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Informist, Monday, Jan. 27, 2025

By Sourabh Kumar

MUMBAI – The rupee ended the day sharply lower, but erased some of the earlier losses as the dollar index fell towards the end of the session, dealers said. The Indian currency came under downward pressure as banks purchased dollars on behalf of foreign portfolio investors and importers, dealers said.

"There was some pressure during the day, but towards the end, the dollar index came down, which released some pressure (on the rupee)," a dealer with the state-owned bank said. After moving in a range of 12 paise, the Indian currency settled at 86.3425 a dollar on Monday. On Friday, the rupee had closed at 86.2050 a dollar. 

On Monday, the rupee had opened sharply lower, under pressure from a higher dollar index, which rose in early Asian trade, dealers said.

During the day, banks purchased dollars for importers on fears that the Indian rupee might fall further going ahead, dealers said. However, most of them did not place large bets as they remained optimistic that the Indian currency may rise this week, similar to last week. Last week, the rupee rose 0.5% against the greenback. 

The rupee came under pressure as banks purchased the greenback on behalf of foreign portfolio investors, who exited the Indian equities market, dealers said. Domestic equities fell on Monday, with both the Nifty 50 and the BSE Sensex closing 1.1% each lower.

After opening sharply down at 86.3725 a dollar, the rupee remained under pressure, with some importers purchasing the greenback. Coupled with foreign fund outflows, the importers' dollar buys drove the rupee down to its day's low of 86.4500 a dollar. The Chinese yuan was also lower against the dollar on Monday, which too weighed on the rupee, dealers said.

In early trade, the dollar index was higher, which weighed on the rupee, dealers said. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 107.35 at 1530 IST against 107.68 at the opening. On Friday, the dollar index was at 107.47.

The dollar index had strengthened in the morning on concerns over wider tariffs by US President Donald Trump. On Sunday, Trump said he would impose tariffs and sanctions on Colombia after it turned away two US military aircraft with deported migrants. 

However, the dollar index fell in the European market hours, as reports emerged that Colombia agreed to take back migrants. This took some pressure off the rupee, dealers said. "The Indian rupee fell from 86.2050 close on Friday to current levels as Trump announced 25% Tariffs on Colombia, which he later retracted (as Colombia agreed to take back its migrants), but the market got the signal that this can happen with any country," Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP said.

FORWARDS

The premium on the one-year dollar/rupee forward contract ended largely steady on Monday as a fall in the benchmark 10-year US Treasury yield offset the impact of the Reserve bank of India's likely dollar sales for forward delivery, dealers said. The RBI has been selling forward dollars continuously in an attempt to ease rupee liquidity in the banking system, dealers said. 

The forwards of a currency pair are reflective of the interest rate differential between the two countries. Some importers purchased the greenback for forward delivery, which also limited the fall in premiums, dealers said.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 196.97 paise, against 197.42 paise on Friday. On an annualised basis, the premium was 2.28%, against Friday's close of 2.29%.

OUTLOOK

On Tuesday, the rupee will take cues from the movement of the dollar index and Chinese yuan, dealers said. The local unit will also take cues from movement in crude oil prices, they said.

If the dollar continues to weaken, dealers expect the Indian unit may rise in the coming days. Therefore, they do not see importers rushing to purchase the greenback until Trump announces tariffs on any nation, stoking fears of wider tariff measures, thereby putting pressure on the rupee.

Dealers expect the RBI may sell dollars to prevent a sharp depreciation in the rupee. In the event of a sharp appreciation, the RBI is expected to step in through dollar purchases to restock its reserves. During the day, the rupee is seen in a range of 86.20-86.60 a dollar, with the technical support pegged at 86.50 a dollar.

India Rupee: Premium dn across most tenures on RBI's likely fwd dollar sales

MUMBAI – The premium on the one-year dollar/rupee forward contract was down across most tenures on Monday as the Reserve bank of India is likely to have sold dollars for forward delivery to ease pressure on rupee liquidity, dealers said. 

"The central bank was doing buy/sell today as well, I think in Jul., Aug., and Dec. tenures," a dealer with a private bank said. The RBI has been selling forward dollars continuously in an attempt to ease rupee liquidity in the banking system, dealers said.

A fall in the benchmark 10-year US Treasury yield limited the fall in premiums, dealers said. The 10-year US Treasury yield fell 2 basis points on Friday to 4.63%. The forwards of a currency pair are reflective of the interest rate differential between the two countries.

Some importers purchased the greenback for forward delivery, which also limited the fall in premiums, dealers said. While importers have actively purchased forward dollars in the past month due to a sharp decline in the rupee in the spot market, they largely refrained from placing large bets on Monday, similar to last week, dealers said. The pressure on forward premiums has eased due to lack of aggressive forward dollar buys by importers as the pressure on the rupee eased in the last one week.

Dealers said forward premiums are likely to remain relatively low as they expect the RBI to keep on purchasing dollars for forward delivery in a measure to ease pressure on rupee liquidity. 

At 1445 IST, the premium on the one-year exact-period dollar/rupee forward contract was 197.22 paise, against 197.42 paise on Friday. On an annualised basis, the premium was 2.28%, against Friday's close of 2.29%.  (Sourabh Kumar)

India Rupee: Remains sharply down as banks buy dollars for FPIs, importers

NEW DELHI – The rupee remained sharply down against the dollar as banks bought the greenback on behalf of foreign portfolio investors and importers, dealers said. A rise in the dollar index also weighed on the Indian currency, they said. 

