Informist, Monday, Mar 28, 2022

By Pratiksha and Srijonee Bhattacharjee

NEW DELHI/MUMBAI – The rupee pared its losses from early in the day and rose against the US dollar, mirroring a similar move in domestic equities, and due to sales of dollars by exporters who converted their deliverables before closing their books for the quarter, dealers said. 

The rupee bounced back from the day's low of 76.3800 a dollar to settle at 76.1550 a dollar, against 76.1975 on Friday. 

The Indian rupee opened 0.23% lower at 76.3700 against the dollar as the US unit was firm against a basket of major currencies after comments from US Federal Reserve officials led to expectations that the central bank may be aggressive with rate hikes.    

New York Fed President and Federal Open Market Committee member John Williams said on Friday that the speed of interest rate hikes this year should be driven by data, as per reports. 

Fed Chair Jerome Powell said last week that inflation was "much too high", and the central bank might "take the necessary steps to ensure a return to price stability".

However, dollar sales by exporters gradually pushed the unit to the day's high of 76.1475 a dollar. According to dealers, there is a strong resistance level for the rupee at 76.1000 a dollar. 

Domestic benchmark indices recovered after moving in the red for most of the trading session, which also provided support to the local unit, dealers said. The Nifty 50 and the Sensex ended 0.4% higher each. 

Prices of crude oil inched lower today as the imposition of a nine-day lockdown in the Chinese city of Shanghai will reduce China's demand for fuel. The fall in oil prices prompted some banks to purchase dollars on behalf of oil marketing companies, dealers said. 

China, the world's largest crude oil importer, imposed lockdowns to curb its latest COVID-19 outbreak. All firms and factories in Shanghai will suspend manufacturing or have people work remotely in a two-stage lockdown spread over nine days, as per reports.

Oil prices play an important role in determining the rupee's movement since India is heavily dependent on imports of the commodity. The recent rise in crude oil prices has not only raised concerns of imported inflation, but also of further widening of the already gaping current account deficit.

At 1635 IST, the May contract of Brent crude on the Intercontinental Exchange was at $115.86 a barrel, against the previous close of $120.65. 

Dollar purchases by importers at relatively lower dollar/rupee levels prevented further gains in the Indian unit, dealers said. Meanwhile, the US unit continued to strengthen in European trade due to risk aversion. This too limited the rise in the Indian unit, dealers said.

At 1635 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 99.10 as against 98.81 on Friday. It was at 98.79 on Thursday. The dollar index rose to 99.31 during the day.

FORWARDS

Premiums on dollar/rupee forward contracts fell significantly because of expectations that the interest rate differential between India and the US will narrow further, dealers said. 

The premium on the one-year, exact-period dollar/rupee contract was at 287.03 paise as against 297.28 paise on Friday. On an annualised basis, the premium was at 3.77%, against 3.90% the previous day.

Premiums on forward contracts on any currency pair reflect the interest rate differential of both the countries. 

Comments by several US treasury officials last week have led markets to expect aggressive monetary policy tightening by way of rate hikes in the economy, and have pushed treasury yields up by 34 percentage points during the week. 

In the last three trading sessions, state-owned banks are said to have bought dollars for forward delivery on behalf of the Reserve Bank of India. Traders are of the opinion that the central bank was supporting premiums from falling below 3.75%. Today, however, such purchases of dollars for forward delivery were not seen, dealers said

OUTLOOK

On Tuesday, the rupee is seen tracking overnight movement in the dollar index and Brent crude oil prices amid the ongoing war between Russia and Ukraine, said dealers.

Dealers have pegged key technical resistance for the rupee at 76.10 a dollar. Dealers also expect the RBI to step in and sell dollars to prevent the rupee from depreciating below the 76.50 a dollar.

"Once the rupee manages to break the 76.10 (a dollar) resistance level or the 76.50 (a dollar) support level, we might see the rupee finding a particular direction," said a dealer with a state-owned bank. 

During the day, the rupee is seen in the range of 76.0000-76.5000 a dollar.

India Rupee:Dlr/rupee fwd premiums down on US-India rate spread view

MUMBAI – Premiums on dollar/rupee forward contracts fell significantly because of expectations that the interest rate differential between India and the US will narrow further, dealers said. 

The premium on the one-year, exact-period dollar/rupee contract was at 288.53 paise as against 297.28 paise on Friday. On an annualised basis, the premium was at 3.79%, against 3.90% the previous day.

Premiums on forward contracts on any currency pair reflect the interest rate differential of both the countries. 

