Informist, Friday, Sep 22, 2023

By Kabir Sharma

MUMBAI – The rupee ended higher against the dollar on hopes of inflows into the Indian debt market on account of inclusion of Indian government bonds in JPMorgan's emerging markets index, dealers said. However, the Indian unit erased some gains as banks stepped in to buy the greenback on behalf of oil marketing companies, they said.

"Today was a knee-jerk reaction in the morning on the bond inclusion news. It has to go beyond 83 a dollar again in the coming days. Oilers were buying as they got these levels after some time," a dealer at a big state-owned bank said.  

The rupee rose to end a five-day streak of ending below the psychologically crucial level of 83 a dollar to close at 82.9300

a dollar against Thursday's close of 83.0900 a dollar. 

The rupee opened sharply higher against the dollar today on news that JPMorgan Chase & Co will add India's gilts to Global Bond Index – Emerging Markets suite, dealers said. The inclusion will pave the way for foreign fund inflows in Indian debt markets in the future, which will create a spill-over effect for the Indian unit.

The inclusion will be starting Jun 28 over a 10-month period, the New York-headquartered financial service provider said on Thursday. The development comes after several years of no-show to take forward the talks that first began in 2013. 

A fall in local share indices also weighed on the Indian unit, dealers said. The Nifty 50 and the Sensex both ended 0.3% lower.

Meanwhile, banks rushed to purchase the greenback on behalf of importers, who wanted to take advantage of a relatively lower dollar/rupee level which pushed the Indian currency to the day's low of 82.9700 a dollar, dealers said.  

Crude oil prices rose today as renewed global supply concerns from Russia's fuel export ban more than offset demand fears due to macroeconomic headwinds and high interest rates.

Russia's Transneft suspended deliveries of diesel to the key Baltic and Black Sea terminals of Primorsk and Novorossiysk today, state media agency Tass said.

Russia banned export of diesel and gasoline to all countries except four former Soviet states with immediate effect to stabilise the domestic fuel market, the Russian government said on Thursday.

Moreover, the dollar index remained firm around a six-month high after the US Federal Reserve hinted at one more rate hike by the end of 2023 on Wednesday. Further, the index strengthened as US jobless claims declined more than expected. This too exerted pressure on the Indian unit.

The dollar also gained strength as Bank of Japan and Bank of England avoided further tightening of their monetary policy, weighing on their respective currencies and supporting the dollar.

The Bank of Japan kept its interest rate unchanged at (-)0.1% and maintained its ultra-loose policy stance, in line with market expectation. The central bank also maintained 10-year Japanese government bond yield around 0% and band of 50 basis points set either side of the yield target.

On Thursday, the Bank of England kept its bank rate unchanged at 5.25%, the first time in two years since it started its aggressive rate hike cycle in November 2021 to tame stubborn inflation.

FORWARDS

Premiums on one-year dollar/rupee forwards ended higher today, on expectations of substantial inflows on account of the inclusion of Indian government bonds in JPMorgan's emerging markets index, dealers said. 

Premiums rose despite a surge in US yields. The yield on the 10-year US Treasury note was at 4.49%, a multiyear-high, as compared to 4.45% at the time of Indian market close on Thursday. US Treasury yields continued their upward movement on Thursday as the market digested lower-than-expected initial jobless claims data.

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

The premium on the one-year dollar/rupee contract was 150.25 paise, against 148.33 paise on Thursday. On an annualised basis, the premium was at 1.80%, against the previous close of 1.78%.

OUTLOOK

On Monday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said. 

"The rupee is expected to remain in a range of 82.70 to 83.20 on Monday as the market waits for Euro German IFO climate Index data being the only major data," said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP. 

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

India Rupee - World FX: Yen falls as Bank of Japan keeps rates steady

India Rupee - World FX: Yen falls as Bank of Japan keeps rates steady

MUMBAI - The Japanese yen fell 0.4% to 148.25 against the dollar after Bank of Japan decided to hold interest rates steady at (-)0.1% in line with the market's expectation. The central bank also maintained 10-year Japanese government bond yield around 0%. 

The pound sterling fell 0.37% against the greenback after the Bank of England left interest rates unchanged at 5.25% in a five-to-four majority.

The euro was also down 0.2% against the US currency after data showed S&P Global flash Eurozone Composite Purchasing Managers' Index remained below the 50 mark which separates expansion from contraction. The S&P Global PMI rose to 47.1 this month from a 33-month low of 46.7 in August. 

Meanwhile, the Australian dollar rose 0.47% against the US dollar as the government reported a budget surplus of $14.2 bln in the last fiscal year 2022-23 (Jul-Jun), for the first time in 15 years. The surplus was equivalent to 0.9% of the country’s GDP. Australia's corporate tax receipts were high for the fiscal year on account of higher energy prices.

The dollar index remained firm as the US Federal Reserve guided for one more rate hike by December end, and said interest rates are likely to stay higher for longer. At 1709 IST, the dollar index, which gauges the strength of the greenback against its major peers across the world, was at 105.60 as against 105.38 on Thursday. It was at 105.33 on Wednesday. The index scaled to a high of 105.74 on Thursday. (Sourabh Kumar and Vaishali Tyagi)

India Rupee: Erases some gains on banks' dollar purchases for oil cos

MUMBAI – The rupee erased some of its earlier gains against the dollar today as banks bought the greenback on behalf of oil marketing companies who sought to take advantage of the relatively lower dollar/rupee level, dealers said.

