Informist, Monday, May 22, 2023

By Aiswarya Santhosh

MUMBAI - The rupee ended near a three-month low against the dollar today as the dollar index remained firm ahead of US debt ceiling talks and as banks bought dollars for importers, dealers said. However, losses in the Indian currency were limited due to banks' persistent dollar sales on behalf of exporters and likely for the Reserve Bank of India, they added. 

After falling for a fourth consecutive session, the Indian unit settled 0.2% lower at 82.8275 a dollar, as against 82.6600 a dollar on Friday. The rupee traded in a narrow range of 13 paise through the day. 

The Indian unit opened sharply lower at 82.7800 a dollar as the dollar index was firm ahead of today's negotiations between US President Joe Biden and House of Representative Speaker Kevin McCarthy on the debt ceiling issue, dealers said. Market participants are concerned about a potential default by the US, as the impending deadline of Jun 1 draws near.  

On Friday, Federal Reserve Chair Jerome Powell had said that given the tight credit conditions due to the banking crisis that rocked the country earlier, interest rates might not need to be raised much. 

However, Fed Governor Philip Jefferson said inflation in the US remains too high, while Dallas Fed President Lorie Logan said that avoiding a rate hike in the next meeting might not be keeping up with the data. 

At 1505 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.10 as against 103.20 on Friday. It was at 103.52 on Thursday. Earlier today, it rose to 103.29. 

Soon after opening, the rupee touched the day's high of 82.7250 a dollar as banks sold dollars for exporters, dealers said. "Exporters were selling (dollars) a lot today, they came in huge at the 82.79-82.81 levels," said a dealer with a state-owned bank. 

Through most of the day, the rupee traded in 82.76-82.83 range, as banks' dollar sales for exporters offset a firm dollar, dealers said. 

However, some dealers said that private and foreign banks bought the greenback for oil marketing companies and importers on dips in the dollar/rupee, which also weighed on the Indian currency. The rupee fell to a low of 82.8500 a dollar during the day.

But dealers said that most importers remained on the sidelines waiting for lower dollar/rupee levels. 

Dealers also speculated that state-owned banks sold the greenback on behalf of the Reserve Bank of India to prevent further depreciation in the Indian currency. 

"The RBI has been active in the market by selling dollars to ensure that rupee does not weaken beyond 83.00 as market awaits the US debt ceiling issue to be resolved. Oil companies and importers have been buyers of the dollar in the last few days," said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors LLP. 

A rise in the domestic share indices also limited losses for the Indian unit. The Nifty 50 and the Sensex closed 0.6% and 0.4% higher, respectively. 

FORWARDS

The premium on the one-year dollar/rupee forward contract came off its near five-month low as state-owned banks bought dollars for delivery later, likely on behalf of the Reserve Bank of India, dealers said. 

"With so much receiving pressure in the market, RBI had to come to pay. These levels are attractive as well," said a dealer with a private bank. "RBI had to mark its presence in both spot and forwards market today, else we would have seen a sharp movement on both sides."

The premium on the one-year dollar/rupee forward contract fell to a near five-month low of 1.97% earlier today as traders expect liquidity in the banking system to rise after the RBI on Friday announced the withdrawal of 2,000-rupee banknotes, dealers said. 

The RBI said it would withdraw the highest denomination banknotes of 2,000 rupees from circulation by Sep 30. By the end of September, the market expects banking system liquidity to increase gradually by 500 bln rupees to 1.5 trln rupees.

Dealers said exporters sold dollars for forward delivery, noting a fall in domestic spot rupee, which further pulled the premiums down.

The premium on the one-year dollar/rupee contract was 167.00 paise, against 167.75 paise on Friday. On an annualised basis, the premium was at 2.01%, against the previous close of 2.02%.

OUTLOOK

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

"The rupee weakening rally will continue in the next few days, we can see exporters coming in huge going ahead," said a dealer with a state-owned bank.

Dealers said the RBI may step in to sell the greenback to prevent the rupee from breaching the psychologically crucial 83-per-dollar mark. 

Dealers pegged the immediate key technical support for the rupee at 82.90 a dollar. During the day, the rupee is seen in the range of 82.50-83.00 a dollar.

India Rupee - World FX: Dollar slightly down post Powell's remark

NEW DELHI – The dollar fell slightly against major peers after US Federal Reserve Chair Jerome Powell said on Friday that the central bank may not have to raise interest rates as much as expected before due to stress in the banking sector. This led to market expectation that the US central bank's rate hike cycle may end soon.

Further, Powell said that there is uncertainty over lag effect of monetary tightening. He also added that the US central bank hasn't made any decision as to what extent the additional policy tightening will be appropriate. 

US President Joe Biden and House of Representative Speaker Kevin McCarthy will resume their discussion about raising US debt ceiling today at Washington. Over the weekend, the top bureaucrats talked on phone and decided to resume in person negotiation with McCarthy terming the phone call as "productive".

At 1521 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.1 as against 103.20 on Friday. It was at 103.52 on Thursday. The index fell as much as 102.96.

The Japanese yen was 0.1% up against the US unit despite reporting lower-than-expected core machine orders. New orders declined 3.5% on month in March against market expectation of 1.3% rise.

