Informist, Monday, Dec 11, 2023

By Kabir Sharma and Sourabh Kumar

MUMBAI – 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 firm dollar index, dealers said. 

"There is not much movement; the range is very narrow. We have been seeing it for quite some time now," said a dealer with a foreign bank.

After trading in a very narrow range of 3 paisa throughout the day, the rupee settled at 83.3925 a dollar, against Friday's close of 83.3850 a dollar. 

The dollar index rose marginally and remained broadly firm as data on Friday showed US job growth accelerated in November, while the unemployment rate fell to 3.7%, underscoring the resilience of the labour market in the world's largest economy and challenging expectations of imminent rate cuts by the Federal Reserve from early next year.

In the US, data from the Labor Department's employment report showed job growth accelerated in November. The data showed non-farm payrolls increased by 199,000 jobs last month, above the 180,000 estimate of economists polled by Reuters, after rising by an unrevised 150,000 in October. The unemployment rate fell to 3.7% from a near two-year high of 3.9% in October.

Moreover, data from University of Michigan showed US consumer sentiment improved much more than expected in December, snapping four straight months of decline, as households saw inflation pressures easing.

Investors anticipate that the Federal Reserve will maintain interest rates within the range of 5.25-5.50% this week. Attention has shifted towards "dot plots" illustrating rate projections and Chair Jerome Powell's upcoming press conference.

Market participants also analysed data on China's inflation in November released on Saturday, which dropped more rapidly than anticipated. The consumer price index recorded a year-on-year decline of 0.5%, surpassing economists' expectations of a 0.1% drop, as polled by Reuters, marking the steepest drop since November 2020.

Market participants now keenly await the US November employment trends index, due today. Market participants also await US CPI data on Tuesday, which could influence the Fed's interest rate outlook.

Meanwhile, the US November headline inflation print is expected to be 3% on year, according to a Dow Jones poll. Core inflation is seen at 4% on an annualised basis. In October, headline inflation stood at 3.2% on year. 

Today, the rupee opened steady, and held its own against a firm dollar. After about 1200 IST, when the rupee repeatedly kept breaching 83.3800 levels, a few banks sold dollars, likely for the RBI, to support the Indian currency.

The trade volume was low due to the year-end, said dealers. Today, the rupee touched a high of 83.3600 a dollar and a low of 83.3925 a dollar.

The rupee was also supported by largely low crude oil prices, which reduce India's import bill. Crude prices recovered a little after stronger US jobs data, but were lower compared to around $80 a bbl two weeks ago.

With low crude oil prices, the US Department of Energy decided on Friday to buy up to 3 mln bbl of crude oil for the Strategic Petroleum Reserve for delivery in March 2024, to replenish the stockpile.

At 1306 IST, the February contract for Brent crude oil was down at $76.38 a bbl, after touching a high of $79.72 a bbl in the previous week. It was $75.84 a bbl on Friday, compared to $74.05 a bbl on Thursday. 

FORWARDS

Premiums on one-year dollar/rupee forwards were down today, tracking a rise in US Treasury yields, dealers said. 

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

The premium on the one-year, exact-period dollar/rupee forward contract was at 134.41 paise, against 137.97 paise on Friday. On an annualised basis, the premium was 1.61%, down from Friday's 1.65%.

OUTLOOK

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

Dealers expect the RBI to continue selling dollars to prevent runaway depreciation in the rupee.

Dealers have pegged key technical support for the local currency at 83.50 a dollar. During the day, the rupee is seen in the range of 83.10-83.50 a dollar.

India Rupee - World FX: Yen down; hopes of change in BoJ policy fade

MUMBAI – The Japanese yen slipped almost 1% against the US dollar as hopes that Bank of Japan may tighten its extremely accommodative monetary policy next week diminished.

Bloomberg today said Bank of Japan officials believe there's little urgency to rush for policy tightening without substantial evidence of wage growth that would support sustainable inflation.

The yen had strengthened significantly last week after Bank of Japan Governor Kazuo Ueda said that policy management would "become even more challenging from the year-end and heading into next year." This was interpreted as potential signals to conclude the prolonged negative interest rate policy at the Dec 19 meeting.

