Informist, Tuesday, Dec 5, 2023

By Sourabh Kumar and Vaishali Tyagi

MUMBAI – The rupee ended slightly lower against the dollar today due to a strong dollar index and persistent demand for dollars from oil marketing companies, dealers said.

The rupee moved in a very narrow range against the dollar, as banks also sold the greenback likely on behalf of the Reserve Bank of India to contain the rupee's fall, dealers said.

"Although the dollar index and rupee do not move in tandem, they are also not decoupled. Today, the index moved up, so rupee was also pressurised from that. In the morning, we also saw demand (of dollars) from oil companies," said a dealer with a state-owned bank.

After moving in a range of four paise during the day, the rupee settled at 83.3825 a dollar today. The rupee had settled at 83.3650 a dollar on Monday.

Today, the rupee opened at a record opening low level of 83.3800 a dollar, as the dollar index kept strengthening, amid skirmishes in the Red Sea. This spurred the demand for safe haven currencies such as the dollar.

After opening, the foreign exchange market saw heavy demand from oil marketing companies on account of low crude oil prices, dealers said.

At 1530 IST, the February contract of Brent crude oil was at $78.66 a bbl compared with $78.14 a bbl on Monday. It was at $78.88 a bbl on Friday. 

Oil prices fell amid prospects of weak global demand. Monday's fall adds to a 2% fall last week after the output cuts announced on Thursday by the Organization of the Petroleum Exporting Countries and allies including Russia. 

Apart from demand for greenback by oil marketing companies, some defence sector related purchases also raised the demand for dollars, said dealers.

The dollar index strengthened, gaining some of its lost ground after Fed Chair Jerome Powell said on Friday that the central bank was prepared to tighten policy further if needed, but also added that interest rates were "well into restrictive territory" and were slowing down inflation.

The dollar was further strengthened amid skirmishes in West Asia. Three commercial ships came under attack in the international waters of the Red Sea on Sunday, US military officials said. Houthi militants claimed responsibility for the attack. This added to the tensions that had already been building since the Israeli war.

Soon after opening, the rupee touched a low of 83.3900, which prompted the central bank to intervene in the market by selling dollars.

Meanwhile, in the US, investors braced for non-farm payroll data for November, due to be released on Friday, which is expected to show the American economy added 180,000 jobs last month, up from 150,000 in October. However, traders continued to price in the possibility of a policy rate cut by March next year, following their dovish interpretation of Fed Chair Jerome Powell's comments last week. 

Fed fund futures traders are expecting an almost 54% chance of a rate cut by the Fed by March compared with 21% just over a week ago, according to the CME's FedWatch tool.

At 1643 IST, the dollar index was at 103.63. The index, which measures the strength of the greenback against a basket of six major currencies, settled at 103.63 on Monday. It was at 103.19 on Friday.

A rise in domestic equities also provided strength to the Indian currency. Today, the Sensex and Nifty 50 were up 0.6% and 0.8% respectively.

Additionally, the Reserve Bank of India is set to announce its policy decision later on Friday. All 25 respondents in an Informist poll of economists, treasury heads, and analysts expect the rate-setting panel to keep the repo rate unchanged at 6.50% and maintain the 'withdrawal of accommodation' stance at the end of its three-day meeting. 

FORWARDS

Premiums on one-year dollar/rupee forwards rose today despite a slight rise in US Treasury yields, dealers said. 

The yield on the benchmark 10-year US Treasury note rose from three-month lows touched on Monday, as investors braced for non-farm payroll data for November, due to be released on Friday. 

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

The premium on the one-year, exact-period dollar/rupee forward contract was at 133.31 paise, against 131.52 paise on Monday. On an annualised basis, the premium was 1.59%, up from the previous close of 1.57%.

OUTLOOK

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

They expect the RBI to continue selling dollars to prevent runaway depreciation in the rupee.

Investors now await the US November services purchasers managers index due later today, and the US employment report for November due on Friday.

Dealers have pegged key technical support for the local currency at 83.50 a dollar. During the day, the rupee is seen in the range of 83.10-83.50 a dollar.

India Rupee - World FX: Australian dollar falls after rate outcome

MUMBAI – The Australian dollar fell 1% against the dollar following the Reserve Bank of Australia's December monetary policy meeting outcome today. The Australian central bank decided to keep the interest rate unchanged at 4.35%.

Australia’s current account balance also fell by $7.9 billion to a deficit of $0.2 billion during Jul-Sep, according to figures released today by the Australian Bureau of Statistics.

The euro weakened 0.1% against the dollar after European Central Bank executive board member Isabel Schnabel in her speech today indicated that the latest inflation figure was "good news" and "a positive surprise", and said further rate hikes were "rather unlikely".

The eurozone inflation came in at 2.4% in November from 2.9% in October, according to flash figures published on Thursday.

The Canadian dollar weakened 0.1% against the greenback as crude oil prices continued to fall. Oil prices fell amid weak global demand on account of a slowing down in global economies. Canada is a major exporter of oil to the US.

Expectations that the Bank of Canada may start cutting its interest rate in Apr-Jun next year also weighed on the Canadian currency.  (Sourabh Kumar)

India Rupee: In thin band; RBI's dlr sales offset oil cos' dlr buys

MUMBAI – The rupee traded in a narrow range against the dollar as banks' dollar sales, likely for the Reserve Bank of India, limited the Indian unit's fall after strong demand for the greenback by oil marketing companies, dealers said.

