Informist, Tuesday, Feb 27, 2024

By Sourabh Kumar

MUMBAI – The rupee closed steady against the dollar today as dollar sales by foreign banks for inflows into the debt market were offset by banks' dollar buys, likely on behalf of the Reserve Bank of India, dealers said.

"There was no movement...why are you making fun of us by asking?" quipped a dealer with a private bank.

For most of the day, the rupee hardly moved 2 paise, dealers said. The Indian unit touched the day's high of 82.8675 a dollar and a low of 82.9000 a dollar, before closing at 82.8950 a dollar. On Monday, the rupee closed at 82.8900 a dollar.

Throughout the day, the dollar/rupee exchange rate was cemented at around 82.8800 a dollar, making it hard to break past even 2 paise on either side. Dealers said that since there was barely any movement in the market, traders did not care to participate, which further weighed on the market volume and volatility. 

Today, the rupee opened steady against the dollar as a rise in crude oil prices offset a slight drop in the dollar index. While there were some flows into the debt market, which supported the rupee, demand for the greenback from a few banks, likely on behalf of the RBI, negated its effect on the Indian currency.

Gains in the domestic equities market also supported the Indian currency. Today, the Sensex and the Nifty 50 closed 0.4% and 0.3% higher, respectively. 

Apart from debt-related inflows and a positive domestic equities market, easing of the dollar index also supported the rupee. The dollar index weakened due to strengthening of the Japanese yen, which accounts for 13.6% of the index. The Japanese currency strengthened following a rise in the CPI print in Japan for January. The core CPI index, which includes oil products but excludes fresh food prices, rose 2.0% in January against a 2.3% increase in December, data showed today. The core CPI was higher than the market forecast of a 1.8% rise, reaffirming the expectation that the Bank of Japan may end its negative interest rate policy in March or April.

The dollar index also weakened after new home sales data from the US for January. The data, released on Monday, showed sales of new single-family homes came in at 661,000 units, a rise of 1.5% month on month, according to the Census Bureau and Department of Housing and Urban Development. According to a Reuters poll of economists, the forecast for new home sales was 680,000 units.

Kansas City Federal Reserve Bank President Jeffrey Schmid said he remains focused on the threat of high inflation and is in no hurry to cut rates. "With inflation running above target, labour markets tight and demand showing considerable momentum, my own view is that there is no need to pre-emptively adjust the stance of policy," he said. "Instead, I believe that the best course of action is to be patient, continue to watch how the economy responds to the policy tightening that has occurred, and wait for convincing evidence that the inflation fight has been won."

The dollar index fell further in early European trading hours, when the euro strengthened after hawkish comments by European Central Bank President Christine Lagarde on Monday. Lagarde said that while inflation was gradually approaching the central bank's target, the ECB remains dedicated to maintaining its current policy measures for the near future.

At 1603 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.77, after touching a low of 103.61 so far today. This compared to 103.78 on Monday, and 103.96 on Friday.

While debt flows, a positive equities market, and easing of the dollar index during trading hours supported the rupee, a slight rise in crude oil prices limited the scope of any gains in the Indian currency. Crude oil futures rose earlier today on account of concerns about supply from the Red Sea route. However, the rise was capped as US President Joe Biden indicated on Monday that he hoped to see a ceasefire between Israel and Hamas by next Monday.

During the latter part of the day, crude oil prices stabilised due to indications of de-escalation in the conflict. Biden said today that Israel had agreed to halt its military activities in Gaza for the holy month of Ramadan. Meanwhile, Hamas analysed a draft proposal for a truce between both the parties, which includes a pause in fighting and a prisoner-hostage exchange. 

Market participants now await the personal consumption and expenditure data for January from the US, due on Thursday. The data print is expected to increase 0.4% on a monthly basis, as per Reuters. 

Market participants also await India's GDP data on Thursday. India's GDP growth is likely to have slowed down to a three-quarter low of 6.6% in the quarter ended December from 7.6% in Jul-Sep, mainly as the statistical effect of a low base normalises, according to an Informist poll of 20 economists. India's GDP grew 4.5% in Oct-Dec.

FORWARDS

Premiums on one-year dollar/rupee forward contracts fell to their lowest level in over two months today as foreign banks persistently sold dollars, dealers said. The premiums fell primarily due to a rise in US Treasury yields, they said.

The premium on the one-year, exact-period dollar/rupee forward contract was 138.50 paise, down from 143.55 paise at Monday's close. On an annualised basis, the premium was 1.67%, down from 1.73% at the previous day's close.

Market participants see technical resistance for the one-year dollar/rupee forward premium at 1.65%.

