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Informist, Thursday, Jan. 30, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended lower against the dollar Thursday due to a strengthening dollar index and banks' dollar purchases for importers, dealers said. However, state-owned banks sold dollars, likely on behalf of the Reserve Bank of India, which prevented the Indian currency from hitting a record low, they said.

"I think by the end they (RBI) let go of the rupee a bit, so it (rupee) came a bit lower," said a dealer at a private bank. After moving in a range of 7 paise throughout the day, the rupee ended at 86.6250 a dollar, not too far from its lifetime low of 86.6475 a dollar, against its previous close of 86.5400 a dollar. 

Dealers said the trade volume in the currency market was lower than usual ahead of the Union Budget due Saturday. "Since the volume is low, any slight buying is reflected sharply in the currency's (rupee) movement," a dealer at a state-owned bank said. 

The rupee opened steady against the greenback at 86.5725 after the US Federal Open Market Committee members unanimously decided to keep the federal funds target range unchanged at 4.25-4.50% as widely expected, early on Thursday. 

The committee, in a statement released after the meeting, said it would be prepared to adjust the monetary policy stance as "appropriate if risks emerge that could impede" taming the inflation to target range or attaining maximum employment. Market participants are now waiting for the US initial jobless claims data and the Oct-Dec GDP print due later in the day for further cues on the US interest rate path. 

However, the rupee came under pressure as banks stepped in to purchase the greenback on behalf of importers, who wanted to meet their month-end payment obligations, dealers said. Some importers also bought the greenback in fear that the Indian currency may depreciate further in the coming days, they said. The rupee has depreciated 1.2% against the greenback so far in January. 

Meanwhile, trade volume remained lacklustre as most traders refrained from placing large bets ahead of the Union Budget for 2025-26 (Apr-Mar) due Saturday. "The rupee is likely to appreciate as much as 86.30-86.10 after the Budget, if they announce something which could attract overseas investors," a dealer at a state-owned bank said.

During the last leg of the trade, the rupee came under further pressure and was dragged to the day's low of 86.6300 a dollar as the dollar index strengthened during European trade, tracking a fall in the euro. The euro declined 0.2% against the US unit ahead of the monetary policy announcement by the European Central Bank due later in the day. The central bank is expected to lower its interest rates by 25 basis points, amid slowing economic growth.

AT 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 108.00, compared with its previous close of 107.94 on Wednesday, and 107.92 on Tuesday.

However, state-owned banks sold the greenback, likely on behalf of the RBI, which prevented the rupee from hitting a record low, according to dealers. However, the central bank's dollar sales were not aggressive in nature, they said. "They (RBI) were there at offer but not that much. They were just protecting the levels," said a dealer at a foreign bank.

FORWARDS

Premium on the one-year dollar/rupee forward contract ended largely steady ahead of the Reserve Bank of India's $5 billion dollar/rupee buy/sell swap auction on Friday. However, some banks' dollar purchases for forward delivery on behalf of importers, who wanted to take advantage of relatively low premiums, supported premiums, dealers said. 

The central bank announced the buy/sell swap auction in a bid to infuse durable liquidity in the banking system. The swap is part of a total of three measures announced by the RBI on Monday to combat the liquidity deficit. The other two measures announced by the central bank are to buy government bonds worth INR 600 billion through open market operation auctions in three tranches and a 56-day variable rate repo auction for INR 500 billion on Feb. 7.

At 1530 IST, the premium on the one-year exact-period dollar/rupee forward contract was 188.52 paise, against 188.01 paise on Wednesday. On an annualised basis, the premium was 2.18%, against Wednesday's close of 2.16%.

OUTLOOK 

On Friday, the rupee will take cues from the movement in the dollar index and Chinese yuan, dealers said. They expect volume in the market to be dull in the run up to the Union Budget. Volume is expected to be lacklustre as other major Asian markets are shut on account of the Chinese Lunar New Year.

