Informist, Friday, Jul 22, 2022

By Pratiksha and Srijonee Bhattacharjee

NEW DELHI – After trading in a very tight range of 7 paise through the day, the rupee rose against the dollar for the second consecutive session today because of dollar sales by foreign portfolio investors and the Reserve Bank of India, dealers said. 

The rupee ended at 79.8550 a dollar as against 79.9450 a dollar on Thursday. 

The Indian unit opened at 79.9050 a dollar because the dollar index settled lower on Thursday, dealers said. 

The dollar index fell as the euro strengthened after the European Central Bank delivered a higher-than-expected 50-basis-point rate hike to tame inflation. It was the central bank's first rate increase since 2011.

At 1715 IST, the dollar index, which measures strength in the US currency against a basket of six major currencies, was at 107.05 compared with 106.91 on Thursday. It was at 107.08 on Wednesday.

An hour into trade, the rupee rose to the 79.86 a dollar, as some foreign banks stepped in to sell dollars on behalf of foreign portfolio investors, dealers said. 

"Domestic equities have been positive for the past few sessions now due to which the market is seeing selling for inflows," a dealer with a big state-owned bank said.

Both the Nifty 50 and the Sensex ended 0.7% higher.

Dealers said some banks purchased dollars on behalf of importers, who wanted to take advantage of relatively lower dollar/rupee level, which weighed on the rupee. 

The Indian currency traded in a narrow range of 79.91-79.87 a dollar for most of the session. Dealers said volume in the currency market was lower than usual as traders were cautious and refrained from placing fresh bets due to lack of significant cues. 

Meanwhile, RBI Governor Shaktikanta Das said today at the Bank of Baroda Annual Banking Conclave 2022 that the central bank will ensure that the rupee finds its level in line with the strong fundamentals of the Indian economy.

"By eschewing sudden and volatile shifts, we have ensured that expectations remain anchored and the forex market functions in a stable and liquid manner," Das said. "We will continue to engage with the forex market and ensure that the rupee finds its level in line with its fundamentals."

The governor said that the central bank has no particular level for the rupee in mind and would like to ensure its orderly evolution, adding that the RBI has zero tolerance for volatile and bumpy movements in the Indian currency. 

During the final thirty minutes of trade, the rupee rose to the day's high of 79.8500 a dollar as some banks sold dollars on behalf of the central bank, and closed at 79.8550 a dollar. 

FORWARDS

Premiums on dollar/rupee forwards were slightly lower because some banks executed a buy/sell swap--buy dollars in the near-term and sell them for delivery going ahead--noting some arbitrage between onshore three-month premium and the rate of deploying the dollars into assets abroad, dealers said. 

Effectively, market participants raised dollars domestically and deployed them abroad at a higher rate of interest, dealers said.

The premium on the one-year dollar/rupee contract was 251.18 paise, against 254.75 paise on Thursday. The premium fell from an intraday high of 257.20 paise. On an annualised basis, the premium was at 3.14% against the previous close of 3.19%.

"There is arbitrage in the 3-month contract, of doing swap here and placing it abroad at SOFAR (Secured Overnight Financing Rate)," a dealer with a state-owned bank said. 

Premiums also fell slightly because some exporters sold dollars for forward delivery noting the rupee's recovery in the spot market, dealers said.

OUTLOOK

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

"For the rupee, until the fundamentals are negative, the view of further depreciation remains intact with RBI continuing to use its reserves to lower the pace of depreciation, with the expected range of 79.70 -80.30 in the short term.," a brokerage firm said in a note.

Dealers expect RBI will continue to intervene through dollar sales to protect the rupee from depreciating beyond the psychologically crucial 80-per-dollar mark.

Dealers see long-term support for the rupee at 80.50 a dollar.

During the day, the rupee is seen at 79.80-80.15 a dollar.

India Rupee - World FX: Euro slips 0.7% after weak Jul PMI data

MUMBAI – The euro fell 0.7% against the US dollar today as eurozone July flash Purchasing Managers' Index shows contraction for first time since early 2021.