OUTLOOK

On Wednesday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said. During the day, the rupee is seen in a range of 82.80-83.05 a dollar, with key technical resistance pegged at 82.80 a dollar.

 India Rupee - World FX: Yen up as Japan's CPI rises on year in Jan

MUMBAI – The Japanese yen strengthened 0.4% against the dollar, following a rise in CPI print in Japan for January. Japan's national CPI increased 2.2% year-on-year in January, against December's 2.6% rise, according to data released by the Japan Statistics Bureau today. 

Japan's core consumer inflation continued to slow for the third consecutive month, and market expectations of the Bank of Japan ending negative rates by April still hold. The so-called 'core core' index, which excludes both fresh food and energy prices, rose 3.5% on year in January, down from a 3.7% rise in December. This index is closely watched by the Bank of Japan as a gauge of the broader price trend. 

Meanwhile, in the US, new home sales in January were lower than anticipated. Data released on Monday showed sales of new single-family homes came in at 661,000 units for the month, a rise of 1.5% month on month, according to the Census Bureau and Department of Housing and Urban Development. According to a poll of economists by Reuters, the forecast for new home sales was 680,000 units.

At 1450 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.67, compared with 103.78 on Monday and 103.96 on Friday.

The euro was 0.1% up against the greenback. The euro strengthened following hawkish comments made by European Central Bank President Christine Lagarde on Monday. Lagarde noted that while inflation is gradually approaching the central bank's targets, the ECB remains dedicated to maintaining its current policy measures for the near future.

The Australian dollar was 0.2% higher against the dollar as investors are now looking forward to the release of the country's monthly consumer price index due Wednesday and retail sales data on Thursday for further insights into the economic landscape of Australia.

The pound sterling and Canadian dollar rose 0.1% against the greenback.  (Vaishali Tyagi)

India Rupee: Steady as weak dlr offsets slight rise in crude prices

MUMBAI – The rupee was steady as a weak dollar index offset the impact of a slight rise in crude oil prices, dealers said. "It is not moving at all...you see barely any movement is there, as traders are not there in the market," a dealer at a state-owned bank said. "We saw some buying came in yesterday (Monday), otherwise volume in the market was very dull."

Slight weakness in the dollar index provided support to the Indian currency, dealers said. "As you see, the dollar is also weak, which is why the rupee is slightly on the upside," a dealer at a state-owned bank said. The dollar index weakened as the Japanese yen strengthened following a stronger-than-expected CPI print in Japan for January. Japan's national CPI increased 2.2% year-on-year, against December's 2.6% rise, according to data released by the Japan Statistics Bureau today.

Japan's core consumer inflation continued to slow for the third consecutive month, and market expectations of the Bank of Japan ending negative rates by April still hold. The so-called 'core core' index, which excludes both fresh food and energy prices, rose 3.5% on year in January, down from a 3.7% rise in December. This index is closely watched by the Bank of Japan as a gauge of the broader price trend. 

Meanwhile, in the US, new home sales in January were lower than anticipated. Data released on Monday showed sales of new single-family homes came in at 661,000 units for the month, a rise of 1.5% month on month, according to the Census Bureau and Department of Housing and Urban Development. According to a poll of economists by Reuters, the forecast for new home sales was 680,000 units.

At 1248 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.74, compared with 103.78 on Monday and 103.96 on Friday.

The rupee also faced pressure from rising crude oil prices due to concerns about supply disruptions after attacks on ships in the Red Sea by Iran-aligned Houthis, even as US President Joe Biden expressed hope of a ceasefire between Israel and Hamas by the following Monday. At 1248 IST, the April contract of Brent crude oil on the Intercontinental Exchange was at $82.65 a bbl, compared with $82.53 a bbl on Monday, and $81.62 a bbl on Friday.

Markets around the world are now awaiting US personal consumption and expenditure data for January, due on Thursday. A poll by Dow Jones showed expectations of a 0.3% on-month rise, the same as in December. Consumer spending is seen increasing 0.2%, lower than a 0.7% increase in December.

Some banks sold dollars for foreign fund inflows into debt markets, which supported the Indian unit, dealers said. A slight rise in domestic equities also provided support, they said. At 1248 IST, both the Sensex and the Nifty 50 were 0.4% higher. However, dealers speculated that a few state-owned bank were likely to have purchased dollars on behalf of the Reserve Bank of India to curb volatility in the foreign exchange market. 

