Informist, Tuesday, Jan 11, 2022

By Pratiksha

NEW DELHI – The rupee today rose to its highest level against the dollar in over three months because some foreign banks sold the US unit, likely for foreign fund flows into Indian companies, said dealers.

After moving within a narrow range of 18 paise throughout the day, the Indian rupee closed at 73.9050 a dollar against 74.0400 at 1530 IST on Monday. The local unit ended at its highest level since Sep 27, 2021.

The rupee had risen to the day's high of 73.8200 a dollar today.

"There was some selling (of dollars) at higher levels by foreign banks, due to which there was some movement in the market, otherwise the market was dull today," said a dealer with a state-owned bank. 

A US-based bank and a UK-based bank were also said to have sold dollars for foreign portfolio investment into Indian companies, according to dealers. 

So far this month, investments by foreign institutional investors into Indian equities stand at $311.80 mln. 

A rise in domestic equity indices further supported the local unit, said dealers. The Nifty 50 and the Sensex ended nearly 0.3% and 0.4% higher, respectively.

Meanwhile, the dollar inched lower in European trade but remained within a narrow range as investors awaited a speech by US Federal Reserve Chair Jerome Powell at a congressional hearing later today, which further supported the local unit. 

Investors are eyeing Powell's speech for clues on the timing of monetary policy tightening by the US central bank.  

In written remarks for the hearing released in advance, Powell pledged to prevent high inflation from becoming "entrenched", but did not give hints on the central bank's timeline and the pace of policy tightening.

At 1650 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 95.93 compared with 95.99 on Monday. It was at 95.74 on Friday.

Trade volumes in currency markets were lower than usual today due to scarcity of staff at treasury benches in view of the imposition of tough COVID-19 curbs across the country to curb a surge in the number of coronavirus cases, said dealers. 

"The market was dull today, with very little movement due to the unavailability of enough traders," said a dealer with a state-owned bank. 

India today reported 168,063 new cases of COVID-19 and 277 related deaths in the past 24 hours, according to data from the health ministry as of 0800 IST. 

Market participants will take cues from data on India's CPI inflation in December, due to be released on Wednesday. 

They will also track data on US inflation, to be released on Wednesday, for further hints on economic recovery in the US and the pace of the Fed's policy normalisation. 

FORWARDS

The premium on the one-year dollar/rupee forwards contract rose sharply today due to dollar purchases by state-owned banks, likely for the Reserve Bank of India, dealers said.

On an annualised basis, the premium on the one-year, exact-period dollar/rupee contract was at 4.77%, compared with 4.70% on Monday. The premium was at 352.83 paise compared with 347.98 paise on Monday.

OUTLOOK

On Wednesday, the rupee may take opening cues from overnight movement in the dollar index after Federal Reserve Chairman Jerome Powell's testimony in renomination hearing in the Senate later today, said dealers.

The local currency may also take cues from global developments related to the spread of the Omicron variant of coronavirus, said dealers.

Dealers have now pegged key technical resistance for the rupee at 73.8000 a dollar.

During the day, the rupee is seen at 73.8000-74.3000 a dollar.

India Rupee: Rises on bks' dlr sale for FX inflows, upbeat equities

NEW DELHI – The rupee rose against the dollar today because foreign banks sold the greenback, likely for foreign fund inflows into Indian companies, dealers said.

"There was some selling (of dollars) for an inflow during the initial hours, but we are also expecting some buying (of dollars) during the day," said a dealer with a state-owned bank.

A rise in domestic and Asian equity indices also supported the local unit, said dealers. At 1045 IST, the Nifty 50 and the Sensex were nearly 0.2% higher each.

The dollar index was moving in a narrow range and remained largely steady against other major currencies ahead of the Federal Reserve Chairman Jerome Powell's renomination hearing in the Senate today and release of the US inflation data on Wednesday

At 1045 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 95.86 compared with 95.99 on Monday. It was at 95.74 on Friday.

Market participants will be watchful of the US inflation data and testimony from Fed Chair Jerome Powell for clues to the US central bank's pace of monetary policy tightening. 

"There is no clear direction for the rupee today but it (rupee) might remain in a narrow range of 73.80/$1-74.05/$1," said the dealer with a state-owned bank.

Dealers have now pegged immediate key technical resistance for the rupee at 73.8000 a dollar.

The rupee is seen in a range of 73.8000-74.3000 a dollar during the day. (Pratiksha)

India Rupee: Expected range for rupee - Jan 11

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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