The euro rose 0.1% against the US unit as the greenback fell slightly on Powell's dovish remark. The pound sterling was largely flat against the greenback as market participants await UK's headline inflation data for the month of April scheduled to be released. (Ananya Chaudhuri)

India Rupee: Premiums at 5-mo low; pulled banknotes may aid liquidity

NEW DELHI – The premium on the one-year dollar/rupee forward contract fell to a near five-month low today as traders expect liquidity in the banking system to rise after the Reserve Bank of India on Friday announced the withdrawal of 2,000-rupee banknotes, dealers said. 

"We are seeing a lot of receiving pressure as there is expectation that liquidity will rise after 2,000-rupee notes withdrawal," a dealer with a private bank said. "We may see premiums falling further going ahead, until and unless RBI does some significant action in forwards."

The RBI said it would withdraw the highest denomination banknotes of 2,000 rupees from circulation by Sep 30. By the end of September, the market expects banking system liquidity to increase gradually by 500 bln to 1.5 trln rupees.

Dealers said exporters sold dollars for forward delivery, noting a fall in domestic spot rupee, which further pulled down the premiums.

At 1358 IST, the premium on the one-year dollar/rupee contract was 165.00 paise, against 167.75 paise on Friday. On an annualised basis, the premium was at 1.98%, against the previous close of 2.02%. (Pratiksha)

India Rupee: In thin band; exporters' dlr sales offset rise in dlr

MUMBAI – The rupee traded in a narrow range against the dollar today as a rise in the dollar index was offset by banks' dollar sales for exporters, dealers said. 

The dollar index rose today ahead of US President Joe Biden's meeting with House of Representative Speaker Kevin McCarthy on the debt ceiling issue. Market participants are concerned about a potential default by the US, as the impending deadline of Jun 1 draws near. A default may result in chaos in financial markets and lead to an increase in interest rates. 

At 1300 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.30 as against 103.20 on Friday. It was at 103.52 on Thursday. 

Some dealers also said that banks likely bought dollars for importers on any dips in the dollar/rupee levels which also weighed on the Indian unit. However, other dealers said that most importers were waiting for the rupee to rise to 82.70-82.75 levels to buy the greenback. 

Meanwhile, dealers said that banks persistently sold the greenback for exporters at the 82.79-82.81 levels, which supported the Indian currency. 

"Exporters are very much there, they are booking at the 82.78 as well as 82.81 levels today," said a dealer with a big state-owned bank. "RBI has not been seen today, they may come at higher (USDINR) levels." 

Dealers also said that the Reserve Bank of India's move to withdraw 2,000-rupee banknotes may not have any direct impact on the foreign exchange market. 

Dealers have pegged the next technical support for the rupee at 82.90 a dollar. During the day, it is seen at 82.50-82.90 a dollar. (Aiswarya Santhosh)

India Rupee: Down as dollar index firm; exporters' dlr sales support

MUMBAI – The rupee fell against the dollar today as the dollar index remained firm ahead of debt ceiling negotiation in the US between US President Joe Biden and House of Representative Speaker Kevin McCarthy, scheduled today, dealers said. 

Over the weekend, Biden and Congressional leaders had a phone call interaction on the issue, after which they decided to resume the talks today.

Market participants are concerned about a potential default by the US, as the impending deadline of Jun 1 draws near. A default may result in chaos in financial markets and lead to an increase in interest rates. 

At 0935 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.10 as against 103.20 on Friday. It was at 103.52 on Thursday. 

Dealers said banks sold the greenback for exporters at the 82.79 level, which limited losses for the Indian unit. 

"From opening, selling (dollars) is there, it might be for exporters," said a dealer with a private bank. "Today, rupee may move in the range of 82.60-82.85."

Gains in domestic equity indices also supported the Indian unit. At 0931 IST, the Nifty 50 and the Sensex traded 0.3% and 0.2% higher, respectively.

Dealers also said the Reserve Bank of India may sell the greenback to prevent the rupee from falling beyond the psychologically-crucial level of 83.00 a dollar.

Dealers have pegged the next technical support for the rupee at 82.80 a dollar. During the day, it is seen at 82.50-82.90 a dollar. (Aiswarya Santhosh)

India Rupee - Asia FX: Mixed as traders eye US debt ceiling talks

NEW DELHI – Asian currencies traded on a mixed note today as market participants were cautious ahead of another round of talks between US President Joe Biden and House of Representative Speaker Kevin McCarthy on raising the US government's debt ceiling, scheduled to take place later today.

If the US fails to raise its borrowing limit before the first week of June, the world's largest economy is likely to run out of money and default on its payment obligation. This will have a devastating effect across financial markets worldwide.

The Chinese yuan fell 0.1% against the US currency after the People's Bank of China kept its one-year prime lending rate unchanged at 3.65% today.

The Philippine peso and Thai baht were down 0.2% and 0.1%, respectively.

Meanwhile, the South Korean won rose 0.5% against the greenback due to improvement sentiment after South Korea agreed with Germany on Sunday to deepen their economic and security cooperation. 

The Indonesian rupiah was 0.3% higher against the US unit as traders await the outcome of the Indonesian central bank's policy review meeting later this week. (Ananya Chaudhuri)

India Rupee: Expected range for rupee - May 22

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

(Aiswarya Santhosh)

End

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

Edited by Vandana Hingorani

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