Informist, Monday, Oct 23, 2023

By Pratiksha

NEW DELHI – The rupee settled slightly lower against the dollar today as oil marketing companies bought the greenback and domestic share indices slumped, dealers said. After moving in a tight range of 10 paise throughout the day, the rupee settled at 83.1925 a dollar against 83.1225 a dollar on Friday.

 
The rupee began the day slightly lower against the US unit as the dollar index edged higher on safe-haven demand amid escalation of the Israel war, dealers said.

There are mounting concerns over the conflict in West Asia, as Israel launched more air strikes against Gaza, prolonging a two-week campaign that began after a surprise attack on southern Israeli communities by the militant group Hamas on Oct 7. The US has also sent more troops to the region.

The dollar index was also boosted by comments by US Federal Reserve officials, who suggested that interest rates may remain high for a prolonged period. 

"We have to get a lot closer to 2% before we are going to consider it (rate cuts), before I would consider any kind of relaxation of our posture. Inflation is job one, we have to get that under control," Federal Reserve Bank of Atlanta President Raphael Bostic told CNBC on Friday. 

Federal Reserve Bank of Cleveland President Loretta Mester also said on Friday that the central bank's interest rate policy still leans towards another hike, but in the midst of the current economic uncertainty, it is time for "nimble" policymaking.

At 1650 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.15, compared with 106.16 on Friday. It was at 106.25 on Thursday. It rose to a high of 106.33 earlier in the day.

Shortly after the currency market opened, some banks stepped in to sell dollars for foreign fund inflows into Indian corporations, which pushed the rupee to the day's high of 83.0900 a dollar, dealers said.

However, importers rushed to purchase the greenback to take advantage of the relatively lower dollar/rupee levels, which weighed on the Indian unit, dealers said.

State-owned banks also purchased the US unit on behalf of oil marketing companies, which further weighed the Indian unit down, dealers said.

"There was a lot of importers' interest around these levels, but overall the day was pretty range-bound," said a dealer with a private bank.

Dealers said some banks sold the greenback on behalf of exporters, which provided a measure of support to the local unit.

Dealers said volume in the market was lacklustre as traders avoided placing fresh bets in a truncated week. The financial markets are shut on Tuesday for Dussehra.

During the last leg of the trade, the rupee fell to the day's low of 83.1925 a dollar, tracking sharp weakness in the domestic share indices, dealers said.

The Nifty 50 fell 260.90 points to close at 19281.75 points, its lowest level in over a month, as concerns around high US bond yields, geopolitical tensions in West Asia, and weakness in global markets culminated in a sell-off towards the end of the session. The Sensex also ended 1.3% lower at 64571.88 points, its lowest level in over three months.

FORWARDS

Premiums on one-year dollar/rupee forward contracts ended at their lowest level in nearly two months after the maturity of the Reserve Bank of India's sell/buy swap of $5 bln today, dealers said.

Banks, which were on the sidelines in the expectation that the RBI would roll over the swap, sold dollars for forward delivery on concerns of a shortage of the greenback in the system, dealers said.

While some market participants expect the central bank to do near-term sell/buy swaps in the forwards market to infuse dollar liquidity in the system and prevent a sharp fall in premiums, some dealers said premiums may not fall significantly from here on as the maturity of the swap was mostly factored in.

Premiums on near-term tenures like one-month and two-month dollar/rupee forward contracts also fell sharply.

Meanwhile, some banks bought dollars on behalf of importers for forward delivery, noting relatively lower levels, which limited losses for the premiums, dealers said. However, some importers may come in to buy dollars for forward delivery at premiums around 1.60%, dealers said.

A jump in US Treasury yields also weighed on premiums, dealers said. US Treasury yields rose after Japanese government bond prices weakened, following media reports suggesting that Bank of Japan officials were considering whether to change the settings of the yield-curve control programme currently in place that caps yields on Japanese government bonds.

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

Premium on the one-year, exact-period dollar/rupee forward contract was at 138.79 paise, against 140.08 on Friday. On an annualised basis, the premium was at 1.65%, against its previous close of 1.68%. The premium fell to a low of 1.63% earlier in the day. 

OUTLOOK

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

"As Asian currencies remain weak, INR is expected to remain weak but will be a close watch at 83.28 where RBI is present," Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP, said.

Dealers expect the RBI to continue to sell dollars to prevent the rupee from falling to a record low.

Dealers have pegged key technical support for the rupee at 83.30 a dollar, a break of which could push the rupee to 83.50 a dollar.

During the day, the rupee is seen in the range of 83.00-83.30 a dollar.

India Rupee - World FX: Major currencies dn on firm dlr as US ylds up

India Rupee - World FX: Major currencies dn on firm dlr as US ylds up 

MUMBAI – Major currencies weakened against the dollar as the dollar index rose sharply due to a dramatic rise in US Treasury yields. The yield on the benchmark 10-year Treasury note touched the 5.02% mark, crossing the key threshold for the first time since 2007. The demand for safe haven assets amidst Israel war also boosted the greenback.

Last week, US Federal Reserve Chair Jerome Powell indicated that interest rates in the US are likely to remain high for a longer period, which also supported the dollar.

Market participants now await key US data, US Flash Manufacturing PMI and US Oct US Flash Services PMI, due Tuesday, and personal consumption expenditures price index for September, due Friday. Investors also await the outcome of the European Central Bank's policy meeting on Thursday. 