For the rest of the day, the rupee is seen in a range of 82.80-83.05 against the dollar, dealers said. They pegged key technical resistance for the Indian currency at 82.80 a dollar.  (Vaishali Tyagi)

India Rupee - Asia FX: Mixed; yen strengthens, Taiwan dollar falls

MUMBAI - Asian currencies were mixed against the dollar today. The dollar index came under pressure from the Japanese yen, after Japan's CPI data came in higher than expected. Core CPI that includes oil products but excludes fresh food prices, rose 2.0% in January against a 2.3% increase in December, data showed today. The core CPI was higher than market forecasts of a 1.8% rise, reaffirming expectation that the Bank of Japan may end negative interest rate policy in March or April.

The dollar index weakened after new home sales in the US in January were lower than expected. The data released on Monday showed sales of new single-family homes came in at 661,000 units, a rise of 1.5% month on month, according to the Census Bureau and Department of Housing and Urban Development. In a Reuters poll of economists, the forecast for new home sales was 680,000 units.

Kansas City Federal Reserve Bank President Jeffrey Schmid said he remains focused on the threat of high inflation and is in no hurry to cut rates. "With inflation running above target, labor markets tight and demand showing considerable momentum, my own view is that there is no need to pre-emptively adjust the stance of policy," he said. "Instead, I believe that the best course of action is to be patient, continue to watch how the economy responds to the policy tightening that has occurred, and wait for convincing evidence that the inflation fight has been won."

At 0914 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.76 compared with 103.78 on Monday. It was 103.96 on Friday.

The US durable goods data is due later today and markets also await personal consumption and expenditure data for January, due to be released on Thursday. The personal consumption and expenditure data is expected to increase by 0.4% on a monthly basis, as per a Reuters poll.

The Taiwan dollar fell 0.2% against the dollar. Business sentiment in the manufacturing and service sectors of Taiwan improved in January, indicating that the economy is picking up faster than expected, the Taiwan Institute of Economic Research said Monday. 

The Indonesian rupiah weakened 0.2% against the greenback. The Malaysian ringgit and the Philippines peso also weakened slightly. However, the Thai baht rose 0.1% against the greenback.  (Sourabh Kumar)

India Rupee: Steady as fall in dollar offsets rise in crude price

MUMBAI – The rupee was steady against the dollar as a fall in the dollar index offset a slight uptick in crude oil prices, dealer said. 

"We are seeing it (rupee) range bound only, there are many things including data points and other factors like we can say election in India and the US, which are strictly keeping the rupee in the narrow range only," a dealer at a state-owned bank said.

The dollar index eased as the Japanese yen gained strength after investors assessed the stronger-than-expected Japanese CPI print for January. The yen comprises 13.6% of the dollar index. Japan's national CPI rose 2.2% on-year, down from a 2.6% rise in December, according to the data released by the Japan Statistics Bureau today.

With Japan's core consumer inflation slowing for the third straight month in January, market expectations of the Bank of Japan ending negative rates by April still hold. The so-called "core core" index, which excludes both fresh food and energy prices, rose 3.5% on year in January, down from a 3.7% rise in December. This index is closely watched by the Bank of Japan as a gauge of the broader price trend. 

Meanwhile, in the US, new home sales in January were lower-than-expected. The data released on Monday showed that sales of new single-family homes came in at 661,000 units for the month, a rise of 1.5% month on month, according to the Census Bureau and Department of Housing and Urban Development. In a Reuters poll of economists, the forecast for new home sales was 680,000 units.

At 0925 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.76 compared with 103.78 on Monday. It was 103.96 on Friday.

A rise in crude price weighed on the rupee. Crude oil prices rose amid concerns of supply disruptions due to Iran-aligned Houthis continuing their attacks on ships in the Red Sea. US President Joe Biden indicated that he hoped to see a ceasefire between Israel and Hamas by next Monday. At 0925 IST, the April contract of Brent crude oil on the Intercontinental Exchange was at $82.44 a bbl, compared with $82.53 a bbl on Monday, and $81.62 a bbl on Friday.

Further, dealers speculated that foreign fund inflows into the debt market may provide support to the Indian unit as the day passes. 

Market participants also await India's GDP data, due Thursday. India's GDP growth is likely to have slowed down to a three-quarter low of 6.6% in the quarter ended December from 7.6% in Jul-Sep, mainly as the statistical effect of a low base normalises, according to an Informist poll of 20 economists. India's GDP grew 4.5% in Oct-Dec.

Markets around the world eye the personal consumption and expenditure data for January from the US, due for release on Thursday. A Dow Jones poll showed expectations of a 0.3% on-month rise, the same as December. Consumer spending is seen increasing 0.2%, lower than a 0.7% increase in December.

For the rest of the day, the rupee is seen in the range of 82.80-83.05 against the dollar, dealers said. They pegged the key technical resistance for the Indian currency at 82.80 a dollar.  (Vaishali Tyagi)

India Rupee: Expected range for rupee - Feb 27

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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