Informist, Thursday, Aug 17, 2023

By Pratiksha

NEW DELHI – Even as the Reserve Bank of India continued its supply of dollars to keep the rupee from runaway depreciation, the rupee settled at a record closing low against the dollar today due to a surge in the dollar index and weakness in the offshore Chinese yuan, dealers said.

Today, the rupee closed 0.2% lower at 83.1475 a dollar. 

The rupee started the day below the psychologically-crucial 83-per-dollar mark for the second consecutive trading session today as the dollar index surged to an over two-month high in early trade, dealers said.

However, the Reserve Bank of India likely intervened through dollar sales in the offshore non-deliverable forward markets, which limited losses for the Indian unit at open, dealers said. 

The dollar index, which measures the strength of the greenback against a basket of six major currencies, rose after minutes of the US Federal Reserve's July meeting, released on Wednesday, showed that most members of the rate-setting committee supported higher interest rates to curb high inflation. 

The US central bank had hiked the key rate to a target range of 5.25% to 5.50%, an over 20-year high, during the meeting in July, and had kept the door open for more increases if inflation remained resilient.

The dollar index also gained as the yen further weakened due to the widening interest rate differential between the US and Japan.

At 1630 IST, the dollar index was at 103.33 as against 103.43 on Wednesday. It was at 103.21 on Tuesday.

Moreover, the offshore Chinese yuan touched its lowest level since November on concerns of an economic slowdown in China. This also weighed on the Indian unit, dealers said.

China's central bank on Tuesday unexpectedly cut key policy rates to boost a sputtering economic recovery, impacting yuan's demand. China's spending and activity data for July was weaker-than-expected.

China's major state-owned banks were seen selling dollars in both onshore and offshore spot foreign exchange markets this week, in order to slow the yuan's depreciation, a media report said citing sources. 

The rupee was dragged to the day's low of 83.1575 a dollar as banks placed fresh bets in favour of the greenback, noting the dollar's strength. 

However, state-owned banks persistently sold the greenback on behalf of the RBI, which limited further downturn in the Indian currency, dealers said.

"I don't think the situation is of a panic as such," said a dealer with a private bank. "The market is relying on RBI and its forex reserves."

Noting RBI's active dollar sales intervention, some banks also sold the greenback on behalf of exporters, who wanted to take advantage of the relatively higher dollar/rupee levels, dealers said. This also provided support to the local unit. 

"Exporters are covering around these levels, looking at RBI's efforts to keep the rupee from falling more," said a dealer with a state-owned bank. "But some exporters are still wary of selling around these levels since the broader expectation is of depreciation."

A fall in domestic share indices also weighed on the Indian unit, dealers said. The Nifty 50 and the Sensex ended 0.5% and 0.6% down, respectively.

FORWARDS

The premiums on dollar/rupee forwards rose as banks bought the greenback for forward delivery noting an arbitrage between the onshore forwards and offshore non-deliverable forwards rates, dealers said.

"There was some paying pressure because of the NDF arbitrage," said a dealer with a brokerage firm. "It's been long that we saw such an arbitrage between onshore and offshore, so traders took the opportunity."

Dealers also said that exporters did not sell dollars for forward delivery because they expect the rupee to fall further from the current levels.

The dollar/rupee exchange rate is a component of the premium received by exporters for selling forward dollars. A rise in the dollar/rupee (a fall in the rupee) pushes up the receivable premiums, thus encouraging exporters to book contracts at those levels.  

The absence of selling of forward dollars by exporters also propped up premiums, dealers said.

The premium on the one-year dollar/rupee contract was 135.27 paise, against 130.48 paise on Monday. On an annualised basis, the premium was at 1.62%, against the previous close of 1.56%.

OUTLOOK

On Friday, the rupee will take cues from the dollar index and crude oil prices, dealers said.

Dealers expect the RBI to continue intervening through dollar sales to prevent a sharp depreciation in the rupee.

"After making a new closing high (in dollar/rupee terms), rupee is expected to depreciate further within a range of 82.90 to 83.30 as oil and FPI (foreign portfolio investors) continue to buy dollars," said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

"Importers to buy the dips (in dollar/rupee) and exporters to hold dollars for selling so that they can get better levels." 

Dealers have pegged immediate key technical support for the rupee at 83.30 a dollar. During the day, the rupee is seen in the range of 82.90-83.30 a dollar.

India Rupee - World FX: Dlr steady post FOMC minutes; jobs data eyed

MUMBAI – The dollar index remained steady after minutes of the US Federal Open Market Committee's Jul 25-26 meeting showed that most policymakers continued to prioritise the battle against inflation, even as others cited economic risks of pushing rates too far. 