At 1718 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.20 compared with 106.16 on Friday. It was at 106.25 on Thursday.

The Australian dollar slipped the most, falling 0.2% against the dollar, due to weak local indices which fell by 0.8%, close to its low of 11 years. 

The pound sterling also tumbled 0.2% against the US unit as UK preliminary manufacturing and services PMI data due on Tuesday are unlikely to change market expectations that the Bank of England will continue to hold interest rate at its monetary policy meeting on Nov 2. 

The Japanese yen faced headwinds and fell 0.07% against the US unit ahead of Japan Oct Flash Manufacturing PMI, due Wednesday. 

The Canadian dollar weakened 0.1% against the US unit after the Bank of Canada indicated that it will hold its key lending rate at 5%, the highest since 2005, in its meeting due Wednesday. 

The euro remained largely flat against the dollar as European Commission is set to publish Euro area Flash Consumer Confidence Indicator data today. The consumer sentiment index is forecast to fall to -18.3 points in October from -17.8 points in September. Additionally, from the Eurozone, Germany and Poland are also scheduled to release their major economic reports today. (Vaishali Tyagi)

India Rupee: Steady; exporters' dollar sales offset oil cos' buys

MUMBAI – The rupee remained largely steady against the dollar amid low volumes as banks' dollar sales for exporters were offset by their dollar buys for oil companies, dealers said. 

"There are few regular corporates who are selling dollars which is offsetting oil buyer's demand, but the market is waiting for fixing to happen, after which some movement can be seen in the currency market," a dealer at a big state-owned bank said.

Also, the conclusion of the Reserve Bank of India's swap of $5 bln may not have much effect on the market, dealers said.  

"RBI swap will not have an impact as we have factored it in already. Margins are already very low, so we are not seeing a major impact," the dealers said.  

Further, fall in crude prices also eased the pressure on the Indian unit, dealers said.  

Oil futures were lower after the Hamas released two American hostages, raising the prospect that the conflict could end without engulfing the entire West Asia and straining oil supplies.

At 1349 IST, the December contract of Brent Crude Oil on the Intercontinental Exchange was at $91.81 a bbl, as against $92.16 a bbl on Friday. It was at $92.38 a bbl on Thursday.

Dealers see immediate technical resistance for the rupee at 83.05 a dollar. During the day, the rupee is seen in the range of 83.00-83.50 a dollar. (Vaishali Tyagi)

India Rupee: Steady; banks' dollar sales for FX inflows aid

MUMBAI – The rupee was steady against the dollar today as a strong dollar was offset by banks' dollar sales for foreign fund inflows into Indian corporates, dealers said. 

"There is selling for inflows just like Friday. However, it will consolidate in the range as the day goes on," a dealer at a state-owned bank said. 

The dollar rose globally on safe haven demand amid the escalation of the Israel war and after comments from several US Federal Reserve officials cemented bets that rates may remain high for a prolonged period. 

"We have to get a lot closer to 2% before we're going to consider it (rate cuts), before I would consider any kind of relaxation of our posture. Inflation is job one, we have to get that under control," Federal Reserve Bank of Atlanta President Raphael Bostic told CNBC on Friday.

Further, Federal Reserve Bank of Philadelphia President Patrick Harker reiterated on Friday his preference of keeping interest rates steady. "This is a time where doing nothing is doing something and, in fact, I'd argue that it equates to doing quite a lot," Harker said, speaking at the Risk Management Association in Philadelphia. "The available data for September have mostly come out stronger than I expected. I remain rooted in my opinion that we are at the point where holding the policy rate steady is the prudent position to take," Harker added.

At 0940 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.31 compared with 106.16 on Friday. It was at 106.25 on Thursday.

Moreover, a slight fall in crude oil prices may support the rupee, dealers said. 

Oil futures were lower after the Hamas-controlled enclave of Gaza released two American hostages, raising the prospect that the conflict could end without engulfing the entire West Asia and straining oil supplies.

At 0941 IST, the December contract of Brent crude oil on the Intercontinental Exchange was at $91.32 a bbl, as against $92.16 a bbl on Friday. It was at $92.38 a bbl on Thursday.

Dealers see immediate technical resistance for the rupee at 83.05 a dollar. During the day, the rupee is seen in the range of 83.05-83.20 a dollar.  (Kabir Sharma)

India Rupee - Asia FX: Indonesian rupiah falls 0.5% on FX outflows

MUMBAI – The Indonesian rupiah weakened 0.5%, the most against the dollar amongst its Asian peers, after the country witnessed a massive outflow of funds from its country. The rupiah continued to decline even after Indonesia's central bank surprised the market with a 25-basis-point rate hike at its policy meeting held last week. 

Both the Malaysian ringgit and Thailand baht fell 0.3% against the greenback as benchmark indices of both countries edged 1.03% and 1.6% lower, respectively, today.

The Philippines peso and South Korean won remained largely flat against the US unit after the dollar index recovered some of its lost ground on safe-haven demand amidst escalating geopolitical tensions in West Asia. 

At 0845 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.28 compared with 106.16 on Friday. It was at 106.25 on Thursday.

Market participants now keenly await the Federal Open Market Committee's meeting outcome, due Nov 1, where it is broadly expected to keep rates steady. (Vaishali Tyagi)

India Rupee: Expected range for rupee - Oct 23

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

(Kabir Sharma)

End

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

Edited by Rajeev Pai

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2023. All rights reserved.