The Australian dollar was down 0.4% against the greenback because the dollar index rose slightly as data on Friday showed US job growth accelerated in November, while the unemployment rate fell to 3.7%, underscoring the resilience of the labour market in the world's largest economy and challenging expectations of imminent rate cuts by the Federal Reserve from early next year.

US Labor Department data showed non-farm payrolls rose by 199,000 last month, against estimates of 180,000 polled by Reuters, after rising by an unrevised 150,000 in October. The unemployment rate fell to 3.7% from a near two-year high of 3.9% in October.

Moreover, data from the University of Michigan showed that consumer sentiment in the US improved much more than expected this month, snapping four straight months of decline, as households saw inflation pressures easing.

At 1447 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.11 as against 103.98 on Friday. It was at 103.61 on Thursday.

Both the pound sterling and euro rose 0.1% against the greenback ahead of the outcome of monetary policy meetings of Bank of England and European Central Bank on Thursday. The central banks are expected to keep interest rates at their current levels to ensure inflation continues to fall back from the highest levels in decades. 

The Canadian dollar strengthened 0.1% against the US currency, while the Swiss franc fell 0.1% against the dollar. (Vaishali Tyagi)

India Rupee: Premiums fall as US yields surge post robust econ data

MUMBAI – Premiums on one-year dollar/rupee forwards fell today, tracking a surge in US Treasury yields on Friday, dealers said. US Treasury yields rose after non-farm payroll data for November showed continued tightness in the labour market despite the US Federal Reserve's efforts to cool the economy.

On Friday, the yield on the 10-year paper jumped 10 basis points, the biggest one-day gain since Nov 9. The two-year US Treasury yield rose by 14.5 basis points, its biggest daily jump since Jun 29.

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

In the US, data from the Labor Department's employment report showed job growth accelerated in November. Non-farm payrolls increased by 199,000 jobs last month, above the 180,000 estimate of economists polled by Reuters, after rising by an unrevised 150,000 in October. The unemployment rate fell to 3.7% from a near two-year high of 3.9% in October.

Moreover, data from the University of Michigan showed that US consumer sentiment improved much more than expected in December, snapping four straight months of decline, as households saw inflation pressures easing.

Investors expect the Federal Reserve to maintain interest rates in the range of 5.25-5.50% this week. Attention has shifted towards "dot plots" illustrating rate projections and Chair Jerome Powell's upcoming press conference.

The fall in premiums was also because banks persistently sold dollars for forward delivery, dealers said.

At 1351 IST, the premium on the one-year, exact-period dollar/rupee forward contract was at 134.29 paise, against 137.97 paise on Friday. On an annualised basis, the premium was at 1.60%, against the previous close of 1.65%. 

Market participants see strong technical support for the one-year forward premium at 1.50%. (Kabir Sharma)

India Rupee: In thin band, RBI's dlr sales offset impact of firm dlr

MUMBAI – The rupee was in a narrow range against the dollar, as banks sold the greenback likely on behalf of the Reserve Bank of India, thereby offsetting the impact of a firm dollar, said dealers.

"We are seeing heavy support at these levels (83.39-83.40). When it opened, we expected it to go above 40 levels today, but since morning we are seeing very restricted movement," said a dealer with a state-owned bank.

The Indian unit has moved in a range of three paise so far today.

The dollar remained firm on better-than-expected data from the US, where the Labor Department's employment report indicated that job growth accelerated in November. Non-farm payrolls increased by 199,000 last month, above the 180,000 estimate of economists polled by Reuters.

Moreover, data from the University of Michigan showed that US consumer sentiment improved much more than expected in December, snapping four straight months of decline.

Market participants expect the US Federal Reserve to maintain interest rates within the range of 5.25-5.50% this week.

At 1248 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104 as against 103.98 on Friday. It was at 103.61 on Thursday.

The rupee was also supported by largely low crude oil prices that reduce the import bill for India. Crude prices recovered a little after stronger US jobs data, but were relatively lower as compared to around $80 a bbl two weeks ago.

At 1306 IST, the February contract for Brent crude oil was at $76.38 a bbl, compared with $75.84 a bbl on Friday. It was at $74.05 a bbl on Thursday. 

Market participants now keenly await the US November employment trends index, due today.

