Informist, Monday, Feb 26, 2024

By Sourabh Kumar

MUMBAI – The rupee closed slightly higher against the dollar today as foreign banks sold dollars for inflows into the debt market, with inflows related to MSCI-rebalancing also aiding, dealers said. "We didn't see much buying or selling today, except for some inflows into the debt market," a dealer with a large state-owned bank said.

Today, the rupee moved in a range of 5 paise, before closing at 82.8900 a dollar, against Friday's close of 82.9375 a dollar. The rupee was again very contained in its movement after a comparatively wide variation in its movement last week, where it moved in a range of around 10 paise.

The rupee opened slightly higher against the greenback today, as foreign banks sold dollars for inflows into the debt market. After opening, the Indian unit was also supported by inflows on account of MSCI rebalancing. 

The Indian unit was found to be de-coupled from the equities market today, as a fall in domestic equities seemed to have no negative impact on the Indian currency, dealers said. The rupee touched a high of 82.86 a dollar and a low of 82.91 a dollar.

Today, the Sensex and Nifty 50 closed 0.5% and 0.4% down, respectively. Dealers said that this week, there are expectations of outflows from the equities market. "Goldman Sachs also weighed down on banking stocks, which they are saying are overvalued," the dealer said.

Goldman Sachs downgraded State Bank of India and ICICI Bank to "neutral" from "buy" earlier, and YES Bank to "sell" from "neutral" earlier. The foreign brokerage has slashed earnings estimates for Indian banks and non-banking finance companies across the coverage universe by an average of 5% for 2024-25 (Apr-Mar).

Continuing from last week, the rupee again closed above 83.00 a dollar today. This coincides with continuous inflows seen in the debt market for the last couple of weeks. 

While the day was mostly dull for dealers, they were able to have some moments of joy, as a few traders demanded dollars for buying gold. With the demand for greenback amping up towards the end of the day, generally the rupee was experiencing some support from exporters, who would sell dollars around 82.96-82.97 a dollar, dealers said. However, today exporters sold dollars around 82.91 a dollar, they said.

Apart from inflows, the rupee was supported by a fall in crude oil prices. The US crude oil stockpiles rose last week, according to the Energy Information Administration on Thursday. This led to a fall in crude futures. 

Crude oil futures also fell as US Federal Reserve Governor Christopher Waller on Thursday said the central bank should consider delaying rate cuts for a few months to see if the recent rise in inflation signals stalling progress toward price stability or is just a bump in the road. 

"I am going to need to see at least another couple more months of inflation data before I can judge whether January was a speed bump or a pothole," Waller said. At 1609 IST, the April contract of Brent crude oil on the Intercontinental Exchange was at $81.24 a bbl, compared with $81.62 a bbl on Friday and $83.67 a bbl on Thursday.

While inflows and lower crude oil futures supported the rupee, a firm dollar index weighed on it. The dollar index remained firm ahead of a slew of economic data due this week. A firm dollar index is expected to weigh on the rupee. The US core personal consumption expenditures price index, the Fed's preferred measure of inflation, is due Thursday. It is expected to increase by 0.4% on a monthly basis, as per Reuters. 

At 1610 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.80 compared with 103.96 on Friday. It was 103.93 on Thursday.

Further, inflation figures from the eurozone, Japan, and Australia are also due to be released this week. China's purchasing managers' index is also due this week. Data on Japan's nationwide consumer prices, due Tuesday, is forecast to show core inflation slowing to 1.8% on year in January, the lowest since March 2022, complicating Bank of Japan's plans to end negative interest rates in the coming months.

The rupee is expected to come under pressure as inflation data for the US is due this week, dealers said. "US PCE (personal consumption expenditure) is also due, and the rupee might see some sort of depreciation," the dealer said. "We think Thursday overnight rupee might go to around 83.10 a dollar, so on Friday we may see rupee moving around that level."

From now on, the dollar should weaken as different data from around the world will start coming out, thus proving to be a positive period for the Indian unit, dealers said. Dealers also said they are awaiting the Reserve Bank of India's decision on delivery of the swap maturing on Mar 11.

FORWARDS

Premiums on one-year dollar/rupee forward contracts rose tracking a fall in US Treasury yields, dealers said. 

