Informist, Monday, Aug 14, 2023

By Pratiksha

NEW DELHI – Even though the Reserve Bank of India tried keeping the Indian rupee afloat through persistent dollar sales, the rupee ended near a 10-month low today due to broad dollar strength and a slump in the offshore Chinese yuan, dealers said.

After falling 0.1% against the dollar, the rupee settled at 82.9500, the lowest level since Oct 19. On Friday, it had settled at 82.8450 a dollar. However, the rupee emerged as the best performing currency among its Asian peers today. The Philippine peso was the worst performing emerging market unit, as it fell 0.9% against the greenback. 

The domestic unit began the day below the psychologically-significant 83-per-dollar mark, and further slipped to 83.07, as the dollar index scaled an over one-month high early in the trade.

The dollar index rose after higher-than-expected US producer prices in July fuelled concerns that the Federal Reserve may keep interest rates high for a prolonged period.

According to the data, the US producer price index rose 0.3% on month in July, the highest monthly increase since January. The revised reading for June remained unchanged. Analysts had expected producer prices to rise 0.2% on month, compared with the 0.1% uptick originally reported for June.

Fed fund futures traders are now pricing in a near 89% chance of the Fed standing pat on interest rates at its meeting next month, the CME FedWatch tool showed.

At 1635 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.85 as against 102.85 on Friday. It was at 102.63 on Thursday. The index rose to a high of 103.02 earlier today.

The offshore Chinese yuan fell to an over six-week low against the dollar due to growing concerns over worsening economic conditions in the country. Shares of Country Garden, one of the country's biggest property developers, slumped to a new record low today after the company said it will suspend trading in its onshore bonds amid growing debt problems. This weighed on Asian currencies, including the Indian unit, dealers said.

However, shortly after opening, the Indian currency pared some of its losses as some state-owned banks stepped in to sell dollars on behalf of the RBI around the 83.07 level, dealers said.

"RBI was there in the market after the 83 level broke, so looks like they are still not comfortable with the 83 level," said a dealer with a state-owned bank. "Nats (nationalised banks) were continuously selling (dollars) in the market."

Some banks sold the greenback on behalf of exporters, which also aided the Indian unit, dealers said. However, dealers said fewer numbers of exporters were willing to sell around the current levels as they expect the rupee to depreciate further going ahead.

"Exporters are in such confident mode that they are not selling aggressively. They are looking for more upside (in the dollar/rupee). Premiums are also low," said Arnob Biswas, head FX research at SMC Global Securities. 

Some banks bought the US unit on behalf of foreign portfolio investors and oil market companies, which weighed on the local unit, dealers said. 

Dealers said most traders refrained from taking large positions in a truncated week. Indian financial markets are closed on Tuesday for Independence Day and money markets will remain shut on Wednesday as well for Parsi New Year.

The dollar index eased during European trade, which also gave support to the Indian unit, dealers said.

FORWARDS

Premiums on one-year dollar/rupee forward contracts ended at an over five-week low tracking a jump in US Treasury yields, dealers said. US Treasury yields rose as producer price inflation for July was higher than economists' expectations.

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

"Both importers and exporters are not hedging a lot in premiums currently. Importers are not paying because the spot rate is not supportive and exporters are not receiving because the premium levels are unattractive," said a dealer with a brokerage firm.

The premium on the one-year dollar/rupee contract was 130.48 paise, against 134.77 paise on Friday. On an annualised basis, the premium was at 1.56%, against the previous close of 1.61%.

OUTLOOK

On Thursday, the rupee will take cues from the dollar index after the minutes of the Fed's July meeting are released on Wednesday, dealers said. The local unit will also take cues from the movement in crude oil prices, dealers said.

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

Dealers have pegged immediate key technical support for the rupee at 83.10 a dollar. During the day, the rupee is seen in the range of 82.70-83.10 a dollar.

India Rupee - World FX:Yen flat as BoJ intervenes, dlr up on firm PPI

MUMBAI – The Japanese yen was flat against the dollar after falling on Friday as the Bank of Japan offered unlimited Japanese government bonds with 5-10 years of residual maturity at a fixed rate earlier today. With this, the Japanese central bank seeks to tame yields on key government bonds to put a floor on the Japanese yen.

The dollar rose against most major currencies after higher-than-expected US producer prices in July fuelled concerns that the Federal Reserve may keep interest rates higher for longer.

According to the data, the US producer price index rose 0.3% on month in July, the highest monthly increase since January. Meanwhile, the revised reading for June remained unchanged. Analysts had expected producer prices to rise 0.2% on month, compared with the 0.1% uptick originally reported for June.

Fed fund futures traders are now pricing in an 89% chance of the Fed standing pat on interest rates at its meeting next month, the CME FedWatch tool showed.

At 1431 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.81 as against 102.85 on Friday. It was at 102.63 on Thursday. The index rose to a high of 103.02 earlier today.