"Overall, importers are more active than exporters. Most of them (exporters) are waiting for 83.00 (a dollar) level except those who have immediate payments," a dealer at a big state-owned bank said. "Because of sentiment (regarding domestic bonds' inclusion in a global bond index), we saw a gap-up opening today; but we can still see 83.20 (a dollar) level next week. Overall, there is weakness in the rupee; dollar index is still above 105.00 level, and crude oil prices can go still further up."

The Indian unit opened around 27 paise higher against the dollar today at 82.8225 on improved sentiment following the news that JPMorgan will add India gilts to its global emerging markets bond index, dealers said. The inclusion will pave the way for foreign fund inflows in Indian debt markets, which will create a spillover effect for the Indian unit.

Some banks sold the US currency on behalf of exporters, which supported the Indian unit, dealers said.

However, crude oil prices rose today due to supply concerns as Russia banned fuel exports, which further weighed on the Indian currency, dealers said. At 1428 IST, the October contract of Brent crude oil on the Intercontinental Exchange was at $93.62 a bbl, against $93.3 a bbl on Thursday. It was at $93.53 a bbl on Wednesday. The prices rose to as much as $95.96 a bbl this week.

Dealers see key immediate technical resistance for the rupee at 82.80 a dollar. During the day, the rupee is seen in the range of 82.70-83.00 a dollar.  (Ananya Chaudhuri)

India Rupee - Asia FX: Mixed; traders digest slew of central bks' meets

MUMBAI - Asian currencies traded on a mixed note against the dollar today as traders digested a slew of central banks' monetary policy decisions published this week. 

The Bank of Japan kept its interest rate unchanged at (-)0.1% and maintained its ultra-loose policy stance, in line with market expectation. The central bank also maintained 10-year Japanese government bond yield around 0% and band of 50 basis points set either side of the yield target.

On Thursday, the Bank of England kept its bank rate unchanged at 5.25%, the first time in two years since it started its aggressive rate hike cycle in November 2021 to tame stubborn inflation.

Additionally, the US Federal Reserve maintained its federal fund rate at 5.25-5.50%, in line with market expectation on Wednesday at the end of its two-day policy meeting. The central bank also hinted at another rate hike by 2023-end. 

The dollar index remained firm around six-month high, which exerted pressure on the Asian units. At 1033 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, traded largely flat and stood at 105.46 against 105.38 on Thursday. It was at 105.33 on Wednesday.

The Indonesian rupiah was 0.10% down against the greenback as the Bank Indonesia kept its benchmark seven-day reverse repurchase rate unchanged at 5.75%, in line with market expectation. With this pause, the Indonesia central bank held its interest rate steady for eight consecutive months. 

The Thai Baht fell by 0.20% against US currency due to weaker exports and lesser growth than expected.

Bucking the trend, the South Korean won rose 0.30% against the dollar and was the top performer among its Asian peers. Both the Chinese yuan and the Philippine peso were 0.10% higher against the US unit.  (Vaishali Tyagi and Sourabh Kumar)

India Rupee: Sharply higher on gilts inclusion in JPMorgan bond index

MUMBAI – The rupee rose sharply against the dollar today on news that JPMorgan Chase & Co will add India's gilts to Global Bond Index – Emerging Markets suite, dealers said. The inclusion will pave the way for foreign fund inflows in Indian debt markets in the future, which will create a spill-over effect for the Indian unit.

Indian government bonds will be included in JPMorgan's Global Bond Index – Emerging Markets suite starting Jun 28 over a 10-month period, the New York-headquartered financial service provider said on Thursday. The development comes after several years of no-show to take forward the talks that first began in 2013. 

"The inclusion of India in the JPMorgan bond index has had a favourable effect on the rupee, with the currency showing strength by appreciating around 0.42% in the NDF markets and reaching levels around 82.80 (a dollar)," said Amit Pabari, managing director and chief executive officer, CR Forex. "This positive momentum is anticipated to carry over to the onshore market, with a potential to move towards 82.50 (a dollar) in the next few sessions once 82.80 (a dollar) levels are taken out."

Gains in local share indices supported the Indian unit, dealers said. At 0927 IST, the Nifty 50 rose 0.1% and Sensex was 0.2% higher.

Meanwhile, banks rushed to purchase the greenback on behalf of the importers, who wanted to take advantage of a relatively lower dollar/rupee level which weighed on the Indian currency, dealers said.  

Moreover, the dollar index remained firm around six-month high after the US Federal Rerseve hinted for one more rate hike by 2023 end on Wednesday. Further, the index strengthened as US jobless claims declined more than expected. This too exerted pressure on the Indian unit.

At 0928 IST, the dollar index, which gauges the strength of the greenback against its major peers across the world, was at 105.51 as against 105.38 on Thursday. It was at 105.33 on Wednesday. The index scaled to a high of 105.74 on Thursday.

Dealers see key immediate technical resistance for the rupee at 82.70 a dollar. During the day, the rupee is seen in the range of 82.70-83.00 a dollar.  (Ananya Chaudhuri)

India Rupee: Expected range for rupee - Sep 22

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

(Ananya Chaudhuri)

End

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

Edited by Maheswaran Parameswaran

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