Dealers expect banks to continue purchasing the greenback on behalf of importers, who want to meet their month-end payment requirements. However, they expect the RBI to step in with dollar sales if the rupee comes under immense pressure and also to 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 86.65 a dollar.

India Rupee - World FX: Yen up as BoJ's Himino hints at further rate hike

MUMBAI – The Japanese yen was up 0.4% against the dollar on Thursday after Bank of Japan Deputy Governor Ryozo Himino said the Bank of Japan would continue to raise its interest rates if the economy and prices move in tandem with the central bank's forecasts. "If our economic and price forecasts are achieved, we will raise our policy rate accordingly and adjust the degree of monetary support," Himino said in a speech on Thursday.

Himino also said the ideal outlook for the Japanese economy would be an uptick in wages and corporate profits, which could push consumption and investments, leading to inflation moderating.

The dollar index remained broadly steady after members of the US Federal Open Market Committee unanimously decided to hold US benchmark rates steady within the 4.25-4.50% target range, as widely expected. The committee, in a statement released after the meeting, said it would be prepared to adjust the monetary policy stance as "appropriate if risks emerge that could impede" taming the inflation to target range or attaining maximum employment. 

At 1538 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.97, compared to its previous close of 107.94 on Wednesday and 107.92 on Tuesday. Market participants are now waiting for US initial jobless claims data, and Oct-Dec advance GDP estimate due later in the day. 

The euro was down 0.2% against the greenback ahead of the monetary policy announcement by the European central bank later in the day. The European bloc's central bank is widely expected to lower its interest rates by 25 basis points and is likely to keep the door open to further policy easing amid sluggish economic growth. 

The Canadian dollar was flat against the US unit. The Bank of Canada lowered its interest rate by a quarter percentage point to 3% and cut its growth forecasts as concerns over the impact of a potential US tariff imposition loom. Central bank officials said US tariffs could trigger persistently high inflation. 

"A long-lasting and broad-based trade conflict would badly hurt economic activity in Canada," Bank of Canada chief Tiff Macklem said. The US, under the new Donald Trump administration, has vowed to impose 25% tariff on Canada and Mexico from as early as Saturday. 

The New Zealand dollar was down 0.2% against the US unit after the country reported a slump in its business confidence print. The business confidence in January fell to 54.4 from the previous reading of 62.3. 

The pound sterling and the Australian dollar traded flat against the greenback. The Swiss franc was also flat against the US dollar ahead of the country's trade balance data.  (Gowri Lakshmi)

India Rupee: Remains slightly down as importers buy dollars; volume dull

MUMBAI – The rupee was slightly down against the dollar Thursday amid lacklustre trade volume as banks bought dollars on behalf of importers for month-end payment requirements, dealers said. Some importers also bought the greenback on fear that the Indian currency may depreciate further in the coming days, they said.  

The dollar index remained broadly strong during European trade ahead of the European Central Bank's policy announcement later in the day, which also weighed on the domestic currency, dealers said. Market participants widely expect the European bloc's central bank to lower interest rates by 25 basis points.

"There is no activity in the market, volumes are also low, making the market stand still," a dealer at a state-owned bank said. "But we expect some movement in European trade, as the dollar index is strengthening after the euro fell."

At 1405 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.86, compared to 107.94 on Wednesday and 107.92 on Tuesday. The index rose to 107.98 earlier in the day. 

Meanwhile, some dealers speculated that some state-owned banks may have sold the greenback, likely on behalf of the Reserve Bank of India, which prevented the rupee from falling further. The local unit has moved in a range of only 3 paise so far in the day.  

Volume in the currency market remained dull as most traders refrained from placing large ahead of the Union Budget due Saturday, according to dealers.  "There is a likelihood of the Budget turning positive for the currency market. If the Budget cuts some capital gains taxes, it can attract FDIs (foreign direct investments) or if they slash income tax to push consumption, it can help the rupee," a dealer at a public-sector bank said. 

Market participants are also keenly waiting for the outcome of the RBI's Monetary Policy Committee's meeting due Feb. 7, when the central bank may lower its benchmark rates for the first time in nearly five years. "Market participants are looking forward to the MPC after the Budget, but things are still bleak, it's a 50-50 chance," a dealer at a state-owned bank said.

