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Informist, Wednesday, Jun. 25, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended lower against the dollar Wednesday as oil marketing companies and other importers persistently bought the greenback, dealers said. The rupee's fall was limited by inflow of dollars from foreign funds who sought to invest in initial public offerings of domestic companies, they said.

The Indian currency rose to a near two-week high intraday but gave up gains and ended lower at 86.0850 a dollar against the previous close of 85.9750. The rupee moved in a relatively narrow range of just over 15 paise during the day. "(Dollar/rupee) Levels leapfrogged as persistent dollar buying outweighed the inflows," a dealer at a private-sector bank said.

Most other Asian currencies ended on a mixed note against the greenback. The Taiwan dollar gained the most, rising 0.9% against the US currency. The South Korean won was hit the worst, falling 0.4%.

The rupee opened steady at 86.0100 against the dollar as the dollar index was unchanged, with market participants wondering whether the Iran-Israel ceasefire would hold, dealers said. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 97.08, down from 97.97 Tuesday and 98.35 Monday. The index had fallen to a one-week low of 97.71 Tuesday.

Shortly after the market opened, the rupee began rising as banks sold dollars likely for IPO-related foreign fund inflows, dealers said. The public issues of Kalpataru Ltd., Globe Civil Projects Ltd., Ellenbarrie Industrial Gases Ltd. opened Tuesday and will close Thursday. Dealers said over $500 million came into the market on account of foreign fund inflows.

Dealers said a good amount of flows also went into the IPO of HDB Financial Services Ltd., which opened for subscription Wednesday and will close Friday. Both the benchmark indices, the Nifty 50 and the BSE Sensex ended 0.8% and 0.9% higher, respectively.

The rupee was also supported by a fall in crude oil prices as investor sentiment improved because of the Israel-Iran ceasefire. At 1530 IST, the August Brent Crude contract on the Intercontinental Exchange was at $67.76 per barrel, against $67.14 per barrel Tuesday and $71.48 per barrel Monday. Crude prices had hit a five-month high of $81.38 per barrel Monday, before US President Donald Trump announced the ceasefire.

The foreign fund inflows, a relatively weaker dollar index, and fall in crude oil prices lifted the rupee to a two-week high of 85.7950 a dollar, dealers said. However, the rise was short-lived as oil marketing companies and other importers rushed to purchase the greenback to take advantage of the lucrative dollar/rupee and crude price levels, dealers said. "85.85 (a dollar) itself was a good level that importers were waiting for, so once it touched that level gold importers and oil bidding came in," said a currency trader at a brokerage firm. 

FORWARDS

The one-year exact-period dollar/rupee forward premium ended sharply higher on expectations of fall in surplus liquidity in the banking system after the Reserve Bank of India Tuesday announced a variable rate reverse repo auction, dealers said. The RBI will hold a seven-day, INR 1.00 trillion variable rate reverse repo auction on Friday, the first such operation to absorb short-term liquidity since November.

A fall in the benchmark 10-year US Treasury yield also pushed dollar/rupee forward premiums higher, dealers said. Expectations of a fall in liquidity in the banking system and rise in dollar inflows from foreign funds also pushed up forward premiums, dealers said.

The one-year exact-period dollar/rupee forward premium Wednesday rose to 1.97%, the highest in over three weeks. The yield on the 10-year US Treasury note had fallen 4 basis points to 4.30% Tuesday, the lowest closing level since May 7. Forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 170.73 paise, against Tuesday's close of 162.02 paise. On an annualised basis, the premium was 1.97%, sharply higher from Tuesday's 1.87%.

OUTLOOK 

On Thursday, the rupee will take cues from the movement of crude oil prices and dollar index, dealers said. The rupee will also take cues from the movement of the offshore Chinese yuan, dealers said.

Dealers expect the rupee to be supported by foreign fund inflows, likely for investment in IPOs. However, the rupee may come under some pressure as importers are likely to buy dollars, to take advantage of the relatively lower dollar/rupee levels, dealers said.

During the day, the rupee is seen moving in a range of 85.90-86.30 against the greenback. Dealers see immediate technical support for the Indian currency at 86.20 a dollar.

