Informist, Tuesday, Feb 6, 2024

By Vaishali Tyagi 

MUMBAI – The rupee ended flat against the dollar today as banks' dollar sales for foreign fund inflows offset their dollar buys for oil marketing companies and importers, dealers said. "There are a few importers in the market and some regular flows are also there," a dealer at a state-owned bank said. Today, the rupee moved in a narrow range of 5 paise throughout the day and settled at 83.0550 a dollar, unchanged against Monday.

The rupee opened steady against the dollar even though the dollar index surged on Monday, touching a near three-month high, after the services sector in the US expanded more than expected in January. This reinforced investors' expectations that the US Federal Reserve may not cut interest rates as soon as earlier expected, dealers said.

The US non-manufacturing purchasing managers index released by the Institute of Supply Management on Monday, increased to 53.4 in January from 50.5 the previous month. It was higher than the forecast of 52.0 in a poll of economists by Reuters. A figure above 50 indicates expansion and below it shows contraction. 

According to CME Group's FedWatch tool, Fed fund futures traders are now pricing in only a 16.5% probability that the US central bank will cut rates at its next meeting in March, compared with 40.4% a week ago. At 1655 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.57 compared with 104.46 on Monday. It was at 103.97 on Friday. The index touched a near three-month high of 104.60 on Monday. 

Some banks bought dollars on behalf of oil marketing companies as they rushed to stock up on the commodity, noting a rise in crude oil prices, dealers said. Crude oil prices rose slightly on Monday due to concerns that escalating tensions in West Asia and Russia's ongoing invasion of Ukraine could curb global supplies. Investors remained apprehensive of any ceasefire announcement between Israel and Hamas. At 1655 IST, the April contract of Brent Crude oil on the Intercontinental Exchange was at $78.25 a barrel, compared with $77.99 a bbl on Monday and $77.33 a bbl on Friday.

However, some banks sold dollars for foreign fund inflows, which supported the Indian unit, dealers said. "There was normal supply-demand movement, but that was also very less," a dealer with a foreign bank said. "Traders are not trading as much as they know the RBI (Reserve Bank of India) will manage the volatility anyhow."

Some dealers also speculated about two-sided intervention by the central bank, both through dollar sales and purchases, to curb volatility in the exchange rate, which resulted in a narrow range in the rupee. 

During European trading hours, the Indian currency found some support as the dollar index came off slightly from the near three-month high it touched on Monday. "I see nothing much is happening. The dollar index was weak slightly, but let's see (how it impacts the rupee)...as I said there is no movement," a dealer at a foreign bank said. 

A few dealers said there were very few exporters in the market as the current dollar/rupee  levels were not particularly lucrative for them. A rise in domestic equities also supported the Indian unit, dealers said. Today, the Sensex and Nifty 50 were 0.6 and 0.7% higher, respectively. 

FORWARDS

The premiums on one-year dollar/rupee forwards rose slightly today, as banks bought dollars on behalf of importers for forward delivery, noting a fall in levels in the past few trading sessions, dealers said.

"There is a lot of paying coming in looking at the downtrend in levels lately. The market is on buy (on dips)," a dealer with a foreign bank said. 

The yields on the 10-year US Treasury note rose on Monday after the US services sector Purchasing Managers' Index reading, which weighed on the premiums, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

Market participants see technical support for the one-year dollar/rupee forward premium at 1.90%. At 1625 IST, the premium on the one-year, exact-period dollar/rupee forward contract was at 148.08 paise, against 146.50 paise at Monday's close. On an annualised basis, the premium  was at 1.77% against its previous close of 1.76%. 

OUTLOOK

On Wednesday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said. Investors now await US weekly export sales data, due Thursday.  

"Rupee is expected to continue in the range of 82.90 to 83.20 as inflow gets absorbed by the RBI," said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP.

During the day, the rupee is seen in a range of 82.80-83.30 a dollar, with key technical support pegged at 83.30 a dollar.

 India Rupee - World FX: Australian dlr rises 0.2% post policy outcome

India Rupee - World FX: Australian dlr rises 0.2% post policy outcome

MUMBAI – The Australian dollar rose 0.2% against the dollar after the Reserve Bank of Australia maintained its official cash rate unchanged at 4.35% today and cautioned that a further increase in rates could not be ruled out given higher inflation levels. 

The Canadian dollar rose 0.1% against the greenback before the Ivey Purchasing Managers Index data due later today and the Bank of Canada governor Tiff Macklem’s speech. The Ivey Purchasing Managers Index is an economic index which measures the monthly variation in economic activity as indicated by a panel of purchasing managers from across Canada.

