More Stories

Informist, Thursday, Jan. 16, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended sharply down against the dollar Thursday as banks persistently bought the greenback on behalf of oil marketing companies, including other importers, dealers said. However, some dollar sales, likely on behalf of the Reserve Bank of India, prevented the rupee from falling sharply and hitting new lows.

"Today the dollar/rupee movement has been on the upside since morning. It was just importers and mostly oil companies who had dollar demand because of the crude price levels," a dealer at a private bank said. 

After moving in a relatively wide range of 14 paise during the day, the rupee settled at 86.5500 a dollar, compared with its previous close of 86.3625 on Wednesday. Most Asian currencies also fell against the dollar, which weighed on the rupee. Asian currencies fell 0.1-0.3%, with the Indonesian rupiah being the worst performer.

The rupee opened lower against the dollar as oil prices rose to an over six-month high on Wednesday after data showed that US crude oil inventories fell last week to their lowest level since 2022. A fall in the world's largest crude producer's inventories and the announcement of new sanctions on Russian oil production and distribution triggered fears among traders, dealers said.

However, news of a ceasefire agreement between Israel and Gaza limited the rise in oil prices. Reports suggest that the ceasefire deal will come into effect only from Sunday, with attacks on Gaza still continuing.

At 1530 IST, the March Brent Crude contract on the Intercontinental Exchange was $82.26 per barrel, compared with its previous close of $81.88 per barrel on Wednesday and $79.92 per barrel on Tuesday. The Brent Crude price rose as high as $82.70 per barrel on Wednesday, the highest since July 2024. Market participants are of the view that if sanctions on Russia continue, crude prices may rise to $85 per barrel in the medium term. 

Further, dealers said the rupee came under pressure as banks also purchased the greenback on behalf of importers, who feared a further fall in the rupee. Importers also purchased the greenback to stock up their dollar holdings as the US markets will be shut on Monday, as President-elect Donald Trump will assume office. 

"Initially the market expected the rupee to breach 87 a dollar by next Monday. Seems like the central bank let it happen very fast and very soon, but Monday and the week after will be a little volatile before it can settle by next month," a dealer at a private bank said.

Further, the rupee was weighed down as the dollar index remained firm after falling on Wednesday. Dealers expect the dollar index to rise sharply next week in the run-up to Trump's inauguration. Data on Wednesday showed the core CPI rose a modest 0.2% on month, the smallest gain since July. It reinforced the view that the US Federal Reserve may opt for a slower pace of monetary policy easing. The data also showed that consumer prices rose 0.4% in December, in line with expectations.

The next meeting of the US Federal Open Market Committee is scheduled for Jan. 28-29. Currently, traders have priced in a 97.3% probability that the Fed will hold benchmark rates steady, according to the CME FedWatch tool.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was 109.07, compared with its previous close of 109.08 on Wednesday and 109.19 on Tuesday.

However, some banks stepped in with its dollar sales, likely on behalf of the RBI, which prevented the domestic currency from falling sharply, dealers said. Dealers also noted that the nature of the central bank's intervention continued to be 'mild'. 

FORWARDS

Premiums on dollar/rupee forward contracts closed lower across tenures on Thursday after the Reserve Bank of India announced measures aiming to ease the concerns around the relatively high liquidity deficit, dealers said. However, they added that the fall was limited as some banks purchased the greenback for forward delivery, fearing a further sharp fall in the rupee in the domestic spot market.

After market hours on Wednesday, the RBI announced that it would conduct variable rate repo auctions on all working days in Mumbai, with reversal taking place on the next working day, until further notice. It said the size of the auction will be decided based on its assessment of liquidity conditions, and will be announced separately. It has also permitted standalone primary dealers to participate.

A relatively high liquidity deficit, coupled with importers' dollar purchases, has kept forward premiums higher, dealers said. A sharp fall in the rupee in spot induced fears among importers that the Indian currency will continue to fall sharply. Consequently, importers rushed in to purchase forward dollars, dealers said.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 207.00 paise, against 212.00 paise on Wednesday. On an annualised basis, the premium was at 2.39%, against Wednesday's close of 2.43%.

OUTLOOK

On Friday, the rupee will take cues from the movement in the dollar index after the release of weekly unemployment data, due after Indian market hours. The rupee will also take cues from the movement in crude oil prices. Dealers expect banks to purchase the greenback on behalf of importers, which may weigh on the rupee.

However, they also expect the central bank to step in with its dollar sales to prevent the rupee from falling sharply and curb excessive market volatility.

During the day, the rupee is seen in a range of 86.40-86.70 a dollar, with strong technical support pegged at 86.60 a dollar.

India Rupee - World FX:Yen up, rise in import prices firms up rate hike view

MUMBAI – The Japanese yen was up 0.5% against the greenback on Thursday after data showed that the index, which measures import prices based on yen, turned positive, rising 0.1% on year in December, after declining for the past three consecutive months. The producer price index, released earlier in the day, showed that the index held steady at 3.8%, in line with market expectations. This strengthened investors' views of a rate hike by the Bank of Japan at its upcoming monetary policy meeting. 

