Informist, Thursday, Oct 14, 2021

By Arushi Jain

MUMBAI – The rupee rose against the dollar for the second straight session today because the US currency slumped as investors worldwide were concerned that the rising inflation in the US is likely to hasten rate hikes around the world, said dealers.

The Indian currency strengthened also because of a sharp rise in equities, dealers said.

The benchmark indices Nifty 50 and Sensex ended higher by nearly 1% each.

"Persistently higher crude prices and local energy crisis coupled with weaker rupee did very little to impact investor confidence in Indian equities," said a dealer with a brokerage.

After moving within a narrow range of nearly 16 paise, the Indian currency closed at 75.2550 a dollar today compared with 75.3650 at 1530 IST on Wednesday.

The local unit had opened higher at 75.2700 a dollar today after the US unit weakened against major currencies in early trade because data on consumer prices fuelled concern among investors that inflation may continue to surge in the world's largest economy, said dealers.

On Wednesday, the US Labor Department reported that the consumer price index rose to 0.4% in September, compared with the 0.3% rise estimated by Dow Jones. 

On an annual basis, inflation edged up to 5.4% in September from 5.3% in August, more than double the US Federal Reserve's average inflation target of 2%.

As a result, the dollar fell nearly 0.8% from the previous close.

At 1635 IST, the dollar index, which measures the US currency against six other major units, was at 93.83 compared with 94.52 on Wednesday, and unchanged from Tuesday.

Meanwhile, the Federal Open Market Committee's September meeting indicated that the Fed could begin to taper its massive $120 bln bond-buying programme in mid-November or mid-December.

Policymakers also talked about the timing and structure of reducing bond buying where officials discussed monthly reductions in the pace of asset purchases--by $10 bln in the case of Treasury securities and $5 bln in the case of agency mortgage-backed securities.

"Higher US inflationary pressures weakened the US dollar, strengthened the euro and precious metals, stoking expectations the Fed will announce a tapering of stimulus next month," said a dealer with a foreign bank.

Separately, data showed that China's producer price index soared 10.7% in September as compared to a year ago, slightly above the 10.5% increase estimated by a Reuters poll.

Investors now wait for data on producer prices and jobless claims in the US, due later today, for further cues on the pace of global economic recovery.

Back home, trade volumes were lower than usual because currency traders refrained from placing fresh bets on either side of the rupee ahead of an extended weekend. Financial markets will remain shut on Friday on account of Dussehra.

However, during early trade, some banks sold dollars for the weekly currency futures expiry, which provided further support to the local unit, said dealers.

The rupee saw the day's high at 75.2050 a dollar today.

On the flip side, the rupee could not rise further because some banks continued to purchase dollars on behalf of oil marketing companies noting elevated Brent crude prices, said dealers.

At 1635 IST, the December contract of Brent crude on the Intercontinental Exchange was at $84.26 per barrel, compared with $83.18 a bbl at close on Tuesday.

"Over the next week, dollar/rupee may continue to see more range bound price action between 75/$1 and 75.80/$1 levels in October futures," said Anindya Banerjee, deputy vice president, currency derivatives and interest rate derivatives at Kotak Securities Ltd.

"For dollar/rupee to break down below 75/$1 or challenge 76/$1, it needs either the dollar index to head lower or equity markets to head lower."

FORWARDS

The premium on dollar/rupee forwards contract ended a tad up in low trade because banks purchased dollars for forward delivery on behalf of importers, dealers said.

On an annualised basis, premium on the one-year, exact-period dollar/rupee contract was at 4.46%, against 4.45% on Wednesday. The premium was at 335.39 paise, compared with 335.54 paise on Wednesday.

OUTLOOK

On Friday, domestic financial markets will remain shut for Dussehra.

The rupee will take opening cues from overnight movement in the dollar index and US bond yields on Monday.

The rupee may not rise sharply as foreign and state-owned banks are expected to continue to buy dollars on behalf of oil marketing companies noting elevated Brent crude oil prices, said dealers.

The rupee is seen in the 75.1000-75.5000 a dollar range during the day.

India Rupee: Rises as dollar falls globally, equities strengthen

MUMBAI – The rupee rose against the dollar today because the dollar index fell in early trade after data on consumer prices fuelled concerns among investors that inflation may continue to rise in the US, said dealers.

The US Labor Department on Wednesday reported that consumer price index rose to 0.4% in September, compared to the 0.3% estimated by Dow Jones. The pace of inflation over the past year edged up to 5.4% in September from 5.3% in August.

At 1030 IST, the dollar index, which measures the US currency against six other major units, was at 94.06 compared with 94.52 on Wednesday, unchanged from Tuesday.

"Although the dollar index retreated from recent highs, Fed’s confidence in beginning the bond tapering and persistently higher inflation may soon lead to another rally in the dollar or at least keep it above the 94.00 mark," said a dealer with a brokerage.

Meanwhile, minutes of the Federal Open Market Committee's September meeting released on Wednesday hinted that the US Federal Reserve could begin to taper its massive bond-buying programme for the economy in mid-November.

A rise in domestic benchmark indices also supported the Indian unit, according to dealers.

At 1030 IST, the Nifty 50 and the Sensex were up over 0.6% and 0.5%, respectively.

Some banks sold dollars ahead of the weekly currency futures expiry today, which provided further support to the local unit, said dealers.

However, gains in the Indian rupee were limited as some banks stepped in to purchase dollars on behalf of oil marketing companies noting elevated Brent crude prices, said dealers.

At 1030 IST, the December contract of Brent crude on the Intercontinental Exchange was at $83.76 per barrel, compared with $83.18 a bbl at close on Tuesday.

The Indian unit is expected to move in a range of 75.10-75.40 a dollar during the day.  (Arushi Jain)

India Rupee - Asia FX: Most units up as US yield, dollar fall

NEW DELHI – Most Asian currencies were up against the dollar in early trade today after the yield on the 10-year benchmark US Treasury note settled lower on Wednesday despite the data on consumer prices fuelled concerns that inflation will continue to climb and the Federal Reserve will be forced to tighten its monetary policy.

The dollar also fell after minutes from the US central bank's September meeting released on Wednesday indicated that policymakers might begin to taper their support measures for the economy in November, but remained split over how big of a threat high inflation represents and how soon they may need to raise rates in response. 

At 0956 IST, the dollar index, which measures the US currency against six other major units, was at 94.04 compared with 94.52 on Wednesday. It was at 94.52 on Tuesday.

The Korean won jumped the most at 0.5%, buoyed by its recent job data which showed the country's largest job growth in more than seven years in September. (Shubham Rana and Pratiksha)

India Rupee: Expected range for rupee - Oct 14

MUMBAI - The following are the expected support and resistance levels for the rupee, as forecast by leading banks and brokerages in an Informist poll:

(Arushi Jain)

End

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

Edited by Michael Correya

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