The pound sterling rose 0.1% against the US unit. Data released by the UK retail consortium today showed that retail sales in January rose by 1.2% on year compared with a rise of 1.7% in December.

The euro fell slightly against the greenback after the Organisation for Economic Co-operation and Development downgraded the eurozone's GDP growth forecast for this year to 0.6% from 0.9%, and to 1.3% from 1.5% for 2025.

The dollar index hovered around the near 3-month high it hit on Monday, post the release of the services sector purchasing managers index. The US non-manufacturing purchasing managers index released by the Institute of Supply Management on Monday, increased to 53.4 in January from 50.5 the previous month. It was higher than the forecast of 52.0 in a poll of economists by Reuters. A figure above 50 indicates expansion and below 50 indicates contraction. 

According to CME Group's FedWatch tool, 85% of Fed Fund Futures traders expect the federal funds interest rate to remain at 5.25-5.50% in the coming meeting in March. However, 55.9% of them expect a 25-basis-point rate cut in May. At 1525 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.51 compared with 104.46 on Monday. It was at 103.97 on Friday. The index rose to a near three-month high of 104.60 on Monday.  (Sourabh Kumar)

India Rupee: Premiums up as importers buy fwd dlrs noting low levels

MUMBAI – Premium on one-year dollar/rupee forward contracts rose as banks bought dollars on behalf of importers for forward delivery, noting a fall in levels in the past few trading sessions, dealers said. On Monday, the dollar/rupee premium had hit a one-month low of 1.76% a dollar.

"Levels have come down quite a bit, so market is quite paid," said a dealer with a foreign bank. "But looking at the US yields, levels may come down further in the next few days."

Meanwhile, the US Treasury yield rose on Monday after a US services sector Purchasing Managers' Index reading, which weighed on the premiums, dealers said. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

The US non-manufacturing purchasing managers index released by the Institute of Supply Management on Monday, increased to 53.4 in January from 50.5 the previous month. It was higher than the forecast of 52.0 in a poll of economists by Reuters. A figure above 50 indicates expansion and below 50 indicates contraction.

Higher than expected US non-farm payrolls data released last week, and the recent non-manufacturing PMI led to expectation amongst investors that the US Federal Reserve may not cut interest rates as soon as previously thought. According to CME Group's FedWatch tool, 83.5% of Fed Fund Futures traders expect the federal funds interest rate to remain at 5.25-5.50% in the coming meeting in March, compared with 52.9% last week.

Market participants see technical support for the one-year dollar/rupee forward premium at 1.90%. At 1343 IST, the premium on the one-year, exact-period dollar/rupee forward contract was at 148.66 paise, against 146.50 paise at the close on Monday. On an annualised basis, the premium was at 1.78% against its previous close of 1.76%.  (Sourabh Kumar)

India Rupee: In thin band; FX inflows offset oil companies' dlr buys

MUMBAI - The rupee moved in a narrow range against the dollar today as banks' dollar sales for foreign fund inflows offset their dollar buys for oil marketing companies and importers, dealers said. The rupee has moved in 5 paise range so far.

"Some buying is there in the market for importers and oil companies, but it is not moving much due to some general inflows," a dealer at a state-owned bank said.

Banks bought dollars on behalf of oil marketing companies as they rushed to stock up on the commodity, noting a rise in crude oil prices. At 1331 IST, the April contract of Brent Crude oil on the Intercontinental Exchange was at $78.30 a barrel, compared with $77.99 a bbl on Monday and $77.33 a bbl on Friday. 

Further, the rupee also found some support as the dollar index came off slightly from the near three-month high it touched on Monday. Earlier, the dollar index strengthened on the back of strong service sector growth in the US for January, reinforcing expectation that the US Federal Reserve is unlikely to cut interest rates anytime soon, dealers said. 

The US non-manufacturing purchasing managers' index data for January was at 53.4 in January, against 50.5 the previous month. It was also higher than the forecast of 52.0 in a poll of economists by Reuters. A figure above 50 indicates expansion, while below indicates contraction. According to CME Group's FedWatch tool, fed fund futures traders are now pricing in only a 16.5% probability that the Fed will cut rates at its next meeting in March, compared with 40.4% chance a week ago.

At 1331 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.31 compared with 104.46 on Monday. It was at 103.97 on Friday. The index touched a near three-month high of 104.60 on Monday. 

Back home, a rise in domestic equities supported the Indian unit, dealers said. At 1308 IST, both the Sensex and Nifty 50 were 0.6% higher. 

