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Informist, Thursday, Jan. 9, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended at a record closing low due to a strengthening dollar index, coupled with importers' purchases of the greenback, dealers said. A few banks also purchased dollars on behalf of overseas investors as they exited the domestic equities market, dealers said.

"The rupee was almost set to test 86 (a dollar) today (Thursday), however some constant selling by PSUs (public sector unit banks) saved it. But, we are not far from breaching the psychologically crucial level (86 per dollar)," a dealer at a private bank said. Some banks sold dollars, likely on behalf of the Reserve Bank of India, preventing the Indian currency from falling further, dealers said. 

After falling to a lifetime low of 85.9325 against the greenback, the local unit settled at a record closing low of 85.8475 a dollar, little changed from Wednesday's close of 85.8450. The rupee moved in a relatively wider range of about nine paise during the day.

The rupee opened lower at 85.9200 against the greenback and soon touched the lifetime low of 85.9325 against the dollar due to a strong dollar index. The dollar index strengthened after reports said that President-elect Donald Trump was mulling a national economic emergency to provide legal footing for a series of universal tariffs on allies and adversaries.

The minutes of the December Federal Open Market Committee meeting showed that policymakers agreed inflation was likely to continue slowing this year, but also saw an increasing risk that price pressures could remain sticky as they deal with the potential effect of Trump's policies. This gave a boost to the dollar index.

At 1530 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 109.13, compared to its previous close of 109.01 on Wednesday and 108.68 on Tuesday. The index rose to 109.38 on Wednesday, the highest in a week.

The rupee also came under pressure because banks purchased dollars immediately after opening to take advantage of the arbitrage opportunity with the non-deliverable forward rates, dealers said. "The pressure (of selling dollars) in the NDF is impacting the spot price (of rupee)," a dealer at a private bank said. 

Within an hour of opening the market, banks rushed to purchase the greenback on behalf of importers, who feared a further fall in the rupee, dealers said. "The rupee will likely breach 86 and 86.10 within this month easily, earlier than we thought," a dealer at a state-owned bank said. 

Banks also bought greenback on behalf of foreign portfolio investors who withdrew funds from the Indian stock market. Both the benchmark indices, the Nifty 50 and BSE Sensex, closed 0.7% each on Thursday.

However, the rupee managed to erase most losses, and touched the day's high of 85.8475 as banks actively sold the greenback, likely on behalf of the RBI, which prevented the rupee from inching toward the psychologically crucial level of 86 per dollar, dealers said. However, some dealers pointed out that the RBI's intervention in the spot market was not as aggressive as earlier. 

"The 86 (a dollar) is a figure that the market has already factored in, but it does not mean that there won't be volatility. It (the volatility) is largely caused by tensions about Trump and his policies. Once he settles in office, the market will stabilise too," a dealer at a private bank said.

FORWARDS 

The premium on the one-year dollar/rupee forward contract settled steady as a few banks sold dollars for forward delivery, offsetting importers' forward dollar purchases, dealers said. Early in the day, the premium had risen to 2.75%, the highest since Oct. 13, 2022.

Dollar/rupee forward premiums have been on the rise in recent weeks on dollar purchases by importers for forward delivery, and as banks took advantage of the arbitrage in the offshore non-deliverable forward and onshore forward levels, dealers said. Importers became active in the forward market, hedging their foreign exchange exposures amid a continuous and sharp fall in the domestic currency.

While some market participants expect the forward premium to continue on an upward trajectory, a few others believe the rise and its pace may be limited. 

At 1530 IST, the premium on the one-year forward contract was 2.69%, on an annualised basis, against 2.69% on Wednesday. In absolute terms, it closed at 230.89 against Wednesday's close of 231.86.

OUTLOOK 

On Friday, the rupee will take cues from the movement in the dollar index and the Chinese yuan, dealers said. Market participants are now awaiting the non-farm payrolls data due Friday to get more insight on the stability and resilience of the US labour market and the interest rate outlook. 

"The NFP (non-farm payrolls) data will be very crucial in determining the rupee's speed toward hitting the big figure (86 a dollar). If the data comes strong, the rupee is likely to break 86.00 a dollar on Monday if not tomorrow (Friday)," a dealer at a state-owned bank said. 

Dealers expect banks to continue purchasing the greenback on behalf of importers, keeping the rupee under pressure. However, they expect the RBI to continue intervening through dollar sales to prevent the rupee from falling sharply and curb volatility. 

During the day, the rupee is seen in a range of 85.80-86.00 a dollar, with strong technical support pegged at 85.95 a dollar.

India Rupee - World FX: Pound sterling falls on worries over economy

MUMBAI – The pound sterling was down 0.7% against the greenback on concerns around the British economy. The yield on 10-year government bonds has surged. Reports said there could be a further rise in taxes or cut government spending in the UK. A strengthening dollar and growing uncertainties about Donald Trump's economic policies also downward pressure on sterling.

