Informist, Friday, Oct 13, 2023

By Ananya Chaudhuri and Vaishali Tyagi

MUMBAI – After trading in a narrow range throughout the day, the rupee ended largely steady against the dollar as banks sold the greenback, likely on behalf of the Reserve Bank of India, which offset the impact of a strong dollar index, dealers said.

Today, the Indian currency settled at 83.2625 against the US currency, barely away from the record closing low of 83.2675 hit on Sep 18. On Thursday, the local currency had settled at 83.2425 a dollar.

Today, the rupee moved in a tight range of 4 paise against the dollar.

The Indian currency emerged as one of the better performing currencies among its Asian peers, after the Indonesian rupiah and the Thai baht. Asian currencies fell in the range of 0.1-0.9% against the dollar.

The Indian currency started the day largely steady against the dollar as banks may have sold the greenback in the offshore non-deliverable forwards market, likely on behalf of the Reserve Bank of India, which offset the impact of overnight gains in the dollar index, dealers said.

The dollar index gained 0.8% overnight following a better-than-expected US CPI print in September. Meanwhile, the rupee opened at 83.2350 against the US unit today, barely changed from Thursday's closing level of 83.2450. 

On an annual basis, US CPI rose 3.7% in September, unchanged from August. On a month-on-month basis, it increased 0.4%, of which shelter, or rent prices, accounted for more than half the rise. Economists polled by Reuters had forecast a rise of 0.3% on month and 3.6% on year. Core CPI, which excludes food and energy components, rose 0.3% in September. On year, core CPI was at 4.1% last month, compared to 4.3% in August.

The unexpected rise in US headline inflation stoked fears among investors that the US Federal Reserve may remain hawkish for a prolonged period. The CME Group's FedWatch tool showed that the chance of a rate hike at the Fed's Oct 31-Nov 1 meeting rose to 11.8% from 8.2%. The current federal funds rate is 5.25-5.50%.

At 1623 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 106.61 as against 106.57 on Thursday. It was at 105.72 on Wednesday.

The Indian currency touched the day's high of 83.2200 against the US unit as banks rushed to sell dollars in the domestic spot currency market, likely on behalf of the Reserve Bank of India, dealers said.

During the last leg of trade, the rupee moved to the day's low of 83.2650 against the dollar as banks stepped in to buy dollars for oil marketing companies, which expected oil prices may rise further, dealers said. 

Crude oil prices rose around 2% today due to worries about supply prospects after the US tightened its sanctions on Russian crude oil exports. At 1623 IST, the December contract of Brent crude oil on the Intercontinental Exchange was at $88.98 a bbl, as against $86 a bbl on Thursday. It was at $85.82 a bbl on Wednesday. Prices rose as much as $89.37 a bbl during the day. 

"The rupee closed at 83.2625 (a dollar) today, basically, there was a lot of (dollar) buying pressure from oil marketing companies because of high inflation in the US. We believe that it (rupee) will depreciate further and might reach 83.30 (a dollar) in the coming week," a dealer at a big state-owned bank said. 

A fall in domestic equity indices also exerted pressure on the Indian currency, dealers said. Today, both the benchmark Nifty 50 and Sensex ended 0.2% lower.

FORWARDS

Premiums on one-year dollar/rupee forwards closed at an over four-week low today as banks sold the greenback for forward delivery on the view that the differential between Indian and US yields may narrow going ahead, dealers said.

Higher-than-expected US inflation data released on Thursday led to fear that the US Federal Open Market Committee may opt for another hike going ahead or keep rates higher for a longer period of time.  

The US consumer price index rose 0.4% on month in September, against a 0.6% rise in August. On an annual basis, the CPI was unchanged from August at 3.7%. Economists polled by Reuters had forecast CPI inflation at 0.3% on month and 3.6% on a year-on-year basis.

10-year US Treasury yields jumped on Thursday after the stronger-than-expected US inflation data. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. A rise in interest rates in the US would ensure that the spread between India and US interest rates narrows going ahead.

Meanwhile, India's CPI combined inflation rate for September was at 5.02%, against the expectation of 5.4% in an Informist poll, reinforcing expectations that the Monetary Policy Committee will keep the repo rate unchanged at least until mid-2024.

Premiums on dollar/rupee forward contracts also fell as exporters sold dollars for forward delivery, noting strong technical support for the rupee at its record low level of 83.29-per-dollar, dealers said. The rupee hit a record low of 83.29 in October last year. 

Exporters sold dollars for forward delivery, noting that the rupee has not breached the 83.29-a-dollar mark since last month, due to persistent dollar sales by the RBI, dealers said.

The premium on the one-year, exact-period dollar/rupee forward contract was at 146.24 paise, against 149.58 paise at the close on Thursday. On an annualised basis, the premium was at 1.75%, against its previous close of 1.79%.