The premium on the one-year, exact-period dollar/rupee forward contract was 143.55 paise, up from 142.56 paise at Friday's close. On an annualised basis, the premium was 1.73%, up from 1.71% at the previous day's close.

Market participants see technical resistance for the one-year dollar/rupee forward premium at 1.70%.

OUTLOOK

On Tuesday, the rupee will take cues from movement of the dollar index and crude oil prices, dealers said. During the day, the rupee is seen in a range of 82.80-83.30 a dollar, with key technical resistance pegged at 82.80 a dollar.

India Rupee:Premiums rise as US ylds fall before consumption data Thu

MUMBAI – Premiums on one-year dollar/rupee forward contracts were up today tracking a sharp fall in US Treasury yields ahead of US personal consumption expenditure data on Thursday, dealers said.

"In the near term, they (premiums) are slightly higher as I think receiving will continue as US yields are down ahead of data this week as we are looking for more cues from the US Federal Reserve," a state-owned bank said. The yield on the benchmark 10-year US Treasury note was at 4.26%, down 7 basis points on Friday.

The US core personal consumption expenditures price index, the Fed's preferred measure of inflation, is expected to rise by 0.4% on a monthly basis in January, as per Reuters poll.

Market participants are currently pricing in a 54% chance of a rate cut by the Fed in June, according to the CME Fed Watch Tool. Earlier, there were expectations of a rate cut in May.

However, in a policy speech in Minneapolis on Thursday, US Fed Governor Christopher Waller said higher-than-expected inflation readings for January had raised questions about where prices are headed and how the US Fed should respond. Data released on Tuesday showed that the US consumer price index rose 0.3% month on month in January and was up 3.1% from the same period a year ago, both higher than expected.

Back home, some banks sold dollars for forward delivery, which checked the premiums from rising further, dealers said. 

On the data front, inflation numbers from the eurozone, Japan, and Australia are due this week. China's purchasing managers' index is due this week as well. Data on Japan's nationwide consumer prices, due Tuesday, is forecast to show core inflation slowing to 1.8% on-year in January, the lowest since March 2022, affecting Bank of Japan's plans to migrate to a positive interest rate policy in the coming months.

At 1421 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 144.05 paise, against 142.56 paise on Friday. On an annualised basis, the premium was 1.73% against the previous day's close of 1.71%. (Vaishali Tyagi)

India Rupee: Tad up as foreign bks sell dlrs for inflows in debt mkt

MUMBAI – The rupee was slightly higher against the dollar as foreign banks sold dollars into the debt market, dealers said. They said that a few foreign banks might also have sold the greenback for inflows, which were expected to come post the MSCI rebalancing.

"It (rupee) is moving in just 2-3 paise range today, and it seems there are some MSCI-related inflows," a dealer with a state-owned bank said. "We expected around 200-300 mln dollars of MSCI inflows today."

With domestic equities falling since the morning, dealers expected some outflows out of it, thus weighing on the rupee. However, the rupee seems to be de-coupled from equities market. "Equities were overheating, so we thought some outflows from it might affect the rupee (negatively), but we haven't seen it yet," the dealer said.

While equities may be putting some pressure on the rupee with MSCI-related inflows negating it to an extent, a firm dollar index at the start of a data-packed week limited the rupee's gains. The US core personal consumption expenditures price index, the Federal Reserve's preferred measure of inflation, is due Thursday. It is expected to increase by 0.4% on a monthly basis, as per Reuters. At 1244 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.91 compared with 103.96 on Friday. It was 103.93 on Thursday.

A fall in crude oil prices acted as a supporting factor to the rupee's movement against the dollar. The US crude oil stockpiles rose last week, according to the Energy Information Administration on Thursday. This led to a fall in crude futures. Crude oil futures also fell as US Federal Reserve Governor Christopher Waller on Thursday said the central bank should consider delaying rate cuts for a few months to see if the recent rise in inflation signals stalling progress toward price stability or is just a bump in the road. At 1251 IST, the April contract of Brent crude oil on the Intercontinental Exchange was at $81.56 a bbl, compared with $81.62 a bbl on Friday and $83.67 a bbl on Thursday.

