Informist, Thursday, May 4, 2023
By Ananya Chaudhuri
NEW DELHI – The rupee ended off its earlier highs against the dollar today, as state-owned banks persistently purchased the greenback on behalf of oil marketing companies, and possibly for the Reserve Bank of India, dealers said.
After rising to the day’s high of 81.6500 against the US currency, the rupee settled at 81.8000 a dollar, little changed from 81.8175 a dollar on Wednesday.
Today, the Indian currency started the day higher at 81.6700 against the greenback, as the dollar index declined after the US Federal Reserve hiked interest rates by 25 basis points, in line with market expectations, and softened its tone for further policy tightening, dealers said.
With the recent rate hike, the US Fed’s benchmark overnight interest rate stands at 5.00-5.25%, the highest since 2007.
Further, the central bank appeared to soften its tone on future rate increases by dropping the line from the March statement that said, “The Committee anticipates that some additional policy firming may be appropriate.”
According to the CME Group FedWatch tool, the probability of the US Fed maintaining status quo at its next meeting in June is now 98%, compared to 62.2% last week.
Despite the expected outcome from the US Fed’s policy meeting, the Indian unit was largely flat compared to most of its Asian peers, which rose 0.1-1.5% against the greenback today.
Soon after open, the Indian rupee started to erase gains as state-owned banks stepped in to buy dollars on behalf of oil importers who wanted to take advantage of the relatively lower dollar/rupee levels, dealers said.
In the last leg of trade, the Indian rupee erased most of its earlier gains and touched the day’s low of 81.8175 a dollar.
Dealers said the RBI might have stepped in to buy the greenback at around 81.65 a dollar to replenish its foreign exchange reserves, which weighed on the Indian currency.
Dealers also said investors now await the outcome of European Central Bank’s policy review meeting, due later today, and US non-farm payrolls data, scheduled to be released on Friday.
“We have ECB (policy meet outcome) today; tomorrow we have NFP, and also tomorrow is a holiday,” a dealer at a private bank said. “So, no heavy positioning was taken today, and people went for long weekend…”
Indian financial markets will be closed on Friday on account of Buddha Purnima.
Gains in domestic equity indices also supported the local unit today, dealers said. Today, both the Nifty 50 and the Sensex ended 0.9% higher.
FORWARDS
The premium on the one-year dollar/rupee forward contract ended off highs as exporters sold dollars for forward delivery, noting relatively higher levels, dealers said.
Earlier today, premiums rose to 2.32%, tracking a fall in US Treasury yields after the Federal Reserve’s policy decision, dealers said.
The US Federal Open Market Committee raised interest rates by 25 basis points and dialled down its policy stance to signal data dependence for further policy actions.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
The premium on the one-year dollar/rupee contract was 186.74 paise, against 185.38 paise on Wednesday. On an annualised basis, the premium was at 2.28%, as against the previous close of 2.26%.
OUTLOOK
On Monday, the rupee will take cues from overnight movement in the dollar index and crude oil prices. Indian financial markets will be closed on Friday on account of Buddha Purnima.
Market participants now await the outcome of the European Central Bank’s policy review meeting, due later today. The central bank is widely expected to raise interest rate by 25 basis points.
“A hawkish ECB could work to drive the dollar index lower, possibly to the 100.80 mark, while the weak global dollar trend could work to drive emerging market currencies such as the rupee higher,” ICICI Bank said in a report. “We see USDINR pair trading lower with a downside bias of 81.20-81.50 emerging in the near term.”
Investors also await US non-farm payrolls data, due to be released on Friday, for further guidance on the US Fed’s monetary policy going forward, dealers said.
Dealers see immediate key technical resistance for the rupee at 81.60 a dollar. During the day, the rupee is seen in the range of 81.60-82.00 a dollar.
India Rupee – World FX: Dollar steadies; ECB policy outcome eyed
MUMBAI – The dollar index steadied today after falling on Wednesday, following the Federal Open Market Committee’s decision to raise interest rates by 25 basis points, in line with market expectations. Also, Fed Chair Jerome Powell put forward a less hawkish outlook on monetary policy, with the Fed adopting a more data-dependent approach to rate hikes moving forward.