OUTLOOK

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

"For Monday, rupee should remain in the range of 83.05 to 83.45 (a dollar) with an eye on RBI and the conflict," 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, a breach of which could push the rupee to 83.50 a dollar. During the day, the rupee is seen in the range of 83.00-83.50 a dollar.

India Rupee - World FX: Swedish krona up 0.3% on strong Sep CPI data

MUMBAI – The Swedish krona strengthened 0.3% against the dollar, after the CPI data for the country came in at 6.5% in September, and up 0.5% on month. Also, Riksbank, the central bank of Sweden, said it sold $390 mln of foreign currencies, which was less than that expected in the first week of its hedging scheme.

The pound sterling rose 0.3% against the dollar as the Bank of England Governor Andrew Bailey today said that future interest rate decisions will remain "tight", after the cental bank held rates at 5.25% at its last policy meeting.

Bailey also said that there has been solid progress in the fight against inflation, but there is still work left to be done to cool off inflation. Inflation in the UK fell to 6.7% in August, which is still above the Bank of England's target of 2%. 

Following the trend, the euro also gained 0.2% against the dollar after the European Central Bank released the minutes of its September monetary policy meeting on Thursday, showing abating growth concerns, inflation risks and the possibility of no more interest rate hikes. 

The Australian dollar was almost flat against the greenback. The dollar eased after rising on the back of stronger-than-expected US CPI. 

US CPI, on an annual basis, rose 3.7% in September, unchanged from August. On a month-on-month basis, it increased 0.4%, of which shelter, or rent prices, accounted for more than half of the rise. Economists polled by Reuters had forecast it would rise 0.3% on month and 3.6% on year. 

Consequently, the CME Group's FedWatch tool showed that the chance of a rate hike at the Fed's Oct 31-Nov 1 meeting rose slightly to 11.8% from 8.2% earlier. The current federal funds rate is 5.25-5.50%.

At 1531 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 106.52 against 106.57 on Thursday. It was at 105.72 on Wednesday.

Market participants now await US Fed Chair Jerome Powell's comments next week before the Economic Club of New York. (Sourabh Kumar and Vaishali Tyagi)

Informist, Friday, Oct 13, 2023

India Rupee: Premiums at over 2-wk low as US-India rate gap may narrow

MUMBAI – Premiums on one-year dollar/rupee forward contracts fell to an over two-week low as banks sold the greenback for forward delivery on the view that the differential between Indian and US yields may narrow going ahead, dealers said.

"There is receiving in the market after the US CPI data," a dealer with a state-owned bank said. "If the expectation of Fed hiking rates gets stronger, I see premiums falling to 1.70%-1.65%."

Higher-than-expected US inflation data released on Thursday, stoked fears that the US Federal Open Market Committee may opt for another hike going ahead or keep rates higher for a longer period of time.  

The US consumer price index rose 0.4% on month in September, down from a 0.6% rise in August. On an annual basis, the CPI was unchanged from August at 3.7%. Economists polled by Reuters had forecast the CPI would gain 0.3% on month and 3.6% on a year-on-year basis.

The 10-year US Treasury yields jumped on Thursday after the stronger-than-expected US inflation data. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. A rise in interest rates in the US would ensure that the spread between India and US interest rates narrows going ahead.

Meanwhile, India's CPI combined inflation rate for September was at 5.02%, against the expectation of 5.4% in an Informist poll, reinforcing expectations that the Monetary Policy Committee will keep the repo rate unchanged at least until mid-2024.

Premiums on dollar/rupee forward contracts also fell as exporters sold dollars for forward delivery, noting strong technical support for the rupee at its record low level of 83.29-per-dollar, dealers said. The rupee hit a record low of 83.29 in October last year. 

Exporters sold dollars for forward delivery, noting that the rupee has not breached the 83.29-a-dollar mark since last month, due to persistent dollar sales by the Reserve Bank of India, dealers said.

"Exporters who have been on the sidelines for a long time have started to receive looking at RBI's strong support for the rupee," said another dealer with a state-owned bank.

At 1300 IST, the premium on the one-year, exact-period dollar/rupee forward contract was at 145.85 paise, against 149.58 paise at the close on Thursday. On an annualised basis, the premium was at 1.76%, against its previous close of 1.79%. The premium had fallen to an over two-week low of 1.74% earlier today. (Pratiksha)

India Rupee: In thin band; RBI likely dlr sales around 83.25/$ support

MUMBAI – The rupee remained in a narrow range against the dollar as state-owned banks' dollar sales likely for the Reserve Bank of India offset the impact of a strong dollar, dealers said. 

Dealers speculated that the central bank sold the US unit around 83.25 a dollar to prevent the rupee from depreciating below the record low level of 83.29 a dollar. 

A sharp rise in the greenback also weighed on the Indian unit, dealers said. 