"With inflation still well above the committee's longer-run goal and the labour market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy," the meeting's summary stated.

However, the dollar eased from its two-month high touched earlier as market participants were wary of placing large bets ahead of the release of data on weekly initial jobless claims in the US.  

At 1556 IST, the dollar index was at 103.42 as against 103.43 on Wednesday. It was at 103.21 on Tuesday.

The pound sterling was up 0.1% against the dollar after data from the UK showed core inflation, a measure that excludes the categories of food and energy, matched June's rate of 6.9% in July, compared with expectations that it would fall a tad to 6.8%. Service inflation rose from 7.2% to 7.4%. 

The Australian dollar, considered a proxy for the Chinese yuan, remained 0.2% lower against the dollar as the economic recovery in China post the pandemic appears to be struggling. (Kabir Sharma)

India Rupee: Near 10-mo low on firm dlr, weak yuan; RBI dlr sales aid

MUMBAI – The rupee remained near its lowest level in over 10 months as the greenback surged to a two-month high after the minutes of the Federal Open Market Committee's latest meeting were released on Wednesday, dealers said. A fall in the offshore Chinese yuan also weighed on the Indian unit, they said. 

"It (dollar/rupee) is mainly tracking a strong dollar. The yuan is pulling entire Asia down across the board. Exporters are covering which provides a slight resistance. We expect the RBI (Reserve bank of India) to intervene again once it goes to 82.30 (a dollar)," a dealer with a large state-owned bank said.  

The dollar surged as minutes of the FOMC's Jul 25-26 meeting showed that most policymakers continued to prioritise the battle against inflation even as others cited economic risks of pushing rates too far. 

"With inflation still well above the committee's longer-run goal and the labour market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy," the meeting summary stated.

At 1335 IST, the dollar index was at 103.44 as against 103.43 on Wednesday. It was at 103.21 on Tuesday.

Moreover, the offshore Chinese yuan fell to its lowest level since November on concerns of an economic slowdown in China. This weighed on Asian currencies, including the Indian unit, dealers said.

The rupee had touched a record low of 83.2850 a dollar on Oct 20. 

Some banks sold the greenback on behalf of exporters which limited losses for the rupee, dealers said. 

Dealers said they expect the RBI to continue selling the greenback to prevent the rupee from depreciating sharply against the dollar. 

Dealers pegged the immediate key technical support for the rupee at 83.20 a dollar and the long-term support at 83.30 a dollar. During the day, the rupee is seen in the range of 82.90-83.20 a dollar. (Kabir Sharma)

India Rupee: Falls below 83/$1 as dollar index surges, yuan weakens

NEW DELHI – The rupee opened below the psychologically-crucial 83-per-dollar mark for the second consecutive trading session today as the dollar index surged to an over two-month high in early trade, dealers said. However, the Reserve Bank of India likely intervened through dollar sales in the offshore non-deliverable forward markets, which limited losses for the Indian unit, dealers said. 

"Looks like the RBI sold heavily in offshore market, else the opening level (for rupee) would have been much lower," said a dealer with a state-owned bank. " I think intervention (by RBI) will be there around these levels...but anyways gradually rupee will fall below 83.20 (a dollar)."

The rupee opened at 83.02 a dollar as the dollar index, which measures the strength of the greenback against a basket of six major currencies, jumped after minutes of the US Federal Reserve's July meeting, released on Wednesday, showed that most members of the rate-setting committee supported higher interest rates to combat high inflation. 

The US central bank had hiked the key rate to a target range of 5.25% to 5.50%, an over 20-year high, during the meeting in July, and had kept the door open for more increases if inflation remained resilient.

The dollar index also gained as the yen further weakened due to the widening interest rate differential between the US and Japan. The yen has now weakened to key levels which triggered intervention by the Bank of Japan last year. 

At 0935 IST, the dollar index was at 103.57 as against 103.43 on Wednesday. It was at 103.21 on Tuesday.

Moreover, the offshore yuan touched its lowest level since November on concerns of an economic slowdown in China. This weighed on Asian currencies, including the Indian unit, dealers said.

Dealers said they expect the RBI to continue selling the greenback to prevent the rupee from depreciating sharply against the dollar. 

Dealers pegged the immediate key technical support for the rupee at 83.10 a dollar and long term support at 83.30 a dollar. During the day, the rupee is seen in the range of 82.90-83.20 a dollar. (Pratiksha)

India Rupee: Expected range for rupee - Aug 17

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

(Kabir Sharma)

End

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

Edited by Vidhi Verma

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