Comments by several US treasury officials last week have led markets to expect aggressive monetary policy tightening by way of rate hikes in the economy, and have pushed treasury yields up by 34 percentage points during the week. 

"US yields spiking and Indian rates are seen stable, so interest rate differential is shrinking," a dealer with a state-owned bank said. "We have seed good receiving today."

In the last three trading sessions, state-owned banks have been said to have bought dollars for forward delivery on behalf of the Reserve Bank of India. Traders are of the opinion that the central bank was supporting premiums from falling below 3.75%. Today, however, such purchases of dollars for forward delivery were not seen, dealers said.  (Srijonee Bhattacharjee)

India Rupee - World FX: Yen plunges as BoJ moves to contain bond ylds

MUMBAI – The Japanese yen plunged to a six-year low against the US dollar as the Bank of Japan moved to contain rising bond yields and pledged to keep monetary policy loose, in contrast with most other major central banks.

To limit the spillover of rising global yields into Japanese bond markets, the Bank of Japan offered to buy an unlimited amount of debt with maturities of more than five years and up to 10 years.

Today, the Japanese currency slumped 2% against the dollar and the euro.

Verbal intervention from Japanese government officials did little to stem the relentless fall in the yen.

Japan's Chief Cabinet Secretary Hirokazu Matsuno said the government was "monitoring impact of weak yen on the Japanese economy closely with a sense of urgency".

He added that it was "best that forex market maintains stability while reflecting fundamentals".

Commodity-linked currencies remained firm due to elevated oil and metal prices. The Australian dollar and the Canadian dollar inched 0.2% higher against the greenback.

At 1450 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 99.18, against 98.81 on Friday. (Richard Fargose)

India Rupee:Erases losses as exporters sell dlrs, local shrs recover

NEW DELHI – The rupee erased all losses and rose against the dollar due to persistent sales of the greenback by exporters who wanted to liquidate their deliverables before closing their books for the quarter, dealers said. 

Moreover, domestic equity indices recovered from losses incurred earlier and rose, which also supported the Indian unit, dealers said.

At 1405 IST, the Nifty 50 and the Sensex were up 0.1% and 0.2%, respectively.

Dealers have pegged key technical resistance for the rupee at 76.10 a dollar.

The rupee is seen at 76.0000-76.5000 a dollar for the rest of the day.  (Pratiksha)

India Rupee: Falls sharply on firm dollar, weak domestic equities

NEW DELHI – The rupee fell sharply against the dollar today, as the US unit strengthened against other major currencies on risk aversion and due to recent hawkish comments from several US Federal Reserve officials, dealers said.

New York Fed President and Federal Open Market Committee member John Williams said on Friday that the speed of interest rate hikes this year should be driven by data, as per reports. 

At 1035 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 99.13 as against 98.81 on Friday. It was at 98.79 on Thursday.

Moreover, domestic and Asian share indices fell today due to the deteriorating COVID-19 situation in China. Several cities in the country are reportedly being put under lockdown under the 'COVID Zero' policy. This further weighed on the sentiment for the local unit, dealers said.

At 1035 IST, the Nifty 50 and Sensex were down more than 0.7% and 0.8%, respectively.

"The rupee might sustain the 76.30-40 (a dollar) range for some time, but if it breaks this range, we might see the rupee appreciating to 76.20 (a dollar) level today," said a dealer with a state-owned bank. 

Dealers have pegged key technical resistance for the rupee at 76.10 a dollar.

The rupee is seen at 76.1000-76.6000 a dollar for the rest of the day.  (Pratiksha)

India Rupee: Expected range for rupee - Mar 28

NEW DELHI – The following are the expected support and resistance levels for the rupee, as forecasted by leading banks and brokerages in an Informist poll:

(Richard Fargose and Pratiksha)

India Rupee - Asia FX: Down on Shanghai lockdown, firm dlr globally

MUMBAI – Most Asian currencies were down against the US dollar in early trade today as the imposition of COVID-19-related restrictions in the Chinese city of Shanghai stoked fear of supply chain disruptions and further hardening of inflation.

Shanghai, a key Asian financial hub, will enter a nine-day lockdown today after daily COVID cases hit a record high in China

Concerns due to the tightening of the monetary policy by the US Federal Reserve also weighed on sentiment.

The South Korean won, and Taiwan dollar were major laggards today, down 0.6% and 0.4%, respectively.

The US dollar has strengthened against the major currencies due to risk aversion and the hawkish Fed comments.

At 0905 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 99.10, against 98.80 on Friday.  (Richard Fargose)  End

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

Edited by Avishek Dutta

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