S&P Global Eurozone PMI composite output index dropped to 49.4 in July from 52.0 in June.

Drop below the 50 level signals a contraction of business output.

The eurozone’s largest economy, Germany, sees the steepest declines, with the composite PMI slipped to 48.0, lowest since June 2020. Manufacturing sector index tumbled to 46.1 from 49.3 in June and marking a 26-month low.

At 1555 IST, the dollar index was at 107.17 compared with 106.91 on Thursday. It was at 107.08 on Wednesday.  (Richard Fargose)

India Rupee: Premia dn; bks execute buy/sell swaps noting arbitrage

MUMBAI – Premiums on dollar/rupee forwards were slightly lower because some banks executed a buy/sell swap--buy dollars in the near-term and sell it for delivery going ahead--noting some arbitrage between onshore three-month premium and the rate of deploying the dollars into assets abroad, dealers said. 

Effectively, market participants raised dollars domestically and deployed them abroad at a higher rate of interest, dealers said.

The premium on the one-year dollar/rupee contract was 251.40 paise, against 254.75 paise on Thursday. The premium fell from an intraday high of 257.20 paise. On an annualised basis, the premium was at 3.15% against the previous close of 3.19%.

"There is arbitrage in the 3-month contract, of doing swap here and placing it abroad at SOFAR (Secured Overnight Financing Rate)," a dealer with a state-owned bank said. 

Premiums also fell slightly because some exporters sold dollars for forward delivery noting the rupee's recovery in the spot market, dealers said. (Srijonee Bhattacharjee) 

India Rupee: Remains in narrow range in absence of significant cues

NEW DELHI – The rupee remained in a narrow range against the dollar today as traders avoided placing fresh bets due to lack of significant cues, dealers said. 

The Indian currency has moved within a range of 6 paise so far today.

Dealers have pegged immediate technical support for the rupee at 80.00 a dollar.

For the rest of the day, the Indian currency is seen at 79.8000-80.0500 a dollar.  (Pratiksha)

India Rupee: Rises as dollar index falls, domestic shares gain

NEW DELHI – The rupee rose against the greenback today because the US dollar index settled lower on Thursday, dealers said. 

The index fell as the euro strengthened after the European Central Bank delivered a higher-than-expected 50-basis-point rate hike to tame inflation. It was the central bank's first rate increase since 2011.

At 0930 IST, the dollar index, which measures strength in the US currency against a basket of six major currencies, was at 106.92 compared with 106.91 on Thursday. It was at 107.08 on Wednesday.

A rise in domestic and Asian share indices also supported the sentiment for the Indian unit, dealers said. At 0930 IST, both the Nifty 50 and the Sensex traded 0.5% higher.

"The range should remain narrow even today, since the RBI has been protecting the 80 level actively since the past few sessions," a dealer with a state-owned bank said.

Dealers have pegged long-term technical support for the rupee at 80.50 a dollar.

For the rest of the day, the Indian unit is seen moving in the range of 79.7000-80.1000 a dollar. (Pratiksha)

India Rupee - Asia FX:Most units up tracking gains in local equities

MUMBAI – Most Asian currencies were trading higher against the US dollar today, tracking gains in local equity markets.

Asian equities traded higher tracking overnight gains in US markets due to the improved risk appetite for technology stocks.

The dollar index, which measures the movement of the greenback against six major units, fell as the euro gained after the European Central Bank announced a 50-basis-point rate hike to tame inflation.

At 0910 IST, the dollar index was at 106.86 compared with 106.91 on Thursday. It was at 107.08 on Wednesday.

Bucking the trend, the South Korean won fell 0.3%, with the benchmark equity index Kospi slipping 0.6%, as foreign investors turned net sellers. (Richard Fargose)

India Rupee: Expected range for rupee - Jul 22

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

(Pratiksha and Richard Fargose)

End

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

Edited by Aditya Sakorkar

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