For the rest of the day, the rupee is seen in the range of 82.80-83.20 against the dollar, dealers said. They pegged the key technical resistance for the Indian currency at 82.80 a dollar.  (Sourabh Kumar)

India Rupee - Asia FX: Down on firm dollar ahead of key econ data

MUMBAI – Most Asian currencies were down against the dollar as the dollar index remained firm ahead of a week packed with key economic data releases which may provide further clues on the global interest rate outlook, with the US inflation reading taking centre stage.

Further, the dollar index also remained firm as central bank policymakers indicated interest rate cuts could be delayed by at least two more months.

The US Federal Reserve policymakers should delay interest rate cuts by at least another couple of months, said US Fed Governor Christopher Waller, which could slow economic growth and curb oil demand. In a policy speech delivered in Minneapolis, he said higher-than-expected inflation readings for January raised questions about where prices are heading and how the US Fed should respond. The consumer price index in the US, released Tuesday, showed that it rose 0.3% in January and was up 3.1% from the same period a year ago, both higher than expected. 

The Indonesian rupiah weakened 0.2% against the greenback. The South Korean won fell 0.1% against the dollar as South Korea's finance minister said the government's corporate reform plan would continue in steps until the "Korea discount" in the local stock market is resolved. The government is scheduled to unveil details of a "Corporate Value-up Programme" on Monday, which led the stock market's recent rally to a 20-month-high.

The Philippines peso was 0.1% down against the dollar. The Philippines is expecting World Trade Organzation ministers to forge agreements on the key fishing and agricultural industries that will address sustainability and food security, a government official has said. 

The Taiwan dollar, Malaysian ringgit and Thai baht remained largely flat against the dollar.

Further, inflation figures from the eurozone, Japan and Australia are also on the calendar this week. China's purchasing managers' index is due this week as well. Data on Japan's nationwide consumer prices, due Tuesday, is forecast to show core inflation slowing to a 1.8% on-year in January, the lowest since March 2022, complicating Bank of Japan's plans to end negative interest rates in the coming months. (Vaishali Tyagi)

India Rupee: Tad up as crude falls 3% Fri, consolidates in new range

MUMBAI – The rupee was slightly up against the dollar as crude oil futures fell post US Federal Reserve Governor Christopher Waller's comments on Thursday, dealers said.

"It (rupee) is expected to be range-bound today," a dealer with a state-owned bank said. "Today as well, they (Reserve Bank of India) are expected to buy (dollars), as was the case for the past couple of days." The rupee has now found a new home at around 82.90 a dollar after closing at over 83.00 a dollar almost every day in the recent past, dealers said.

Crude oil futures fell as US Federal Reserve Governor Christopher Waller on Thursday said the central bank should consider delaying rate cuts for a few months to see if the recent rise in inflation signals stalling progress toward price stability or is just a bump in the road. "I am going to need to see at least another couple more months of inflation data before I can judge whether January was a speed bump or a pothole," Waller said. At 0915 IST, the April contract of Brent crude oil on the Intercontinental Exchange was at $81.22 a bbl, compared with $81.62 a bbl on Friday and $83.67 a bbl on Thursday.

The dollar index has remained firm ahead of a slew of economic data due this week. A firm dollar index is expected to weigh on the rupee. The US core personal consumption expenditures price index, the Fed's preferred measure of inflation, is due Thursday. It is expected to increase by 0.4% on a monthly basis, as per Reuters. At 0916 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.99 compared with 103.96 on Friday.

Further, inflation figures from the eurozone, Japan and Australia are also in the data calendar this week. China's purchasing managers' index is due this week as well. Data on Japan's nationwide consumer prices, due Tuesday, is forecast to show core inflation slowing to 1.8% on-year in January, the lowest since March 2022, complicating the Bank of Japan's plans to migrate to a positive interest rate policy in the coming months.

For the rest of the day, the rupee is seen in the range of 82.80-83.20 against the dollar, dealers said. They pegged the key technical resistance for the Indian currency at 82.80 a dollar.  (Sourabh Kumar)

India Rupee: Expected range for rupee - Feb 26

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)

End

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

Edited by Manisha Baxla

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