Investors now await the Reserve Bank of India's Monetary Policy Committee meeting outcome on Thursday. According to an Informist Poll, the rate-setting panel is expected to keep the repo rate unchanged at 6.50%. 

For the rest of the day, the rupee is seen in the range of 82.90-83.20 against the dollar, dealers said. They pegged key technical support for the Indian currency at 83.30 a dollar. (Vaishali Tyagi)

India Rupee - Asia FX: Most up as dlr index eases from near 3-mo high

MUMBAI – Most Asian currencies were up against the dollar today as the dollar index came off slightly from the near three-month high it touched on Monday.

The dollar index hit a near three-month high after the services sector purchasing managers index rose more than expected. The non-manufacturing Purchasing Managers' Index, which the Institute of Supply Management released Monday, increased to 53.4 in January from 50.5 the previous month. The reading was also higher than 52.0, as projected by a Reuters poll. A figure above 50 indicates an expansion, while a reading below 50 indicates a contraction. 

According to CME Group's FedWatch tool, 83.5% of Fed Fund Futures traders expect the federal funds interest rate to remain at 5.25-5.50% in the coming meeting in March, compared with 52.9% last week.

At 1104 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.32 compared with 104.46 on Monday. It was at 103.97 on Friday. The index touched a near three-month high of 104.60 on Monday. 

Most Asian currencies were also supported by upbeat domestic equities. The Thai baht rose 0.3% against the US unit. The Thai Prime Minister Srettha Thavisin Monday said there should be coordination between fiscal and monetary policy after four consecutive months of negative inflation. He was in conflict with the country's central bank governor over a $14 bln cash handout plan.

The South Korean won and Taiwan dollar rose 0.3% and 0.1%, respectively, against the greenback. The Philippines peso was also up 0.1% against the greenback. The Philippines' annual inflation was at 2.8% in January, against the previous month’s 3.9%, the country's statistics agency said today.

Bucking the trend, the Malaysian ringgit and the Indonesian rupiah fell 0.3% and 0.1% respectively against the dollar.  (Sourabh Kumar)

India Rupee:Steady even as dlr hits 3-mo high post strong US econ data

MUMBAI – The rupee was steady against the dollar even though the dollar surged to a near three-month high on Monday after the services sector in the US expanded more than expected in January. This reinforced investors' expectations that the US Federal Reserve may not cut interest rates as soon as earlier expected, dealers said.

The US non-manufacturing purchasing managers index released by the Institute of Supply Management on Monday, increased to 53.4 in January from 50.5 the previous month. It was higher than the forecast of 52.0 in a poll of economists by Reuters. A figure above 50 indicates expansion and below 50 indicates contraction. 

According to CME Group's FedWatch tool, 85% of Fed Fund Futures traders expect the federal funds interest rate to remain at 5.25-5.50% in the coming meeting in March. However, 55.9% of them expect a 25-basis-point rate cut in May. At 0951 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.40 compared with 104.46 on Monday. It was at 103.97 on Friday. The index rose to a near three-month high of 104.60 on Monday.

"Dollar is growing stronger today after PMI data from the US and we are expecting it will be a good day for dollar/rupee pair, and we are also seeing some good support at 83.00 a dollar," a dealer at a big state-owned bank said.

A slight rise in oil prices also weighed on the Indian unit, dealers said. Crude oil prices rose about a dollar a barrel on Monday on concerns that escalating tensions in West Asia and Russia's ongoing invasion of Ukraine could curb global supplies. Investors remained apprehensive of any cease-fire announcement between Israel and Hamas. At 0944 IST, the April contract of Brent Crude oil on the Intercontinental Exchange was at $78.13 a barrel, compared with $77.99 a bbl on Monday and $77.33 a bbl on Friday.

"It (rupee) is around the same level where it closed yesterday and no significant movement has happened yet but today in the day we are expecting some buying (of dollars) as some outflows are likely to take place," a dealer at a big state-owned bank said. "We see that it (dollar/rupee pair) will follow the same pattern as it followed yesterday." 

Dealers speculated lack of exporters in the market as the current dollar/rupee levels are not particularly lucrative. 

Investors now await the Reserve Bank of India's upcoming Monetary Policy Committee meeting outcome on Thursday. According to an Informist Poll, the rate-setting panel is expected to keep the repo rate unchanged at 6.50%. 

For the rest of the day, the rupee is seen in the range of 82.90-83.30 against the dollar, dealers said. They pegged the key technical support for the Indian currency at 83.30 a dollar. (Vaishali Tyagi)

India Rupee: Expected range for rupee - Feb 6

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

(Vaishali Tyagi)

End

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

Edited by Tanima Banerjee

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