Dealers see key technical support for the rupee at 83.50 a dollar. The rupee is seen in a range of 83.10-83.50 against the dollar for the rest of the day. (Sourabh Kumar)

India Rupee - Asia FX:Most down as China CPI falls more than expected

MUMBAI – Most Asian currencies were down today, tracking a fall in the offshore Chinese yuan after data pointed to a sustained deflationary trend in China.

Investors analysed China's November inflation data released on Saturday, which showed the fall was more rapid than anticipated. The consumer price index recorded a year-on-year decline of 0.5%, surpassing economists' expectation of a 0.1% drop, as polled by Reuters. This was the steepest drop since November 2020.

In another data point from China released Sunday, the producer price index in November witnessed a 3.0% year-on-year decline, exceeding both October's 2.6% drop and the expected fall of 2.8%.

The weakness in Asian currencies was also because the dollar index rose marginally, but remained broadly firm as data on Friday showed US job growth accelerated in November, while the unemployment rate fell to 3.7%, underscoring the resilience of the labour market in the world's largest economy and challenging expectations of imminent rate cuts by the Federal Reserve from early next year.

The Labor Department's employment report showed US job growth accelerated in November. Data showed non-farm payrolls increased by 199,000 last month, above the 180,000 estimate of economists polled by Reuters, after rising by an unrevised 150,000 in October. The unemployment rate fell to 3.7% from a near two-year high of 3.9% in October.

Moreover, data from the University of Michigan showed that consumer sentiment in the US improved much more than expected in December, snapping four straight months of decline, as households saw inflation pressures easing.

The South Korean won slipped 1% against the US unit and fell the most among its Asian peers, as investors refrained from placing big bets ahead of key US inflation data due later in the week.

The Indonesian rupiah fell 0.6% against the greenback. 

Both the Thai baht and the Taiwan dollar weakened 0.4% against the dollar. 

The Philippine peso saw a dip of 0.3% and the Malaysian ringgit fell 0.3% against the US currency.

Market participants now await the US November employment trends index, due today. (Vaishali Tyagi)

India Rupee: Steady despite firm dlr; traders digest China CPI data

MUMBAI – The rupee was steady against the dollar even as the greenback remained firm on the back of stronger-than-expected data from the US, dealers said. 

"The US labour market may convince the Fed to delay rate cuts in 2024. Chinese CPI and PPI (producer price index) came in worse than expected. Traders will monitor US inflation data ahead of the FOMC (Federal Open Market Committee), ECB (European Central Bank) monetary policy meetings," said Kunal Sodhani, vice president, Shinhan Bank.

The dollar index rose marginally and remained broadly firm as data on Friday showed US job growth accelerated in November, while the unemployment rate fell to 3.7%, underscoring the resilience of the labour market in the world's largest economy and challenging expectations of imminent rate cuts from the Federal Reserve beginning early next year.

In the US, data from the Labor Department's employment report indicated that job growth accelerated in November. Data showed non-farm payrolls increased by 199,000 jobs last month, above the 180,000 estimate of economists polled by Reuters, after rising by an unrevised 150,000 in October. The unemployment rate fell to 3.7% from the near two-year high of 3.9% in October.

Moreover, data from the University of Michigan showed that US consumer sentiment improved much more than expected in December, snapping four straight months of decline, as households saw inflation pressures easing.

Investors anticipate that the Federal Reserve will likely maintain interest rates within the range of 5.25-5.50% this week. Attention has shifted towards "dot plots" illustrating rate projections and Chair Jerome Powell's upcoming press conference.

Market participants also analysed China's November inflation data released on Saturday, which dropped more rapidly than anticipated. The consumer price index experienced a year-on-year decline of 0.5%, surpassing economists' expectations of a 0.1% drop, as polled by Reuters, marking the fastest drop since November 2020.

Market participants now keenly await the US November employment trends index, due today.

Dealers see key technical support for the rupee at 83.50 a dollar. The rupee is seen in a range of 83.10-83.50 against the dollar for the rest of the day. (Kabir Sharma)

India Rupee: Expected range for rupee - Dec 11

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

(Vaishali Tyagi)

End

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

Edited by Avishek Dutta

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