The South Korean won was down 0.4% against the dollar. The Australian dollar and the pound sterling were down 0.1% each. (Kabir Sharma)

India Rupee: In thin band; oil cos' dlr buys offset RBI's dlr sales

MUMBAI – The rupee was in a narrow range against the dollar as banks' dollar purchases on behalf of oil marketing companies was offset by their sales of the greenback likely on behalf of the Reserve Bank of India, dealers said. 

"There are OMCs (oil marketing companies) that are buying, but there is strong resistance at around 83.00 a dollar level," a dealer with a large state-owned bank said. "It (rupee) is tracking dollar strength and the massive fall in (Chinese) yuan."

The rupee fell to its lowest level since Oct 20 as the dollar index rose to an over-a-month high after higher-than-expected US producer prices in July fuelled concerns that the Federal Reserve may keep interest rates high for a prolonged period.

According to the data, the US producer price index rose 0.3% on month in July, the highest monthly increase since January. Meanwhile, the revised reading for June remained unchanged. Analysts had expected producer prices to rise 0.2% on month, compared with the 0.1% uptick originally reported for June.

Fed fund futures traders are now pricing in a nearly 89% chance of the Fed standing pat on interest rates at its meeting next month, the CME FedWatch tool showed.

At 1357 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.81 as against 102.85 on Friday. It was at 102.63 on Thursday. The index rose to a high of 103.02 earlier today.

Some banks bought the greenback on behalf of oil marketing companies which also weighed on the rupee, dealers said. However, some banks sold dollars for exporters which supported the Indian unit, they said. 

Market participants are now awaiting the release of the minutes of the Federal Reserve's last meeting, due Wednesday, for more cues on the central bank's rate hike cycle.

Dealers pegged the immediate key technical support for the rupee at 83.05 a dollar. During the day, the rupee is seen in the range of 82.80-83.10 a dollar. (Kabir Sharma)

India Rupee: Recoups some losses as PSU bks sell dlrs, likely for RBI

NEW DELHI – The rupee recouped some losses and moved above the psychologically-crucial 83-per-dollar mark against the dollar as some state-owned banks stepped in to sell the greenback, likely on behalf of the Reserve Bank of India, dealers said.

"The rupee breaching the 83 (a dollar) mark was not much of a surprise for the market considering the dollar index level," said a dealer with a big state-owned bank. "But we are expecting that RBI will keep selling (dollars) beyond 83 to manage volatility. Importers and exporters may stay on the sidelines today."

Today, the rupee opened at 83.0100 a dollar and further slipped to 83.07, its lowest level since Oct 20, as the dollar index touched an over one-month high in early trade. 

The dollar index gained after higher-than-expected US producer prices in July fuelled concerns that the Federal Reserve may keep interest rates high for a prolonged period.

According to the data, the US producer price index rose 0.3% on month in July, the highest monthly increase since January. Meanwhile, the revised reading for June remained unchanged. Analysts had expected producer prices to rise 0.2% on month, compared with the 0.1% uptick originally reported for June.

Fed fund futures traders are now pricing in a nearly 89% chance of the Fed standing pat on interest rates at its meeting next month, the CME FedWatch tool showed.

At 0940 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.99 as against 102.85 on Friday. It was at 102.63 on Thursday. The index rose to a high of 103.02 earlier today.

A slump in domestic share indices also weighed on the Indian unit, dealers said. At 0940 IST, the Nifty 50 and Sensex were down 0.6% and 0.7%, respectively.

Market participants are now awaiting the release of the minutes of the Federal Reserve's last meeting, due Wednesday, for more cues on the central bank's rate hike cycle.

Dealers pegged the immediate key technical support for the rupee at 83.10 a dollar. During the day, the rupee is seen in the range of 82.80-83.10 a dollar. (Pratiksha)

India Rupee: Expected range for rupee - Aug 14

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

(Pratiksha)

India Rupee - Asia FX: Dn as dlr surges on higher-than-view US PPI

MUMBAI – Most Asian currencies were down against the dollar as the greenback strengthened after the release of higher-than-expected US producer price index data on Friday. 

The US producer price index rose 0.3% on month in July, the Bureau of Labor Statistics reported. This was the highest monthly increase since January. Meanwhile, the revised reading for June remained unchanged. Economists had expected the producer prices to inch up by 0.2% on month compared with the 0.1% uptick originally reported for June.

The producer price index gauges the costs that goods and services producers receive for their products as opposed to those that consumers pay.

The core producer price index, which excludes food and energy, also increased 0.3%, the highest monthly increase since November, after falling 0.1% in June. On a yearly basis, the core producer price index rose 2.4%, the lowest since January 2021.

The higher-than-expected data prompted fears that the US Federal Reserve may keep the rates higher for longer. The CME FedWatch tool showed that 90.0% of Fed fund futures traders now expect the central bank to maintain status quo at its September meeting, while the rest expect a 25-basis-point rate hike.

At 0818 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.98 as against 102.85 on Friday. It was at 102.63 on Thursday.

The Philippine peso headlined the losses and was down 1% against the dollar. The Indonesian rupiah was down 0.7%. 

The South Korean won, and the Malaysian ringgit were down 0.5% and 0.4%, respectively, against the dollar. (Kabir Sharma)

End

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

Edited by Ashish Shirke

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