India Rupee - World FX: Dollar stays weak; euro near 4-year high early Wed

MUMBAI – The dollar index continued to be weak as market participants assessed whether the Iran-Israel ceasefire would hold. US President Donald Trump announced a "complete ceasefire" in the 12-day conflict between Iran and Israel. However, shortly after the announcement, Israel accused Iran of violating the truce and retaliated by launching two ballistic missiles and destroying a radar station near Tehran.

"I'm really unhappy that Israel went out this morning," Trump told reporters. "ISRAEL is not going to attack Iran. All planes will turn around and head home, while doing a friendly 'Plane Wave' to Iran. Nobody will be hurt, the Ceasefire is in effect!," Trump posted on Truth Social as the ceasefire was back in effect after he spoke to Israel's Prime Minister Benjamin Netanyahu.

The dollar fell despite US Federal Reserve Chair Jerome Powell said higher tariffs could begin exerting inflationary pressure this summer. "I do not want to point to a particular meeting. I don't think we need to be in any rush," Powell said in his testimony to Congress. His comments have further reduced the likelihood that the Fed will cut rates at its Jul. 29-30 meeting, as proposed by some other Fed policymakers recently. Monday, Fed policymaker Michelle Bowman said there could be a case for an interest rate cut amid the softening labour market in the US. 

"Our job is keeping inflation under control, and when policies have short- and medium-term, meaningful, implications, then inflation becomes our job," Powell said.

At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 97.08, down from its previous close of 97.97 Tuesday and 98.35 Monday. The index fell to a one-week low of 97.71 Tuesday.

The euro rose to its highest level since October 2021 early Wednesday owing to weakness in the dollar index. European Central Bank Chief Economist Philip Lane said Tuesday the central bank has made progress in bringing inflation back to 2% despite the risks of higher price pressure remaining. "While headline inflation is currently around the target, services inflation still has some distance to travel," Lane said. "Still, there has been sufficient progress in returning inflation to target to consider that this monetary policy challenge is largely completed."

The Japanese yen fell 0.5% against the greenback after Bank of Japan board member Naoki Tamura said the central bank may need to raise interest rates decisively to address inflation risks even as uncertainties from US tariffs persist. "If upward inflation risks heighten, the BoJ may need to act decisively as a guardian of price stability," Tamura said. "There is a good possibility our price stability target will be achieved earlier than expected."

The BoJ's summary of opinions at the bank's June policy meeting showed that some policymakers called for keeping the benchmark lending rates steady for the time being due to heightened uncertainty over the impact of US tariffs on the Japanese economy. At the Jun. 16-17 meeting, the BoJ held the rates steady at 0.5%. 

The pound sterling traded flat against the greenback. Bank of England Governor Andrew Bailey said Tuesday there are signs now of the UK labour market softening and reiterated his view that interest rates are likely to continue falling. "We are starting to see a softening of the labour market... pay increases are still well above a level consistent with the target. However... they are coming off," Bailey said. "In these circumstances we are particularly careful about what we say on that front because the world is just so uncertain."

The Australian dollar was up 0.1% against the greenback after Australia's monthly CPI rose 2.1% in May, compared with a 2.4% rise in April. However, the CPI was below the market forecast of 2.3%.

The New Zealand dollar was up 0.3% after China released guidelines with an objective to use financial tools to boost consumption and vowed to support employment and increase household incomes as part of broader efforts to support the economy. Any change in the Chinese economy has a direct impact on the New Zealand dollar owing to their close bilateral trade relations. 

The Canadian dollar traded flat against the dollar after Canada's annual inflation in May was unchanged from the previous month at 1.7% due to a fall in gasoline costs. The Swiss franc was down 0.2% against the greenback.  (Gowri Lakshmi)

India Rupee: Pares most gains as importers buy dlrs; FII inflows lend support

MUMBAI – The rupee pared most of its gains against the dollar Wednesday as oil marketing companies and other importers purchased the greenback, dealers said. On the other hand, foreign fund inflows into initial public offerings of domestic companies lent the rupee support, dealers said. "Importer buying has come now, oilers (oil marketing companies) are there actively...," said a dealer at a brokerage firm. "They (oil marketing companies) are buying for the (good oil) levels and for strategic reserves."