For the rest of the day, the rupee is seen moving in a range of 86.50-86.70 against the dollar. Dealers see immediate technical support for the Indian unit at 86.65 a dollar.  (Gowri Lakshmi) 

India Rupee: Technical Levels for rupee - Jan 30

MUMBAI – At 1201 IST, the rupee was at 86.5900 per dollar. At 0900 IST, the rupee was at 86.5725 a dollar against its previous close of 86.5400. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Pratiksha)

India Rupee: Steady as traders avoid large bets before budget; volume low

MUMBAI – The rupee was steady against the dollar Thursday, as traders refrained from placing large bets ahead of the Union budget for 2025-26 (Apr-Mar) due Saturday, dealers said. Further, a slight ease in the dollar index supported the rupee, they said. Overall volume in the market was low in early trade, they said.

"The next key thing for the rupee is the budget. If the government announces some tariff cuts for FDIs (foreign direct investments), then the rupee will be on the uptick," a dealer at a public-sector bank said.

While the dollar index eased a bit during the Asian trade, the overall movement was limited as some major markets in Asia were closed on account of Lunar New Year. The index had eased from a near-one-week high of 108.30 hit on Wednesday just after the US Federal Open Market Committee left the benchmark rates unchanged. 

At 0925 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.85, compared to its previous close of 107.94 on Wednesday and 107.92 on Tuesday.

The US Federal Open Market Committee members unanimously kept Federal funds target range unchanged within the 4.25-4.50% target range, as widely expected. The committee, in a statement released after the meeting, said it would be prepared to adjust the monetary policy stance as "appropriate if risks emerge that could impede" taming the inflation to target range or attaining maximum employment. 

"After the FOMC, no much movement happened in the dollar/rupee pair, though it was seen in other global currencies. Even in the NDF (non-deliverable forwards) market, the rupee did not move much," a dealer at a state-owned bank said. 

Dealers expect a rise in the dollar index in European trade, as the euro is likely to decline following the widely anticipated rate cut by the European Central Bank. The euro has a weightage of 57.6% in the dollar index. This may put pressure on the rupee later in the day, dealers said. However, they do not expect the rupee to fall beyond 86.65 a dollar for the day.

During the day, the rupee is seen moving in a range of 86.40-86.70 against the dollar. Dealers see technical support for the Indian unit at 86.65 a dollar.  (Gowri Lakshmi)

India Rupee - Asia FX:Mixed after FOMC leaves rate steady; ECB decision eyed

MUMBAI – Asian currencies were mixed against the dollar after the US Federal Open Market Committee left the federal funds target range unchanged at 4.25-4.50%. The committee said that the risks to achieving its employment and inflation goals are roughly in balance. "The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate," the statement said. 

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 107.84 at 0920 IST against 107.94 on Wednesday and 107.92 on Tuesday. The index had eased slightly in early Asian trade. Consequently, the Philippines peso was up 0.1% against the greenback. Gains in the Philippines currency were howevwe capped as data released early Thursday showed that the country's GDP expanded lower-than-expected at 5.2% in Oct-Dec. A Reuters poll had forecast the GDP growth at 5.4%.

The Indonesian rupiah was down 0.1% against the greenback. A fall in Indonesian equities weighed on the currency. The Jakarta Stock Exchange Composite Index was down 1.5% in early trade.

The Malaysian ringgit and the Thai baht were steady against the greenback. A few markets in Asia were closed on account of Lunar New Year. The South Korean market was shut Thursday and will open on Friday, while the market in Taiwan will open only on Monday. The market in China is closed till Tuesday.

Market participants now await the European Central Bank's rate decision, due later in the day. Investors expect the ECB to cut rates by 25 basis points.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Jan 30

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:

Compiled by Sourabh Kumar, Pratiksha, and Gowri Lakshmi

End

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

Edited by Akul Nishant Akhoury

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