Informist, Tuesday, Feb 13, 2024

By Sourabh Kumar

MUMBAI – The rupee closed flat against the dollar as trading in the market was dull with many participants refraining from placing large bets ahead of the release of US CPI data for January later today, dealers said.

"The market was pretty flat today as well," a dealer at a state-owned bank said. "US CPI is awaited, and the rupee doesn't seem (likely) to break this 82.90-83.10 range in the near term."

Today, the rupee moved in a narrow range of 5 paise and ended the trading day at 83.0025 a dollar. The rupee has been trading steady against the greenback as the time for the release of US Jan CPI data nears.

The Indian unit was steady in the morning as well, and remained range-bound throughout the day. It touched a high of 82.9800 a dollar and a low of 83.0275 a dollar. Investors did not seem to pay heed to India's CPI for January, released Monday, as the rupee did not budge after the data came out, dealers said.

India's retail inflation rate based on CPI fell to a three-month low of 5.10% in January from 5.69% in December. A fall in the pace of inflation paves the way for the Reserve Bank of India to cut interest rates, at a time when central banks across the world are similarly mulling a cut in rates with inflation cooling in their respective countries.

The rupee is likely to be affected if the release of US CPI data should throw up unexpected figures. A Reuters poll for US CPI for January projected a 0.2% monthly rise, while core CPI was expected to be up 0.3%. On an annual basis, CPI is likely to rise 3.0%, down from 3.4% in December, and core CPI is forecast to rise 3.8%, down from 3.9% in December.

A fall in the pace of inflation indicates a cooling of the economy, which could further cement investors' expectations of a rate cut as early as May by the US central bank. Fed funds futures traders see around 50% chance of a rate cut at the US Federal Open Market Committee's May meeting.

The dollar index remained steady ahead of the release of US CPI data. At 1545 IST, the index, which measures the strength in the greenback against a basket of six major currencies, was at 104.17 compared with 104.13 on Monday. It was at 104.08 on Friday.

A rise in domestic benchmark indices supported the rupee today. The BSE Sensex and the Nifty 50 ended 0.7% and 0.6% higher, respectively.

Oil prices were up slightly as traders were cautious of the situation in West Asia after Israel announced that it had completed its air strikes in Rafah, a southern city in the Gaza Strip. At 1552 IST, the April contract of Brent crude oil on the Intercontinental Exchange was at $82.66 a barrel, compared with $82.00 a bbl Monday, and $82.19 a bbl Friday.

As far as movement in the near-term rupee is concerned, dealers expect the inclusion of five more companies in the MSCI index to lead to greater inflows into the country, supporting the local unit. Today, MSCI announced the addition of five companies to its Global Standard (Emerging Markets) index, which is expected to bring flows of $800 mln-$1 bln into India. The changes in the index will come into effect from Mar 1, after which India's weightage in the index will rise to 18.2%, next only to China.

Market participants will also be looking at fresh comments from Federal Reserve officials lined up this week, which may hint at the rate cut trajectory in the world's largest economy.

FORWARDS

Premiums on one-year dollar/rupee forward contracts were broadly steady as the yield on the 10-year benchmark US Treasury note did not move with investors awaiting US CPI data for January, 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 1556 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 151.04 paise, against 149.73 paise at Monday's close. On an annualised basis, the premium was 1.80%, the same as the previous day's close of 1.80%.  

OUTLOOK

On Wednesday, the rupee will take cues from movement in the dollar index, which in turn will take its cues from the US Jan CPI data, dealers said. The Indian unit will also track the movement in crude oil prices, they said.

During the day, the rupee is seen in a range of 82.90-83.30 a dollar, with key technical resistance pegged at 82.90 a dollar.

India Rupee - World FX: Yen falls 0.2% ahead of US Jan CPI data

MUMBAI – The Japanese yen fell 0.2% against the dollar as the dollar index remained firm on caution ahead of the release of US CPI data for January. The Japanese unit also fell as Bank of Japan Deputy Governor Shinichi Uchida's recent statements indicated a reluctance to pursue aggressive tightening even after the abandonment of negative interest rates.

At 1521 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.25 compared with 104.13 on Monday. It was at 104.08 on Friday. A Reuters poll on US CPI for January projected a 0.2% monthly rise, while core CPI was expected to rise 0.3%. On an annual basis, CPI is likely to rise 3.0%, down from 3.4% in December, and core CPI is forecast to rise 3.8%, down from 3.9% in December.

Investors are currently pricing in a 13.5% chance of a rate cut in March and about 49.8% in May, according to the CME Group's FedWatch Tool.

The Australian dollar slipped 0.2# against the US currency despite the release of improved Australia Consumer Confidence data on Tuesday. Australian consumer sentiment rebounded to a 20-month high in February. The euro slipped 0.1% against the dollar ahead of the eurozone Oct-Dec flash estimate GDP due Wednesday.

The pound rose 0.2% against the dollar as the unemployment rate in the UK fell to 3.8% from 3.9% in December.

The Canadian dollar was largely steady against the dollar.  (Vaishali Tyagi)

India Rupee: Premiums steady ahead of US CPI due later today

MUMBAI - Premiums on one-year dollar/rupee forwards contracts were steady today, as the 10-year benchmark US Treasury yield did not move with investors awaiting the US CPI data for January due later in the day, dealers said.

"Premiums are largely steady, however, there is some receiving in the long-term contract," a dealer with a large state-owned bank said. "But the near-term contract is low because of the liquidity deficit."