The rupee hit a near two-week high of 85.7950 earlier in the day on foreign fund inflows, dealers said. Around $500 million came into the market as foreign inflows, they said. At 1259 IST, the benchmark share indices, the Nifty 50 and the Sensex, were up 0.7% each.

The public issues of Kalpataru Ltd., Globe Civil Projects Ltd., Ellenbarrie Industrial Gases Ltd. opened Tuesday and will close Thursday. Significant amount of flows went into the IPO of HDB Financial Services Ltd., which opened for subscription Wednesday and will close Friday, dealers said.

Noting the lucrative dollar/rupee levels, importers, including oil marketing companies, and gold importers purchased the greenback, which prevented the rupee from rising further. Due to the continued dollar demand, the rupee may fall back to the psychologically crucial 86-per-dollar mark, dealers said.

Oil marketing companies purchased dollars due to worries over whether the truce between Israel and Iran will hold, dealers said. "Oil prices have come down a lot, from $77 a barrel to $67 per barrel, which is a great level for oilers given all the uncertainties," a dealer at a state-owned bank said.

At 1304 IST, the August Brent Crude contract on the Intercontinental Exchange was at $68.38 per barrel, compared to $67.14 per barrel Tuesday and $71.48 per barrel Monday. Crude oil prices had hit a five-month high of $81.38 per barrel on Monday due to rising attacks between Israel and Iran.

For the rest of the day, the rupee is seen moving in a range of 85.75 and 86.10 against the dollar. Dealers peg key immediate resistance for the Indian currency at 85.75 a dollar.  (Gowri Lakshmi)

India Rupee: Premiums rise on VRRR auction announcement, fall in US yields

MUMBAI – The dollar/rupee forward premium rose across the curve Wednesday after the Reserve Bank of India announced after market hours Tuesday a variable rate reverse repo auction, dealers said. A fall in the benchmark 10-year US Treasury yield also pushed dollar/rupee forward premiums higher, dealers said.

The central bank would conduct a seven-day, INR 1.00 trillion variable rate reverse repo auction on Friday, the first such operation to absorb short-term liquidity since November. "It is VRRRs which is why you are seeing the levels higher today (Wednesday)," a dealer with a foreign bank said. "It gives market the indication that the central bank doesn't want overnight rate (call rate) at current levels, and wants it to be near repo. Unless that sentiment changes, premiums, at least shorter tenures, are likely to remain a bit higher."

Liquidity in the banking system has remained in excess of 1% of banks' net demand and time liabilities despite scheduled outflows for advance tax and goods and services tax over the past 10 days, which together drained around INR 3.00 trillion. Despite this, the RBI's net liquidity absorbed from the banking system Tuesday--a proxy for the systemic liquidity surplus--was INR 2.59 trillion. It was up from INR 2.44 trillion Monday and INR 2.46 trillion Sunday.

Coupled with expectations of a fall in the banking system liquidity, slight excess in dollar due to foreign fund inflows also pushed up forward premiums, dealers said. Foreign fund inflows this week are related to the currently open initial public offerings. The public issues of Kalpataru Ltd., Globe Civil Projects Ltd., and Ellenbarrie Industrial Gases Ltd. opened Tuesday and will close Thursday. The IPO of HDB Financial Services Ltd. opened for subscription Wednesday and will close Friday. 

The one-year exact-period dollar/rupee forward premium rose to 1.94% Wednesday, the highest in over three weeks. It was at 1.94% at 1051 IST, up from 1.88% Tuesday and 1.90% Monday. On an absolute basis, the forward premium was 167.50 paise, up from 161.53 paise Tuesday and 164.77 paise Monday. The yield on the 10-year US Treasury note fell 4 basis points to settle at 4.30% Tuesday, the lowest closing level since May 7. 

Market participants expect the one-year exact-period dollar/rupee forward premium to rise to around 1.98%, a level at which exporters may sell forward dollars, noting lucrative premiums, which could cap a further rise, dealers said. 