The rupee has moved in the range of only 3 paise so far today. 

"There was quite a significant buying (of dollars). Majorily OMCs (oil marketing companies) are there. We also saw RBI selling (dollars) at around 39 levels (83.39 a dollar)," said a dealer with a foreign bank.

Dealers said banks bought the greenback on behalf of oil marketing companies, noting attractive crude prices, dealers said.

At 1257 IST, the February contract of Brent crude oil was at $78.10 a bbl compared with $78.14 a bbl on Monday. It was at $78.88 a bbl on Friday. 

The dollar regained some of its lost ground as market participants focussed on the US Federal Reserve Chair Jerome Powell's comments on Friday, saying that the central bank was prepared to tighten policy further if needed, but also added that interest rates were "well into restrictive territory" and were slowing down inflation.

At 1257 IST, the dollar index was at 103.60. The index, which measures the strength of the greenback against a basket of six major currencies, settled at 103.63 on Monday. It was at 103.19 on Friday.

For the rest of the day, the rupee is seen in a range of 83.10-83.50 against the dollar, with immediate key technical support pegged at 83.50 a dollar.  (Sourabh Kumar)

India Rupee - Asia FX:Most units dn as dlr firm ahead of US econ data

MUMBAI – Most Asian units were lower against the dollar as the greenback remained firm on caution ahead of crucial economic data releases in the US which are expected to provide further cues on the Federal Reserve's monetary policy path. 

Market participants await the US non-farm payroll data for November, due on Friday, which is expected to show that the country's economy added 180,000 jobs last month, up from 150,000 in October, as per Reuters.

Further, market participants expect the Fed to keep rates unchanged at its policy meeting next week. According to the CME Group's FedWatch tool, interest rate futures suggest a 58% probability that the Fed will start cutting rates by March 2024. 

At 1024 IST, the dollar index was at 103.58. The index, which measures the strength of the greenback against a basket of six major currencies, settled at 103.63 on Monday. It was at 103.19 on Friday.

The South Korean won fell 0.7% against the dollar as data showed the country's overall inflation rate in November was at 3.3% compared with 3.7% as expected by a Reuters poll.

The offshore Chinese yuan recovered against the greenback after stronger-than-expected data from the region. China's services purchasing managers' index jumped to 51.5 in November, as against the October reading of 50.4, the latest data published by Caixin showed today. The markets had expected a print of 50.8.

The Taiwanese dollar was down 0.3% against the dollar. The Indonesian rupiah was down 0.2% against the greenback.  (Kabir Sharma)

India Rupee: Steady despite firm dollar; crude price fall supports

MUMBAI – The rupee started the day at a record opening low of 83.38 per dollar. However, it was steady against the US unit despite the dollar index recovering marginally from a three-month low hit last week, driven by speculation that the US Federal Reserve may imminently reduce interest rates, dealers said. Volumes in the currency market remained dull, they said. 

"There is no such big movement as of now even though oilers are always there, so it is around yesterday's (Monday's) level," a dealer at a state-owned bank said. "I would say the market is shallow currently."

The dollar retraced some of its lost ground after Fed Chair Jerome Powell said on Friday that the central bank was prepared to tighten policy further if needed, but also added that interest rates were "well into restrictive territory" and were slowing down inflation.

At 0952 IST, the dollar index was at 103.60. The index, which measures the strength of the greenback against a basket of six major currencies, settled at 103.63 on Monday. It was at 103.19 on Friday.

The Indian unit may also take cues from movement of the offshore Chinese yuan, dealers said.

In November, a survey revealed that Chinese service sector activity surpassed expectations, rebounding from earlier downturns observed this year. The improvement was attributed to the ongoing stimulus measures by Beijing, which contributed to enhanced local demand.

China's Services Purchasing Managers' Index (PMI) jumped to 51.5 in November, as against the October reading of 50.4, the latest data published by Caixin showed today. The markets had expected a print of 50.8.

"Also, the Indian currency may be affected if the yuan depreciates in the after-effects of Chinese data which came out today," the dealer said. 

Amid the data releases from major economies, the Reserve Bank of Australia members decided to leave the interest rates unchanged at 4.35%, following the conclusion of its December monetary policy meeting today.

Also, data on Monday showed that exports from Germany unexpectedly fell in October, denting hope that Europe's biggest economy was stabilising.

This week, investors eagerly await data on key US economic indicators, commencing with the ISM manufacturing Purchasing Managers Index today and US jobs data due on Friday. Investors estimate 180,000 jobs were added in November, compared with the 150,000 recorded in October.

A fall in crude oil prices supported the Indian currency. At 0947 IST, the January contract of Brent crude oil was at $78.03 a bbl compared with $78.14 a bbl on Monday. It was at $78.88 a bbl on Friday. 

A rise in domestic equities also provided strength to the Indian currency. At 0947 IST, the Sensex and Nifty 50 were up 0.4% each.  

Additionally, the Reserve Bank of India is set to announce its policy decision later on Friday, with widespread expectation that interest rates will remain unchanged.

For the rest of the day, the rupee is seen in a range of 83.10-83.50 against the dollar, with immediate key technical support pegged at 83.50 a dollar.  (Vaishali Tyagi)

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 Maheswaran Parameswaran

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