The pound sterling was up 0.3% against the greenback after data showed that the country's GDP in November returned to growth after showing signs of contraction in October. The data showed that the economy expanded by 0.1% in November. While this was slightly lower than the analyst estimate of a 0.2% rise, it was still better than the previous month's contraction.

The euro traded 0.1% higher against the greenback after the December Ifo price expectations index in Germany, the largest economy of the bloc, rose to its highest level since April 2023. The index rose to 19.7 points in December, up from 15.8 in November.

The dollar index declined slightly on Thursday after the consumer price index for December showed that the core inflation rose a modest 0.2%, posting the smallest gain since July. It reinforced the view that the US Federal Reserve may opt for a slower pace of monetary policy easing. As per the data, consumer prices rose 0.4% in December, in line with expectations.

The next meeting of the US Federal Open Market Committee is scheduled on Jan. 28-29. Currently, traders have priced in a 97.3% probability that the Fed will hold benchmark rates steady, according to the CME FedWatch tool.

At 1526 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 109.16 compared with its previous close of 109.08 on Wednesday and 109.19 on Tuesday. It fell to 108.60 on Wednesday.

The Australian dollar was down 0.2% against the greenback after Australia's employment data revealed that the jobless rate rose to 4.0% in December from 3.9% in November. 

Tracking a fall in the Australian unit, the New Zealand dollar was down 0.1% against the greenback. Any change in the Australian economy will directly influence the currency of New Zealand due to their close bilateral trade relations. The Canadian dollar and the Swiss franc were both down 0.1% against the US unit.  (Gowri Lakshmi)

India Rupee: Premiums dn across tenures as daily VRRs ease liquidity concerns

MUMBAI – Premiums on dollar/rupee forward contracts fell across tenures on Thursday after the Reserve Bank of India announced measures aiming to ease the concerns around the relatively high liquidity deficit, dealers said. However, they added that the fall was limited as some banks purchased the greenback for forward delivery, fearing a further sharp fall in the rupee in the domestic spot market.

"Yesterday (Wednesday), the RBI announced daily VRR (variable rate repo) auctions to ease liquidity, and that has pulled premiums down," a dealer with a private bank said. The one-year dollar/rupee forward premium fell to 2.36% on an annualised basis, the lowest level since Dec. 30. 

After market hours on Wednesday, the RBI announced that it would conduct variable rate repo auctions on all working days in Mumbai, with reversal taking place on the next working day, until further notice. It said the size of the auction will be decided based on its assessment of liquidity conditions, and will be announced separately. It has also permitted standalone primary dealers to participate.

This measure by the RBI follows demands made by some treasury heads of banks and primary dealers at a meeting with central bank officials last week. Informist had reported on Friday, quoting market sources, that the central bank was asked to ease the persistent cash crunch in the banking system.

The banking system liquidity has remained in deficit for about a month straight. On Wednesday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--rose to INR 2.22 trillion from INR 2.09 trillion on Tuesday, as per data from RBI. 

The liquidity has also remained under pressure due to the RBI's intervention in the foreign exchange market. The central bank has intervened in the spot currency market by selling dollars to prevent a sharp fall in the rupee and to curb extreme volatility. This put further pressure on the banking system's liquidity. To manage the spillover effects of its spot intervention on the liquidity deficit, the RBI, in the past few weeks, has been selling forward dollars, market participants said.

A relatively high liquidity deficit, coupled with importers' dollar purchases, has kept forward premiums higher, dealers said. A sharp fall in the rupee in spot induced fears amongst importers that the Indian currency will continue to fall sharply. Consequently, importers rushed in to purchase forward dollars, dealers said.

Now, after the announcement of VRR auction on a daily basis, dealers see forward premiums cooling off a bit. "I think the upward pressure on premiums will also reduce slightly," a dealer with another bank said. "But if the rupee continues to fall sharply, importers may remain active in forwards, keeping the upward pressure on premiums (intact)."

At 1350 IST, the premium on the one-year exact-period dollar/rupee forward contract was 204.18 paise, against 212.00 paise Wednesday. On an annualised basis, the premium was at 2.36%, against Wednesday's close of 2.43%.  (Sourabh Kumar)

India Rupee: Down on oil cos' dlr buys; RBI's dlr sales limit further fall

MUMBAI – The rupee remained lower against the dollar as oil marketing companies persistently bought the greenback, dealers said. However, dollar sales by banks, likely for the Reserve Bank of India, limited a sharp fall in the rupee, they said. 

"Oil marketing companies are the ones weighing in today. Crude prices are very high, the buying pressure is pulling the rupee down," a dealer at a foreign bank said. 

Oil prices continued to hover near the over-six-month high it hit on Wednesday due to supply side concerns after the US imposed new sanctions on Russian oil production and distribution. Further, data from the US on Wednesday showed that its crude oil inventories fell last week to their lowest level since 2022. The fall in US crude inventories, coupled with the new sanctions on Russia triggered worries among traders around stable supply. 