"No one should be under any doubt that meeting the fiscal rules is non-negotiable, and the government will have an iron grip on the public finances," a spokesperson from the UK finance ministry said on Wednesday, as reported by media outlets.

The dollar index rose to a near one-week high on Wednesday after reports said that Trump is considering a national economic emergency to provide legal footing for a series of universal tariffs on allies and adversaries. The dollar index also rose as investors assessed the minutes of the Federal Open Market Committee's December meeting, released late Wednesday. The minutes showed that Fed policymakers see the risk of price pressure rising from Trump's policies.

At 1601 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 109.12, compared to its previous close of 109.01 on Wednesday and 108.68 on Tuesday. The index rose to 109.38 on Wednesday, its highest level since Jan. 2. Market participants are now waiting for the US non-farm payrolls data due Friday. The Swiss franc was down 0.2%.

The Australian dollar was down 0.4% against the US currency, after data showed weak inflation in China due to dampened demand. Weak demand from China negatively affects Australia's exports, as the bulk of its exports are to China. However, losses in the currencies were limited after data showed a more-than-expected trade surplus of $4.39 billion in November. Tracking the fall in the Australian currency, the New Zealand dollar was also down 0.3%, due to close economic ties between the two nations.

The euro was down 0.1% against the greenback after data showed a less-than-expected rise in the eurozone's retail sales. Retail sales rose 0.1% on month in November, slower than the expected 0.3%. Sales rose 1.2% on year in November, down from a revised figure of 2.1% in October.

The Japanese yen was up 0.2% against the dollar after the Bank of Japan said it saw progress in wage gains, providing support to the view that the Japanese central bank could hike rates. However, the central bank did not give any clear hint on whether the policymakers will deliver an interest rate hike in January or March. The Bank of Japan is scheduled to meet for its first monetary policy meeting of the year in January.  (Gowri Lakshmi)

India Rupee: Premium off highs on banks' forward dlr sales at higher levels

NEW DELHI – The premium on the one-year dollar/rupee forward contract came off its earlier high as a few banks sold dollars for forward delivery, dealers said. Early in the day, the premium had risen to 2.75%, the highest since Oct. 13, 2022.

"There is NDF arbitrage that happened today, and then importers are paying," a dealer with a state-owned bank said. "So these factors are driving premiums higher, but at such a high level people are bound to receive, and that is what we saw today (Thursday)."

After hitting an over a two-year-high, the premium on the one-year forward contract was 2.70% at 1323 IST, on an annualised basis, against 2.69% on Wednesday. At the same time, it was 231.59 against Wednesday's close of 231.86. 

Dollar/rupee forward premiums have been on the rise in recent weeks on dollar purchases by importers for forward delivery, and as banks took advantage of the arbitrage in the offshore non-deliverable forward and onshore forward levels, dealers said. Importers became active in the forward market, hedging their foreign exchange exposures amid a continuous and sharp fall in the domestic currency.

Forward premiums also received a boost from a deficit in the banking system's liquidity. On Wednesday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--rose to INR 1.82 trillion from INR 1.44 trillion on Tuesday.

While some market participants expect the forward premium to continue on an upward trajectory, a few others believe the rise and its pace may be limited. "I do not expect sharp high movement in premiums now because of talks in the market about a February rate cut by the Reserve Bank of India," a dealer with another state-owned bank said.  (Sourabh Kumar)

India Rupee: Remains down; RBI's likely persistent dlr sales limit losses

MUMBAI – The rupee remained lower against the dollar as banks bought the dollars on behalf of foreign portfolio investors and importers. However, losses in the currency were limited as state-owned banks persistently sold the greenback, likely on behalf of the Reserve Bank of India, dealers said.

"Nats (nationalised banks) have been selling (dollars) continuously since this morning. That's what is likely to have bought the rupee back from the lows. There is some aggressive selling (of dollars) going on," a dealer at a state-owned bank said. "But we are close to the big figure (86 per dollar) sooner than we thought. Tomorrow's (Friday) NFP (US non-farm payrolls) data could bring it closer to the level." 

However, some dealers pointed out that the RBI's intervention in the spot market did not seem to be intended towards protecting any particular level of the rupee, as seemed the case earlier. "RBI has become passive (in intervention). Whatever sales (of dollars) they did earlier to protect levels has not been sustainable so they have almost stopped supporting any one level (of the rupee)," a dealer at a private bank said.

Dealers said banks' dollar purchases on behalf of foreign portfolio investors, looking to pull out funds from domestic equities, weighed on the domestic currency. At 1340 IST, the benchmark indices, the Nifty 50 and BSE Sensex, were down 0.7% each. So far this month, FPIs have net withdrawn $971.4 million from the Indian market. Some banks also bought dollars on behalf of importers, fearing further depreciation in the Indian unit, which too weighed on the Indian unit, as per dealers. The Indian unit hit a record low of 85.9325 a dollar earlier in the day.