US Treasury yields were down Tuesday due to an unexpected fall in the US consumer confidence index this month. The Conference Board released the consumer confidence report Tuesday, which showed that confidence was down among consumers of all age and income groups, due to increasing worries over the availability of jobs. The index fell to 93.0 in June, way lower than economists' expectation of 100.0 in a Reuters poll. The survey was conducted till Jun. 18, therefore it did not take into account the effects of US joining the Israel-Iran war, and developments thereafter.

After the consumer confidence report, the odds of a rate cut by the US Federal Open Market Committee at its meeting in September increased to 70% Wednesday from around 67% Monday, as per the CME Fedwatch tool. The chances of a quarter-basis-point rate cut in July, however, fell to 18.6% from 20.7% Monday.

Market participants said the decrease in US rate cut expectations in next month's FOMC meeting was due to Fed Chair Jerome Powell's comments Tuesday. Recent US economic data could have led to lowering interest rates, but concerns of higher inflation remained because of US reciprocal tariffs, he said at a US House Financial Services Committee hearing Tuesday. "If it turns out that inflation pressures do remain contained, we will get to a place where we cut rates sooner rather than later, but I wouldn't want to point to a particular meeting," Powell said.

A rate cut by the US will increase its interest rate differential with India, thus pushing dollar/rupee forward premiums higher, dealers said. Forwards of a currency pair are reflective of the interest rate differential between the two countries.  (Sourabh Kumar)

India Rupee: Technical levels for rupee - Jun 25

MUMBAI – At 1043 IST, the rupee was at 85.8325 per dollar. At 0900 IST, the rupee was at 86.0100 a dollar, against the previous close of 85.9750. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Gowri Lakshmi and Sourabh Kumar)

India Rupee: Rises slightly on likely IPO-related inflows, weak dollar index

MUMBAI – The rupee rose slightly against the dollar Wednesday, after opening steady, as banks sold the greenback, likely on behalf of foreign portfolio investors looking to invest in initial public offerings of domestic companies, dealers said. A weak dollar index also supported the rupee, they said. 

The rupee was supported by likely IPO-related foreign fund inflows, dealers said. The public issues of Kalpataru Ltd., Globe Civil Projects Ltd., Ellenbarrie Industrial Gases Ltd. opened Tuesday and will close Thursday. Dealers said a good amount of flows also went into the IPO of HDB Financial Services Ltd., which opened for subscription Wednesday and will close Friday. 

Sustained weakness in the dollar index also continued to support the rupee, dealers said. The dollar weakened as investors continue to assess the truce between Iran and Israel, dealers said. The weakness in the US currency was despite US Federal Reserve Chair Jerome Powell saying higher tariffs could begin raising inflation pressure this summer. His comments further reduced the likelihood that the US Fed will cut rates at its Jul. 29-30 meeting, as suggested by other Federal policymakers recently.  

At 0919 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 97.91, broadly stable against its previous close of 97.97 but slightly lower than 98.35 Monday. The index fell to a one-week low of 97.71 Tuesday.

"Market is having mixed emotions now. Good flows, weak dollar and fall in crude oil have put out pressure in the rupee like anything," a dealer at a state-owned bank said. "Exporters are a bit confused now, they will be active very soon, given how the rupee is appreciating." 

A fall in crude oil prices also lifted the rupee as investor sentiment improved after the ceasefire between Israel and Iran was declared. At 0928 IST, the August Brent Crude contract on the Intercontinental Exchange was at $68.00 per barrel, compared to $67.14 per barrel tuesday and $71.48 per barrel Monday. Crude prices hit a a five-month high of $81.38 per barrel Monday in the wake of rising Israel-Iran tensions. 

However, dealers expect the rupee's rise to be limited if the Indian currency inches toward 85.85 a dollar, as importers will purchase the greenback in large quantum to take advantage of the relatively lower dollar/rupee levels. 

During the day, the rupee is seen moving in a range of 85.80 and 86.20 against the dollar. Dealers peg key immediate resistance for the Indian currency at 85.80 a dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Jun 25

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

(Gowri Lakshmi and Sourabh Kumar)

End

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

Edited by Ashish Shirke

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