Powell also warned that economic growth in the world’s largest economy was cooling and that US banks were set for tighter credit conditions. Market participants are now pricing in a 92% chance that the Fed will hold rates steady in June, according to CME Group’s FedWatch tool.
The euro fell 0.2% against the greenback ahead of European Central Bank’s decision on interest rates later today, as market participants have priced in a 25-basis-point hike, with a chance of a 50-bps increase as well.
Traders will closely watch the European Central Bank’s statement and governor Christine Lagarde’s press conference for indications about the central bank’s monetary policy path, with expectations that the central bank may continue raising rates.
The Japanese yen rose 0.1% against the greenback due to a boost in safe-haven demand for the currency as market participants were concerned over worsening economic conditions this year. (Aiswarya Santhosh)
India Rupee: Erases some gains as banks buy dollars for importers
NEW DELHI – The rupee erased some gains against the dollar as banks stepped in to purchase the greenback on behalf of oil importers, dealers said.
“There’s a little buying (of dollars) in the market since morning. Actually, importers are buying (dollars) because they are afraid 81.60 (a dollar) level is protected,” a dealer at a big state-owned bank said. “So they’re (importers) partially hedging.”
However, most of the importers remained on the sidelines waiting for the Indian unit to rise to 81.55 a dollar level, dealers said.
Earlier in the day, the rupee rose to the high of 81.6500 against the US currency.
A rise in domestic share indices also supported the Indian unit, dealers said. At 1255 IST, both the Nifty 50 and Sensex were 0.5% up.
Dealers said investors are now looking forward to the release of US non-farm payroll data, scheduled to be published on Friday, for further guidance on US Federal Reserve’s monetary policy going forward.
Dealers see immediate key technical resistance for the rupee at 81.60 a dollar. During the day, the rupee is seen in the range of 81.50-82.00 a dollar. (Ananya Chaudhuri)
India Rupee: Rises as dlr index falls on Fed’s rate hike pause hints
NEW DELHI – The rupee rose against the dollar as the dollar index declined after the US Federal Reserve hiked interest rates by 25 basis points, in line with market expectation, and signalled a pause in its historic rate hike cycle going forward, dealers said.
This time, traders focused on what the Fed didn’t say in its post-meeting statement. The central bank appeared to soften its language about future rate increases by dropping the line from the March statement that said, “the Committee anticipates that some additional policy firming may be appropriate.”
At 0935 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 101.1 as against 101.34 on Wednesday. It was at 101.94 on Tuesday.
A sharp decline in crude oil prices also supported the Indian unit, dealers said. Crude oil prices declined 4% on Wednesday after US Fed raised its benchmark overnight interest rate, worrying investors that it may slow down the economy, subsequently reducing demand for the fuel.
At 0935 IST, the June contract of Brent crude oil on the Intercontinental Exchange was at $72.80 a barrel as against $72.33 a bbl on Wednesday. It was at $75.32 on Tuesday.
“People are short (on dollar) only. It(rupee) may go further up to 81.20 (a dollar) once it breaks 81.60 (a dollar) level,” a dealer at a private bank said.
Dealers see immediate key technical resistance for the rupee at 81.60 a dollar. During the day, the rupee is seen in the range of 81.50-82.00 a dollar. (Ananya Chaudhuri)
India Rupee – Asia FX: Up on weak dlr as Fed hints at rate hike pause
MUMBAI – Most Asian currencies rose against the dollar as the greenback weakened after the US Federal Reserve raised the interest rates by 25 basis points but hinted at a pause in its rate hike cycle.
“We’re closer, or maybe even there,” Powell said of the end-point of rate increases that have boosted the Fed’s policy rate by a full 5 percentage points in 10 meetings since Mar 2022.
However, market participants were focused on what the Fed didn’t say this time in its post-meeting statement. The central bank appeared to soften its language about future rate increases by dropping the line from the March statement that said, “the Committee anticipates that some additional policy firming may be appropriate.”
At 0920 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 101.1 as against 101.34 on Wednesday. It was at 101.94 on Tuesday.
The South Korean won led the gains and was up 1.2% against the dollar. The Indonesian rupiah, the Thai baht and the offshore Chinese yuan were up 0.5%, 0.4% and, 0.3% respectively. (Kabir Sharma)
India Rupee: Expected range for rupee – May 4
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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