Informist, Thursday, Jul 13, 2023

By Kabir Sharma and Ananya Chaudhuri

NEW DELHI – The rupee surged against the greenback as the dollar index fell to an over one-year low after US headline inflation declined more than expected in June, leading to hope that the US Federal Reserve may soon end its aggressive rate hike cycle.

The rupee broke the crucial 82-a-dollar level and touched a high of 81.9425 during the day before erasing some gains and settling at 82.0725 a dollar against Wednesday's close of 82.2475 a dollar. 

"It was all based on the dollar weakness today. If you see, rupee fell to decade lows against other currencies like pound and euro because there was mass dollar selling and people were looking for alternatives. Now, the Fed won't hike after the July meeting," a dealer at a big state-owned bank said.  

US headline inflation stood at 3.0% on year in June, the smallest annual increase since March 2021, compared with a forecast of 3.1% by analysts polled by Dow Jones. The CPI print was at 4.0% in May. Core US CPI stood at 4.8% on year in June, against a Dow Jones poll projection of 5.0%.

US interest rate futures continue to reflect strong conviction of traders that the policy rate will increase by a quarter of a basis point to a range of 5.25-5.50% at the Fed's Jul 25–26 meeting, but they now project a 25% likelihood of another hike by the year-end, down from 35% earlier. 

At 1627 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 100.28 as against 100.56 on Wednesday. It was at 101.66 on Tuesday.

Shortly after opening, the rupee rose to the day's high of 81.9425 against the greenback as banks rushed to unwind their long-dollar bet after stop-losses were triggered. Dealers also said banks sold dollars on behalf of exporters who expected the rupee to appreciate further, which also supported the local unit.

"They (exporters) are expecting the market to move up cause there's quite weakening of dollar index. It's (dollar index) also not expected to move much since other currencies are appreciating," a dealer at a big state-owned bank said.

A rise in domestic equity indices also supported the Indian currency, dealers said. Today, the benchmark Nifty 50 and Sensex ended 0.2% and 0.3% higher, respectively. 

However, the Indian currency started to erase gains and touched the day's low of 82.1400 a dollar as state-owned banks bought the greenback on behalf of oil marketing companies, which wanted to take advantage of relatively lower dollar/rupee level, dealers said. 

Oil futures rose and settled above $80 a barrel on Wednesday, the first time since May, as a softer US CPI print for June raised hope that the US Fed may stop hiking interest rates after this month. Higher interest rates hurt growth, subsequently weighing on demand for the fuel.

At 1627 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $80.28 a bbl, as against $80.11 a bbl on Wednesday. It was at $79.4 a bbl on Tuesday.

Some dealers speculated that the Reserve Bank of India might have bought dollars from the currency market to replenish its foreign exchange reserves and contain sharp appreciation of the Indian currency.

FORWARDS

Premiums on one-year dollar/rupee forward contracts ended at an over two-week high, tracking a fall in US Treasury yields, dealers said.

US Treasury yields declined on Wednesday after data showed the CPI print for the country stood at 0.2% on month in June, compared with market expectations of 0.3%. This fuelled hopes that the end to the US Federal Reserve's rate hike cycle was near. 

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

The rise in premiums on dollar/rupee one-year forward contracts was also because gains in the rupee prompted banks and importers to buy dollars for forward delivery, dealers said.

Premiums on one-year dollar/rupee forward contracts should consolidate in the 1.60-1.80% band in the near term, dealers said.

The premium on the one-year dollar/rupee contract was 142.98 paise, against 135.14 paise on Wednesday. On an annualised basis, the premium was at 1.74%, against the previous close of 1.63%.

OUTLOOK

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

"Rupee is expected to remain in a range of 81.80 to 82.30 (a dollar) with flows dominating and RBI watching and possibly buying dollars to give another chance for exporters to hedge," said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP.

Dealers peg immediate key technical resistance for the rupee at 81.80 a dollar. During the day, the rupee is seen in the range of 81.80-82.30 a dollar.

India Rupee:Premiums jump on fall in US Treasury yields post CPI data

NEW DELHI – Premiums on one-year dollar/rupee forward contracts jumped, tracking a fall in US Treasury yields, dealers said.

US Treasury yields declined on Wednesday after data showed the CPI print for the country stood at 0.2% on month in June, compared with market expectations of 0.3%. This fuelled hopes that the end to the US Federal Reserve's rate hike cycle was near. 

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

The rise in premiums on dollar/rupee one-year forward contracts was also because gains in the rupee prompted banks and importers to buy dollars for forward delivery, dealers said. 

"Premiums should consolidate in the 1.60-1.80% band in the near term," said a dealer with a state-owned bank. "Importers have been paying aggressively today looking at the rupee appreciation."

Market participants see technical support at 1.50% for the one-year dollar/rupee forward contract. 

At 1500 IST, the premium on the one-year, exact-period dollar/rupee forward contract was at 143.48 paise as against 135.13 paise at Wednesday's close. On an annualised basis, the premium was at 1.74% as against 1.63% at the previous close. (Pratiksha)

India Rupee - World FX: Dollar index at 1-year low on fall in US CPI

MUMBAI – The dollar index fell to an over one-year low as US headline inflation declined more than expected in June, fuelling hopes that the US Federal Reserve may soon end its aggressive rate hike cycle.