The dollar index rose sharply on Thursday after US CPI rose 3.7% in September, beating a 3.6% increase projected by a Reuters' poll for the month. On a month-on-month basis, it increased 0.4% compared with the 0.3% expectation.

Consequently, the CME Group's FedWatch tool showed that the chance of a rate hike at the Fed's Oct 31-Nov 1 meeting rose to 11.8% from 8.2% earlier. The current federal funds rate is 5.25-5.50%.

At 1237 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 106.43 as against 106.57 on Thursday. It was at 105.72 on Wednesday.

Losses in domestic share indices weighed on the Indian unit, dealers said. At 1238 IST, the benchmark Sensex and Nifty 50 were 0.4% and 0.5% lower, respectively. 

Dealers see immediate technical support for the rupee at 83.30 a dollar. During the day, the rupee is seen in the range of 83.00-83.30 a dollar. (Kabir Sharma)

India Rupee - Asia FX: Most dn on strong dollar post US Sep CPI data

MUMBAI – Most Asian currencies were weak against the dollar, as the dollar index rose sharply on Thursday, after data showed US consumer prices for September rose more than expected.

The robust CPI data raised concerns of a further hike in rates by the US Federal Reserve going forward and maintaining the levels for a longer period. US CPI, on an annual basis, rose 3.7% in September, unchanged from August. Economists polled by Reuters had forecast a reading of 3.6%.

Post the high inflation data, the CME Group's FedWatch tool showed the chance of a rate hike at the Fed's Oct 31-Nov 1 meeting rose to 11.8% from 8.2% earlier. The current federal funds rate is 5.25-5.50%.

At 1103 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 106.39 against 106.57 on Thursday. It was at 105.72 on Wednesday.

The South Korean won was down 0.8% against the greenback. The Governor of the Bank of Korea said on Thursday that it may need to revise its growth projections for the country if crude oil prices see a significant rise.

The Thai baht weakened 0.4% against the greenback. The Bank of Thailand has reduced its 2023 growth forecast to 2.8% from 3.6% earlier.

The Taiwan dollar was down 0.4% against the dollar. The Indonesian rupiah and the Malaysian ringgit weakened 0.1% and 0.5% against the dollar, respectively. The Philippines peso was 0.2% down against the US currency.

Moreover, a lower than expected inflation reading from China also weighed on Asian currencies. China’s CPI for September came in flat, lower than a 0.2% rise as per a poll by Reuters. China also reported a 2.5% fall in its producers price index, compared to Reuters’ estimates of a 2.4% drop. (Sourabh Kumar and Vaishali Tyagi)

India Rupee: Largely steady despite firm dlr after upbeat US CPI data

MUMBAI – The rupee remained largely steady against the dollar despite a rise in the dollar index following a better-than-expected US CPI print for September. 

Dealers said banks might have sold the greenback in the offshore non-deliverable forwards market likely on behalf of the Reserve Bank of India to prevent the Indian currency from breaching the record low of 83.29 against the US unit.

The dollar index rose sharply on Thursday after US CPI rose 3.7% in September, beating a 3.6% increase projected by a Reuters' poll for the month. On a month-on-month basis, it increased 0.4% compared to the 0.3% expectation. 

Consequently, the CME Group's FedWatch tool showed that the chance of a rate hike at the Fed's Oct 31-Nov 1 meeting rose to 11.8% from 8.2% earlier. The current federal funds rate is 5.25-5.50%.

At 0934 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 106.43 as against 106.57 on Thursday. It was at 105.72 on Wednesday.

Losses in domestic share indices weighed on the Indian unit, dealers said. At 0935 IST, the benchmark Sensex and Nifty 50 were 0.4% and 0.3% lower, respectively. 

Meanwhile, crude oil prices erased intraday gains and settled lower on Thursday, which supported the Indian currency, dealers said. Oil prices reversed gains as US crude stockpiles rose by 10.2 mln barrels to 424.2 mln bbl in the week ended Oct 7, beating analysts' expectations of a 500,000-bbl rise for the week. Earlier this week, crude oil prices had surged amid the Israel war.

A fall in crude oil prices decreases India's import bill, which subsequently supports the Indian currency.

At 0935 IST, the December contract of Brent crude oil on the Intercontinental Exchange was at $86.49 a bbl, as against $86 a bbl on Thursday. It was at $85.82 a bbl on Wednesday. Prices eased from an intra-day high of $87.64 a bbl on Thursday.

"These leveLs: anywhere above 83.20 (a dollar), 83.23-83.24 (a dollar) has become a very high resistance, and it's (rupee) not able to break through this level particularly," a dealer at a state-owned bank said. "Normal intraday selling (of dollars) is there, no huge selling."  

Dealers see immediate technical support for the rupee at 83.30 a dollar. During the day, the rupee is seen in the range of 83.00-83.30 a dollar. (Ananya Chaudhuri)

India Rupee: Expected range for rupee - Oct 13

MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecasted 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 Avishek Dutta

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