Banks bought dollars on behalf of foreign portfolio investors, who are looking to pull out funds from domestic equities, dealers said. So far this month, FPIs have withdrawn $6.8 billion from the local stock market. At 1345 IST, both the Nifty 50 and Sensex were down 1.0% each. 

Further, state-owned banks bought the greenback for importers, who fear a further depreciation in the local unit in the near term, they said. However, dollar purchases by importers were not aggressive in nature, according to dealers. "Importers are buying (dollars) but not that heavily. They got a lot of opportunity to buy (dollars) last week at above 86.20 (a dollar)," said a dealer at a big state-owned bank. The rupee appreciated 0.5% against the dollar last week. 

The dollar index strengthened on looming concerns over US President Donald Trump's tariff policies. On Sunday, Trump said he would impose sweeping retaliatory measures on Colombia, including tariffs and sanctions, after the South American country turned away two US military aircraft with migrants being deported.

At 1345 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 107.72, against 107.47 on Friday and 108.12 on Thursday. The index had fallen to an over five-week low of 107.22 on Friday. 

"The dollar's direction has become a bit of a risk. There have been sharp moves every day," said a dealer at a private bank. "But I feel overall the dollar may have peaked, since Trump may take his tariff plans one at a time. The only issue is that if he gives out extreme statements meanwhile, market volatility goes up."

A decline in most Asian currencies, particularly the Chinese yuan, against the US unit, also weighed on the Indian unit, as per dealers. Most Asian units fell 0.2-0.5% against the dollar, with the onshore Chinese yuan weakening 0.3% on Monday.   

For the rest of the day, the rupee is seen moving in a range of 86.30-86.50 against the dollar. They see technical support for the Indian unit at 86.50 a dollar. (Pratiksha)

India Rupee: Technical Levels for rupee - Jan 27

MUMBAI/NEW DELHI – At 1115 IST, the rupee was at 86.3825 per dollar. At 0900 IST, the rupee was at 86.3725 a dollar against its previous close of 86.2050. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Pratiksha)

India Rupee - Asia FX: Most dn as dlr index rises post US tariff on Colombia

MUMBAI – Most Asian currencies were down against the US dollar as the dollar index recovered from an over five-week low as fears of wider tariff measures grew after US President Donald Trump announced tariffs on Colombia, dealers said. 

The dollar index recovered slightly to 107.71 at 0841 IST after hitting a low of 107.22 on Friday. The index, which measures the strength of the greenback against a basket of six major currencies, was at 108.12 on Thursday.

The dollar recovered due to growing fears of wider tariff measures after Trump announced the imposition of tariffs and sanctions on Colombia. On Sunday, Trump said he would impose retaliatory measures on Colombia, after it turned away two US military aircraft with migrants. The migrants were being deported as the new US administration starts to crack down on illegal immigration. However, reports early Monday suggested that Colombia had agreed to accept its illegal migrants to the US.

The Thai baht was down 0.3% against the US dollar, with the Malaysian ringgit and the Philippines peso falling 0.1% each against the greenback. Markets in Taiwan, South Korea, and Indonesia were closed on Monday.

Market participants analysed latest data from China, which showed that the manufacturing activity in the second-largest economy contracted unexpectedly. This weighed on Asian currencies. The offshore Chinese yuan was down 0.3% against the greenback.

Data showed that China's manufacturing purchasing managers' index contracted to 49.1 in January from last month's figure of 50.1. The forecast in a Reuters poll had indicated a reading of 50.1. A value below 50 indicates that the sector is in contraction, and one above it suggests expansion.  (Sourabh Kumar)

India Rupee: Sharply down as dlr index up post Trump's tariffs on Colombia

MUMBAI – The rupee was sharply lower against the dollar in early trade as the dollar index recovered from an over five-week low due to fear of wider tariff measures after US President Donald Trump announced tariffs on Colombia, dealers said. 

"After announcing tariffs on Colombia, the sentiment has shifted, and people now increasingly fear that it may well be the start of tariff announcements," a dealer with a private bank said.

After falling to an over five-week low of 107.22 on Friday, the dollar index recovered and was at 107.69 at 0921 IST. The index, which measures the strength in the greenback against a basket of six major currencies, was at 108.12 on Thursday. 

The dollar recovered due to growing fears of wider tariff measures after Trump announced the imposition of tariffs and sanctions on Colombia. On Sunday, Trump said he would impose retaliatory measures on Colombia, after it turned away two US military aircraft with migrants. The migrants were being deported as the new US administration starts to crack down on illegal immigration. Latest reports suggest that Colombia has agreed to take its migrants from the US.

In the domestic market, banks purchased the greenback on behalf of some importers, which weighed on the rupee, dealers said. However, most importers refrained from placing large bets on the greenback, hoping for a fall in the dollar/rupee levels, similar to last week, dealers said. 

A fall in crude oil prices supported the rupee, dealers said. Given that crude oil is a major commodity that India imports, a fall in its price eases the pressure on the domestic currency. Oil prices were down after Trump again called on the Organization of the Petroleum Exporting Countries to reduce oil prices to hurt the finances of Russia. At 0936 IST, the March Brent crude oil contract on the Intercontinental Exchange was at $78.06 per barrel, compared to its previous close of $78.50 per barrel and $78.29 per barrel on Thursday.

For the rest of the day, the rupee is seen moving in a range of 86.20-86.50 against the dollar. They see technical support for the Indian unit at 86.40 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Jan 27

MUMBAI – Following are the expected support and resistance levels for the rupee on Monday, as forecast by leading banks and brokerages in an Informist poll:

(Sourabh Kumar and Pratiksha)

Edited by Saji George Titus

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