacting to just the movement in US yield," a dealer with a private bank said. The one-year dollar/rupee forward premium opened steady Tuesday, before a few banks purchased dollars for forward delivery, which lifted the forward premium higher, dealers said. Such banks purchased forward dollars, tracking a fall in the US Treasury yield.
Dealers said most market participants were unsure of the movement in the dollar/rupee forward premium due to the prevailing uncertainty around the quantum of rate cuts at the Fed's upcoming policy meetings. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
"One day the rate cut probability goes higher and the other day only it comes down, so there is no sustained view on how much the Fed is going to cut rates," a dealer with a state-owned bank said. "Therefore, it is very difficult to predict exactly where the premiums will go."
While the one-year dollar/rupee forward premium rose Tuesday, dealers said the rise is expected to be capped. They said it was because of the reduced chances of aggressive interest rate cuts by the US Federal Reserve, after strong economic data from the US last week. Investors are now waiting for the release of weekly unemployment data and purchasing managers indices, all due later this week, dealers said. As of Tuesday, the odds of the Fed going for a 25-basis-point rate cut were 58.4%, down from 65.3% seen a week ago.
The overall volumes in the forward market were relatively lower on Tuesday as market participants waited for fresh economic data from the US. The volumes were also lower as markets were closed on Wednesday due to the Maharashtra assembly election.
At 1412 IST, the premium on the one-year exact-period dollar/rupee forward contract was 183.03 paise, against 180.94 paise Monday. On an annualised basis, the premium was 2.17%, up from Monday's close of 2.14%. (Sourabh Kumar)
India Rupee: Technical Levels for rupee - Nov 19
MUMBAI – At 0900 IST, the rupee was at 84.3875 a dollar, against its previous close of 84.3850. At 1113 IST, the rupee was at 84.4050 per dollar. The following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:
| Participants | S2 | S1 | R1 | R2 |
| State-owned bank | 84.45 | 84.42 | 84.38 | 84.35 |
| Private bank | 84.45 | 84.42 | 84.37 | 84.35 |
| Brokerage firm | 84.45 | 84.43 | 84.33 | 84.30 |
(Sourabh Kumar and Pratiksha)
India Rupee:Steady; RBI's likely dlr sales offset buys by oil cos, importers
| AT 0922 IST | AT 0900 IST | HIGH | LOW | PREVIOUS(AT 1530 IST) | |
| Spot rupee per $1 | 84.3950 | 84.3875 | 84.3875 | 84.4000 | 84.3850 |
MUMBAI – The rupee opened steady against the dollar Tuesday as banks stepped in with dollar sales, likely on behalf of the Reserve Bank of India, which offset the impact of banks' dollar buys for oil marketing companies and importers, dealers said. A fall in the dollar index also eased the downward pressure on the rupee, they said.
Dealers expect the rupee to rise slightly during the day, even though the local unit may remain in a narrow range. Banks bought dollars for oil marketing companies as crude oil prices were on the rise during Asian trade. Oil companies feared crude prices may rise further. Oil prices were up in anticipation of further escalation in the Russia-Ukraine war and production-side disruption in Norway. At 0928 IST, the January Brent crude contract on the Intercontinental Exchange was at $73.49 per barrel, against its close of $73.30 per barrel on Monday and $71.04 per barrel on Friday.
Banks also purchased the greenback on behalf of importers and corporates who were wary that the rupee may fall beyond its lifetime low of 84.41 a dollar, which weighed on the rupee, dealers said.
The downward pressure on the rupee eased as the dollar index fell slightly on Monday after investors and market participants were done assessing the latest economic data. The index began cooling after rising to over a year's high of 107.06 it hit last week. At 0935 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 106.18 compared to the close of 106.23 on Monday and 106.67 on Friday.
The rupee was also aided by foreign fund inflows, as banks sold dollars on behalf of overseas investors looking to invest in the initial public offering of domestic companies. NTPC Green Energy Ltd. opened for subscription on Tuesday and will close on Friday. However, dealers said that "inflows may be absorbed easily due to the buying pressure and dollar demand".
A rise in other Asian currencies also supported the rupee, dealers said. Asian currencies rose between 0.1-0.4%, with the Taiwan dollar being the best performer.
Dealers expect the RBI to continue intervening through dollar sales in the spot market for the rest of the day. The rupee is likely to move in a range of 84.35-84.45 against the dollar. Dealers see strong immediate technical support for the Indian unit at 84.45 a dollar. (Gowri Lakshmi)
India Rupee - Asia FX: Most up as dollar index eases; more US econ data eyed
MUMBAI – Most Asian currencies strengthened against the dollar in early trade due to a fall in the dollar index. Both the Taiwan dollar and the Indonesian rupiah led the gains, rising 0.2% each against the greenback.
The Indonesian rupiah fell ahead of the Bank Indonesia's interest rate decision on Wednesday. The Indonesian central bank is expected to keep the benchmark rate unchanged at 6.00%, as per a poll by Reuters. The same poll also suggested that a majority of the respondents believed the central bank may cut rates by 25 basis points in December.
The dollar index fell after hitting over a year's high of 107.06 last week. The US dollar eased as investors were done assessing last week's strong US economic data, which had driven the dollar index to an over one-year high Thursday. The index, which measures the strength of the greenback against a basket of six major currencies, was at 106.20 at 0819 IST against the previous day's 106.23 and Friday's 106.67.
Now market participants await the release of more economic data to assess the interest rate trajectory in the world's largest economy. Investors eyed the weekly unemployment report and flash purchasing managers' index from the US, both due later this week. As of early Tuesday, the odds of the US Federal Reserve cutting the benchmark rate at its next meeting in December were 58.7%, against 65.3% seen a week ago.
The South Korean won was up 0.2% against the dollar. A rise in its benchmark index, the Korea Composite Stock Price Index, which rose over 0.2%, supported the nation's currency. The Philippines peso and the Malaysian ringgit were up 0.1% and 0.2%, respectively, against the US unit. While most Asian currencies rose Tuesday, the Thai baht was on the decline, falling 0.2% against the US currency.
India Rupee: Expected range for rupee - Nov 19
MUMBAI – Following are the expected support and resistance levels for the rupee on Tuesday, as forecast by leading banks and brokerages in an Informist poll:
| PARTICIPANTS | SUPPORT | RESISTANCE |
| Private bank | 84.42 | 84.37 |
| Foreign bank | 84.45 | 84.30 |
| Brokerage firm | 84.43 | 84.37 |
| Brokerage firm | 84.44 | 84.35 |
| Brokerage firm | 84.50 | 84.40 |
(Sourabh Kumar and Pratiksha)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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