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. Investors have remained cautious ahead of the US CPI data, a dealer said. A Reuters poll for US CPI for January projected a 0.2% monthly rise, while core CPI was expected to be up 0.3%. On an annual basis, CPI is likely to rise 3.0%, down from 3.4% in December, and core CPI is forecast to rise 3.8%, down from 3.9% in December.

Today, MSCI announced the addition of five new companies to its Global Standard (Emerging Markets) index, which is expected to bring inflows to the tune of $800 mln-$1 bln in India. The changes in the index will come into effect from Mar 1. After the inclusion, India's weightage in the index will increase to 18.2%, second to China. The inflows may not have much effect on the one-year dollar/rupee forward contract, dealers said.

"It (MSCI-linked inflows) may not affect much because if they (foreign investors) are coming, they won't just come to be invested for one year," Arnob Biswas, a dealer with SMC securities said. "They will probably remain invested for two or three years, so they will hedge accordingly."

Market participants will be looking at fresh comments from the US Federal Reserve officials lined up this week, which may also hint at the rate cut trajectory in the world's largest economy.

At 1339 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 151.29 paise, against 149.73 paise at Monday's close. On an annualised basis, the premium was 1.80%, the same as the previous day's close of 1.80%.  (Sourabh Kumar)

India Rupee: Steady amid low volumes, market awaits US Jan CPI data

MUMBAI - The rupee remained stable today against the dollar as volumes in the currency market remain subdued ahead of the crucial US CPI data for January later today, which could influence the US Federal Reserve's decision on interest rates, dealers said.  

"There is very low volume today in the market, barely any buyers and sellers are there as everyone has an eye on US inflation data," a dealer at a state-owned bank said. 

The dollar was largely steady ahead of the release of US CPI data. At 1230 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.16 compared with 104.13 on Monday. It was at 104.08 on Friday.

A Reuters poll on US CPI for January projected a 0.2% monthly rise, while core CPI was expected to be up 0.3%. On an annual basis, CPI is likely to rise 3.0%, down from 3.4% in December, and core CPI is forecast to rise 3.8%, down from 3.9% in December.

Investors are currently pricing in a 13.5% chance of a rate cut in March and about 49.8% in May, according to CME's FedWatch tool.

The rupee did not show any significant movement after the release of India's CPI data for January, post market hours on Monday. India's retail inflation rate based on CPI fell to a three-month low of 5.10% in January from 5.69% in December. 

Traders are abstaining from any activity as they expect the US CPI to lend them some cues about shaping their expectations on when the Federal Reserve will cut interest rates. "Importers are looking for 82.82-82.85 rupees a dollar level as they expect it (rupee) will appreciate in near time, but at the same time I see exporters will come around 83.18-83.20 a dollar level, let's see when it happens," a dealer at a state-owned bank said.

Morgan Stanley's announcement of adding five new companies to its index is projected to bring in inflows of approximately $800 mln to $1 bln in India, with the changes taking effect from Mar 1. "Yes, some MSCI inflows are expected towards the end of the month," the dealer said. 

A rise in domestic equities supported the Indian unit. At 1241 IST, Sensex and NIFTY 50 were 0.3% and 0.1% higher, respectively. 

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 key technical resistance for the Indian currency at 82.90 a dollar.  (Vaishali Tyagi)

India Rupee - Asia FX: Most units up ahead of US CPI data

MUMBAI – Most Asian currencies rose against the dollar as some market participants returned after the Lunar New Year holidays ahead of the release of the US CPI data, due later today. However, the dollar index remained firm on caution before the crucial US economic data release.

At 1019 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.23 compared with 104.13 on Monday. It was at 104.08 on Friday. A Reuters poll for US CPI for January projected a 0.2% monthly rise, while core CPI was expected to be up 0.3%. On an annual basis, CPI is likely to rise 3.0%, down from 3.4% in December, and core CPI is forecast to rise 3.8%, down from 3.9% in December.

The South Korean won rose 0.3% against the dollar as the country's market rose after it returned to trade after the Lunar New Year holiday. The Philippines peso was steady against the greenback. The Philippines is likely to introduce a non-Blockchain-based central bank digital currency within two years, its central bank Governor said on Monday. The Thai baht and Indonesian rupiah rose 0.3% and 0.1%, respectively, against the greenback.  (Sourabh Kumar)

India Rupee: Steady; MSCI rebalance-linked inflows may aid this week

MUMBAI – The rupee was steady against the dollar ahead of the release of the US CPI data, due later today, dealers said. The rupee is not expected to move much after the release of the data, provided the CPI comes as expected, they said.

"Inflation data is expected today. However, I don't expect a major movement in the rupee," a dealer with a state-owned bank said. "If it comes as expected, the rupee will be range-bound, moving 10 paise throughout the day."

The dollar index remained firm before the release of the US CPI data. At 0917 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.24 compared with 104.13 on Monday. It was at 104.08 on Friday. A Reuters poll for US CPI for January projected a 0.2% monthly rise, while core CPI was expected to be up 0.3%. On an annual basis, CPI is likely to rise 3.0%, down from 3.4% in December, and core CPI is forecast to rise 3.8%, down from 3.9% in December.

The rupee did not budge after the release of India CPI data for January on Monday evening. India's retail inflation rate based on CPI fell to a three-month low of 5.10% in January from 5.69% in December. 

Today, Morgan Stanley announced the addition of five new companies to its Morgan Stanley Capital International index, which is expected to lead to inflows to the tune of around $800 mln-$1 bln in India. The changes in the index will come into effect by Mar 1. "MSCI inflows might come later this week, probably Friday," the dealer said. 

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 key technical resistance for the Indian currency at 82.90 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Feb 13

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

(Sourabh Kumar)

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

Edited by Rajeev Pai

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