Informist, Thursday, Dec 16, 2021

By Arushi Jain and Pratiksha 

NEW DELHI – The rupee recovered earlier losses and rose sharply against the dollar today because the US unit weakened from its earlier highs, noting which banks stepped in to cover their existing bets placed in favour of the dollar, dealers said.

The dollar had risen sharply on Wednesday after the US Federal Reserve confirmed tightening of its monetary policy to combat high inflation, said dealers. The US central bank doubled the pace at which it tapers bond purchases to $30 bln a month, while leaving the federal funds rate unchanged at 0.00-0.25%.

At 1640 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 96.27 compared with 96.57 on Tuesday. It was at 96.32 on Monday.

Today, the Indian rupee snapped its nearly two-week losing streak and closed at 76.0850 a dollar against 76.2300 a dollar at 1530 IST on Wednesday. The local unit had earlier fallen to the day's low of 76.3125 a dollar.

The Indian currency had opened largely steady at 76.2800 a dollar today because the Fed's policy outcome was in line with the market's expectations, said dealers. During the day, the rupee found support as foreign banks stepped in to sell the dollar for overseas investments into Indian companies raising funds through various means, dealers said. 

"There was some corporate (dollar) selling which helped the rupee appreciate to 76.16-76.17/$1 levels during the second half of the day," said a dealer with a private bank. "The selling (of dollars) was in cohesion with the dollar weakness globally."

Some dealers said that banks also stepped in to sell dollars on behalf of exporters who wanted to benefit from relatively higher dollar/rupee levels of around 76.10 a dollar, which further strengthened sentiment for the rupee.

The local unit had risen to the day's high of 76.0575 a dollar today.

Some dealers said that trade volumes were lower than usual because employees of public sector banks went on a two-day strike starting today to protest against the government's move to privatise several public sector banks, which impacted normal banking operations across the country.

Investors now await outcomes of the meetings of the European Central Bank, the Bank of England, and others, due later today.

FORWARDS

The premium on the dollar/rupee forwards contract rose today due to dollar purchases by banks for forward delivery on behalf of importers, dealers said.

On an annualised basis, the premium on the one-year, exact-period dollar/rupee contract was at 4.58%, compared with 4.55% on Wednesday. The premium was at 348.67 paise compared with 348.98 paise on Wednesday.

OUTLOOK

On Friday, the rupee may take opening cues from the outcome of the policy meetings of BoE and ECB later today, said dealers.

The local currency is also likely to take cues from overnight movement in the dollar index and prices of Brent crude oil, dealers said.

On Friday, the rupee is seen at 75.9000-76.3000 a dollar.

India Rupee - World FX: Sterling, euro up ahead of BoE, ECB outcome

NEW DELHI – The pound sterling was up 0.2% against the dollar in European trade ahead of Bank of England's policy meeting outcome later today. 

Investors expect BoE to keep rates unchanged even though the country's consumer price index grew 5.1% year-on-year in November, its highest level in a decade.

The UK recorded 78,610 COVID-19 cases on Wednesday, the highest single-day spike since the beginning of the pandemic last year. 

The euro was also up 0.2% against the US unit ahead of the European Central Bank's interest rate announcement later today. 

Although ECB is expected to dial back its monetary stimulus, some investors are betting that the central bank will not hike interest rates just yet.

Meanwhile, the Australian dollar was up 0.2% against the greenback after the country's jobs data showed a more-than-expected addition of 366,100 jobs, raising investors' expectations of the central bank winding down its pandemic-era bond buying early next year. 

The dollar edged lower today following sharp gains on Wednesday after US Federal Reserve's policy outcome confirmed that it would be tightening its monetary policy to combat high inflation.

At 1500 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 96.16 compared with 96.51 on Wednesday. It was at 96.57 on Tuesday. (Pratiksha)

India Rupee: Steady as US Fed's decisions on expected lines

MUMBAI - The rupee was largely steady against the dollar today after the US Federal Reserve confirmed tightening of its monetary policy to combat high inflation on Wednesday, in line with market expectations, said dealers.

While the Fed doubled the pace at which it tapers bond purchases to $30 bln a month, policymakers left the federal funds rate unchanged at 0.00-0.25%. 

In reaction, most equity markets across the globe gained which also triggered investor appetite for riskier assets, said dealers.

At 1028 IST, the Nifty 50 and the Sensex were nearly 0.3% higher each.

Meanwhile, the dollar index softened against other major currencies today, having given up a brief rally after the Fed's announcement, which also supported sentiment for the rupee, said dealers.

At 1028 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 96.40 compared with 96.51 on Wednesday. It was at 96.57 on Tuesday.

Investors now await meetings of the European Central Bank, the Bank of England, and others, due later today.

The rupee is seen moving in a range of 76.1000-76.4000 a dollar during the day.  (Arushi Jain)

India Rupee - Asia FX: Mixed after Fed confirms asset tapering

NEW DELHI – Asian currencies were mixed in early trade today as investors were assured that the US Federal Reserve will tighten its monetary policy to combat high inflation without derailing economic recovery from COVID-19.

The US Federal Reserve confirmed on Wednesday that it will double the pace of its asset tapering programme to $30 bln a month. 

The central bank kept its interest rate steady at 25%, but projected three quarter-point interest-rate increases in 2022, another three in 2023, and two more in 2024.

The South Korean won was up 0.2% against the dollar even after the country’s government said today that it will reinstate social distancing rules as soaring numbers of both new infections and serious cases threaten to overwhelm its medical system.

The Philippine peso was also up 0.2% against the greenback ahead of its central bank’s monetary policy outcome later today. 

Investors expect Bangko Sentral ng Pilipinas to put off any rate hikes well into 2022 amid the emergence of the Omicron variant of COVID-19 and its impact on economic recovery. 

Meanwhile, the Indonesian rupiah was also marginally up against the US unit ahead of its monetary policy decision scheduled later today. Market participants expect Bank Indonesia to hold interest rates steady.

Investors’ focus is now on the monetary policy meetings of the European Central Bank and the Bank of England, among others. (Pratiksha)

India Rupee: Expected range for rupee - Dec 16

NEW DELHI – The following are the expected support and resistance levels for the rupee, as forecasted by leading banks and brokerages in an Informist poll:

(Pratiksha)

End

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

Edited by Avishek Dutta

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