US headline inflation fell to 3.0% on year in June, marking the smallest annual increase since March 2021, compared with a fall of 3.1% forecast by analysts polled by Dow Jones. The CPI was at 4.0% in May. Core US CPI fell to 4.8% on year in June against the Dow Jones poll projection of 5.0%.

US interest rate futures continue to reflect strong conviction of traders that the policy rate will increase by a quarter of a basis point to a range of 5.25% to 5.50% at the Fed's Jul 25–26 meeting, but they now project a 25% likelihood of another hike by year-end, down from 35% earlier.

At 1355 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 100.34 as against 100.56 on Wednesday. It was at 101.66 on Tuesday.

After the inflation data was released on Wednesday, the US dollar fell to its lowest level versus the Swiss franc since early 2015. It was last trading at 0.8634 francs, down 0.5%, the lowest since the Swiss National Bank abolished the currency's peg in January 2015.

The Australian dollar was up 0.8% against the dollar, pound sterling up 0.4% and the euro up 0.2%. (Kabir Sharma)

India Rupee: Erases some gains as banks buy dollars for oil importers

NEW DELHI – The rupee erased some of its gains against the dollar as banks rushed to buy the greenback on behalf of oil marketing companies and other importers, dealers said.

"The rupee opened up, but it has gone down since there's consistent (dollar) buying," a dealer at a big state-owned bank said. "We had a view that rupee would go up, but (dollar) buying pressure has picked up."

Earlier in the day, the Indian currency rose to a high of 81.9425 against the US currency.

Some dealers speculated that the Reserve Bank of India might have bought dollars from the currency market to replenish its foreign exchange reserves and contain sharp appreciation of the Indian currency.

However, dealers said some banks also sold dollars on behalf of exporters who expect the rupee to appreciate hereon, which supported the Indian unit, dealers said.

The dollar index hovered around a one-year low as US CPI declined more than expected, which also supported the rupee, dealers said. At 1302 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 100.45 as against 100.56 on Wednesday. It was at 101.66 on Tuesday.

A rise in domestic share indices also supported the local unit, dealers said. At 1303 IST, the Nifty 50 and Sensex were up 0.8% and 0.9%, respectively.

Dealers peg immediate key technical resistance for the rupee at 81.80 a dollar. During the rest of the day, the rupee is seen in the range of 81.80-82.20 a dollar. (Ananya Chaudhuri)

India Rupee: Surges as dollar index at 1-yr low on soft US CPI data

NEW DELHI – The rupee surged against the greenback today as the dollar index plunged to a one-year low after data showed headline inflation in the US declined more than expected in June, fuelling hopes that the US Federal Reserve may soon end its aggressive rate hike cycle, dealers said

Data showed US headline inflation fell to 3.0% on year in June, the smallest annual increase since March 2021, compared with a 3.1% decline forecast by analysts in a Dow Jones poll. The CPI print was at 4.0% in May. 

Further, core US CPI stood at 4.8% on year in June, against a projection of 5.0% in a Dow Jones poll.

According to the CME FedWatch tool, Fed fund futures traders expect a 94.2% chance of a 25-basis-point rate hike in this month's meeting, and a 5.8% chance of a pause. After this, the possibility of a rate hike by the end of the year is less than 25%.

At 0933 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 100.48 as against 100.56 on Wednesday. It was at 101.66 on Tuesday.

Dealer said banks rushed to sell the US unit to unwind their long dollars bets as stop-losses were triggered after the Indian unit rose past the psychologically crucial level of 82.00 a dollar. This also supported the rupee.

However, banks purchased the greenback on behalf of importers, noting relatively lower dollar/rupee levels, which limited gains for the rupee, dealers said.

"People who have taken long position (on dollar) they got hit, so in the morning we're seeing selling (of dollars), but it (rupee) now came down a little from 81.94 (a dollar)," a dealer at a state-owned bank said. "Buying (of dollars) is coming in the market right now."

Dealers peg immediate key technical resistance for the rupee at 81.80 a dollar. During the day, the rupee is seen in the range of 81.80-82.20 a dollar. (Ananya Chaudhuri)

India Rupee - Asia FX: Up as dollar index at 1-yr low on weak US CPI

MUMBAI – Most Asian currencies were up against the dollar as the greenback slumped to an over one-year low after data showed CPI inflation in the US economy was lower than expected, raising hopes of less aggressive monetary tightening by the US Federal Reserve going ahead. The dollar index dropped to 100.44, the lowest since April 2022.

Data showed US headline inflation fell to 3.0% on year in June, marking the smallest annual increase since March 2021, compared with a 3.1% decline analysts forecast in a Dow Jones' poll. The CPI was at 4.0% in May. 

Further, core US CPI fell to 4.8% on year in June against a projection of 5% by a Dow Jones' poll.

The South Korean won lead the gains and was up 1% against the dollar after Bank of Korea decided to keep rates unchanged at its monetary policy meeting earlier today. The governor of the central bank said, "Rate-cut discussions to start only when inflation converges on 2% target." 

The Philippines peso and the Indonesian rupiah were up 0.7% each against the greenback. Bucking the trend, the offshore Chinese yuan was down 0.1% against the dollar. (Kabir Sharma)

India Rupee: Expected range for rupee - Jul 13

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

(Ananya Chaudhuri)

End

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

Edited by Avishek Dutta

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