At 1230 IST, the March Brent Crude contract on the Intercontinental Exchange was at $82.36 per barrel, compared to its previous close of $82.03 per barrel on Wednesday and $79.92 per barrel on Tuesday. The Brent Crude price rose to a high of $82.63 per barrel on Wednesday, the highest level since July 2024. Market participants are of the view that if sanctions on Russia continue, crude prices may rise to $85 per barrel in the medium term.
 

However, dealers said, banks' dollar sales, likely on behalf of the RBI, at around 86.50 a dollar prevented the domestic currency from falling sharply. Dealers noted that the nature of the central bank's intervention continued to be 'mild'. 

The dollar index strengthened slightly, which also weighed on the rupee, dealers said. The index, which measures the strength of the greenback against a basket of six major currencies, was 109.12 at 1245 IST against 109.08 on Wednesday and 109.19 on Tuesday.

For the rest of the day, the rupee is likely to move in a range of 86.35-86.55 against the dollar. Dealers see immediate technical support for the Indian unit at 86.55 a dollar.  (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Jan 16

MUMBAI – At 1214 IST, the rupee was at 86.4750 per dollar. At 0900 IST, the rupee was at 86.4275 a dollar against its previous close of 86.3625. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar)

India Rupee - Asia FX: Mixed; Indonesian rupiah down after 25-bps rate cut

MUMBAI – Asian currencies traded on a mixed note Thursday as investors assessed the US consumer price index data, released Wednesday. The data showed that core CPI in the US rose a modest 0.2% on month, the smallest gain since July. It reinforced the view that the US Federal Reserve may opt for a slower pace of monetary policy easing. As per the data, consumer prices rose 0.4% in December, in line with expectations.

The next meeting of the US Federal Open Market Committee is scheduled on Jan. 28-29. Currently, traders have priced in a 97.3% probability that the Fed will hold benchmark rates steady, according to the CME FedWatch tool.

At 0917 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 109.20 compared to its previous close of 109.08 on Wednesday and 109.19 on Tuesday. It fell to 108.60 on Wednesday.

The Indonesian rupiah was down 0.4% against the greenback as Bank Indonesia unexpectedly cut the benchmark rate on Wednesday to spur growth in the economy. The central bank cut its benchmark interest rates by 25 basis points to 5.75%, its first cut since September. "This is the timing to lower rates so we can create a better growth story," the central bank's Governor Perry Warjio said. Analysts had forecast that the bank would hold rates steady.

The Taiwan dollar was up 0.2% against the US unit, tracking gains in its domestic stock market. The benchmark equity index, TAIEX, was up 2.8% in early trade. The Philippine peso was also up 0.2% against the greenback.

The South Korean Won was down 0.1% against the dollar due to ongoing political upheaval in the country. South Korean authorities arrested impeached President Yoon Suk-Yeol on charges of insurrection following his attempt to impose martial law. Meanwhile, the Bank of Korea held policy rates steady on Thursday amid a weakening currency and political instability. "Elevated exchange rates could potentially exert upward pressure (on consumer prices), and uncertainties have increased related to global oil prices, as well as economic growth at home and abroad," a statement released by the central bank said.

Meanwhile, the Chinese yuan, the Malayasian ringgit and the Thai Baht traded flat against the greenback.  (Gowri Lakshmi)

India Rupee: Down as banks buy dollars for oil cos amid rise in crude price

MUMBAI – The rupee was down against the dollar as banks purchased the greenback for importers, especially oil marketing companies, dealers said. They said oil companies demanded the greenback, fearing a further rise in oil prices.

"Right now, there is some demand from importers, mainly oil companies," a dealer with a state-owned bank said. "But I think it is too early, we still have to see how the movement goes during the day."

Crude oil prices were up on Thursday, which weighed on the Indian currency, dealers said. A rise in oil prices increases India's import bill, exerting pressure on the domestic currency. Crude prices were up due to a fall in the US crude inventory and expectations of supply disruptions due to sanctions on Russian oil.

However, news of a ceasefire agreement between Israel and Gaza limited the rise in oil prices. Reports suggest that the ceasefire deal will come into effect only from Sunday, with attacks on Gaza still continuing. Traders also fear that the ceasefire deal may not sustain, again raising oil prices further, dealers said. 

At 0931 IST, the March Brent crude contract on the Intercontinental Exchange was $82.37 per barrel, against the previous close of $82.03 per barrel and $79.92 per barrel on Tuesday.

The dollar index recovered slightly and was steady, after falling on Wednesday as data showed that US core inflation rose 0.2% in December, lower than the expectation of a 0.3% rise. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 109.10 against 109.08 on Wednesday and 109.19 on Tuesday. It had fallen to 108.60 on Wednesday, before recovering.

"I expect the dollar index to decline slightly after the European market opens, which might give some support to the rupee," a dealer with a private bank said.

Back home, data released Wednesday showed that India's trade deficit in December sharply narrowed from November. This is expected to support the Indian currency, dealers said. 

For the rest of the day, the rupee is likely to move in a range of 86.35-86.55 against the dollar. Dealers see immediate technical support for the Indian unit at 86.50 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Jan 16

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:

(Sourabh Kumar and Gowri Lakshmi)

End

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

Edited by Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.