The rupee was also weighed down by strength in the dollar index, which rose to a near-one-week high on Wednesday after the minutes of the December Federal Open Market Committee meeting showed that policymakers view the risk of price pressure and heightened uncertainty regarding President-elect Donald Trump's policies once he assumes office on Jan. 20. At 1340 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 109.31, compared with its previous close of 109.01 on Wednesday and 108.68 on Tuesday. The index rose to 109.38 on Wednesday, its highest level since Jan. 2.

Dealers expect the central bank to continue intervening through dollar sales to prevent the rupee from inching toward the psychologically-crucial level of 86-per-dollar and prevent excessive market volatility. For the rest of the day, the rupee is likely to move in a range of 85.80-86.00 against the dollar. Dealers see immediate technical support for the Indian unit at 85.95 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Jan 9

NEW DELHI – At 1212 IST, the rupee was at 85.8800 per dollar. At 0900 IST, the rupee was at 85.9200 a dollar against its previous close of 85.8450. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar, Pratiksha and Gowri Lakshmi)

India Rupee: At record low on strong dlr index; RBI dlr sales limit fall

MUMBAI – The rupee fell to a fresh lifetime low of 85.9300 against the dollar as the dollar index strengthened to a one-week high on Wednesday and continued to hover around the same level, dealers said. However, banks' dollar sales, likely for the Reserve Bank of India, prevented the rupee from falling further, they said. 

The dollar index rose to its highest level in nearly a week on Wednesday after reports that US president-elect Donald Trump was considering the use of a national economic emergency to provide legal footing for a series of universal tariffs on allies and adversaries. At 1010 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 109.06, compared to its previous close of 109.01 on Wednesday and 108.68 on Tuesday. The index rose to 109.38 on Wednesday, its highest level since Jan. 2.

The rupee also came under pressure as banks rushed to purchase the greenback on behalf of importers, who are wary of further fall in the currency, dealers said. Banks also bought the greenback on behalf of foreign portfolio investors, who continue to exit the Indian stock market amid a strong dollar index and rising global uncertainties, which exerted further pressure on the rupee. So far this month, FPIs have net withdrawn $971.4 million from the Indian market.

However, some banks stepped in through dollar sales, likely on behalf of the Reserve Bank of India, which prevented the rupee from falling further and curbed excessive market volatility. "The panic around Trump and the strength in the dollar index have shot up. The RBI is actively selling (dollars). We will likely hit 86 per dollar this week. Today, we may be just 2-3 paise short of breaking the big figure," a dealer at a private bank said. "The RBI will let the rupee depreciate only gradually."

During the day, the rupee is likely to move in a range of 85.80-86.00 against the dollar. Dealers see immediate technical support for the Indian unit at 85.95 a dollar.  (Gowri Lakshmi) 

India Rupee - Asia FX: Most fall as dollar index hits near 1-week high

MUMBAI – Most Asian currencies traded lower against the dollar as the dollar index hit a one-week high on Wednesday after reports that US president-elect Donald Trump was considering the use of a national economic emergency programme to provide legal footing for a series of universal tariffs on allies and adversaries. 

The dollar index also got a boost after minutes of the US Federal Reserve's December policy meeting showed officials of the central bank see an increasing risk of price pressures from Trump's policies.

At 1000 IST, the dollar index, which measures the strength of the dollar against six major currencies, was at 108.98, compared to its previous close of 109.01 on Wednesday and 108.68 on Tuesday. The index rose to 109.38 on Wednesday, its highest level since Jan. 2. The Philippine peso was down 0.3% against the US unit and the Taiwan dollar was down 0.1%.

The Indonesian rupiah was down 0.2% against the dollar. Bank Indonesia on Thursday reported that foreign reserves rose to a fresh record high of $155.7 billion in December, strengthening the central bank's fight against continued dollar strengthening and stabilising the rupiah. 

The Malaysian ringgit was flat against the greenback. However, on Wednesday, the country's Second Finance Minister Amir Hamzah Azizan said the country's growth is set to sustain at a constant pace and exceed 5% in the current calendar year due to strong foreign direct investment and domestic support to curb global risks.

The Chinese yuan was flat against the dollar. Data on Thursday showed China's consumer inflation slowed amid dampened demand in December, which weighed on the yuan. The consumer price index rose 0.1% from a year earlier, compared with a 0.2% gain the previous month. The median forecast of economists surveyed by Bloomberg was 0.1%.

The Thai baht was flat against the greenback. Reports said the Bank of Thailand has refused demands to take measures to boost its sluggish economy as the central bank is in a comfortable position with a subdued inflation outlook, and wants to focus on monetary policy to ensure financial stability. (Gowri Lakshmi)

India Rupee: Expected range for rupee - Jan 9

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 and Pratiksha)

End

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

Edited by Tanima Banerjee and Saji George Titus

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