Informist, Tuesday, May 23, 2023
By Ananya Chaudhuri
NEW DELHI – After trading in a narrow range throughout the day, the rupee ended largely steady against the dollar today as dollar sales by banks likely for the Reserve Bank of India offset the impact of strength in the dollar index, and dollar buys on behalf of importers, dealers said.
Today, the Indian unit settled at 82.7950 against the greenback compared to 82.8275 a dollar on Monday. The rupee traded in a tight range of nine paise throughout the day.
The Indian currency started the day largely steady against the greenback at 82.8400 as traders awaited the minutes of the US Federal Open Market Committee meeting and further news on the US debt ceiling issue.
The minutes of the FOMC meeting held on May 2-3 are due to be released on Wednesday. Traders await the minutes for clarity on the Federal Reserve’s policy decision in its meeting next month.
Moreover, market participants remained wary about the ongoing negotiation on raising US government’s debt ceiling as President Joe Biden and House Representative Speaker Kevin McCarthy failed to come up with an agreement after Monday’s meeting. However, McCarthy termed the hour-long meeting as “professional” and “productive”.
“The US won’t default on that for sure. Only delay will induce some risk-off sentiment, and till then INR (rupee) should depreciate,” a dealer at a big state-owned bank said. “After it’s resolved, INR can go back to 82.00-82.50 (a dollar) level.”
Shortly after opening, the rupee moved to the day’s low of 82.8450 against the US unit as banks bought dollars for importers who expected the rupee may depreciate from here on, dealers said.
Dealers said banks sold the greenback for exporters who wanted to take advantage of relatively higher dollar/rupee level which supported the local unit.
However, they said nature of selling dollars on behalf of exporters wasn’t significant as most of them remained on the sidelines on hopes that the local unit may fall further.
The volumes in the currency market was also lacklustre today as traders avoided placing fresh bets due to lack of significant cues, dealers said.
Further, the dollar index rose during European trade as uncertainty over US debt ceiling talks weighed on investors’ sentiment prompting them to move to the safe-haven subsequently exerting pressure on the rupee.
At 1634 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.53 as against 103.24 on Monday. It was at 103.20 on Friday.
During the last leg of the trade, the rupee touched the day’s high of 82.7500 a dollar as the RBI sold the US unit at around 82.84 a dollar level to protect the local unit from breaching the psychologically crucial level of 83-per-dollar mark, dealers said.
“Rupee was very ranged today as market pondered over whether a debt limit deal was possible before Jun 1, the deadline given by the Treasury Secretary Yellen,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors LLP. “It (rupee) has moved between 81.76 to 81.85 (a dollar) as RBI protects one end and all others being buyers of dollar.”
FORWARDS
The premium on the one-year dollar/rupee forward contract came off its earlier low and ended higher as banks and importers bought dollars for forward delivery at relatively low levels, dealers said.
“It makes sense for importers to pay around these levels, since there’s no clarity if these levels will sustain going ahead,” a dealer with a state-owned bank said.
Some dealers speculated that banks bought dollars for delivery later, likely on behalf of the Reserve Bank of India, which also supported the premiums.
The premium on the one-year dollar/rupee forward contract fell to a low of 1.99% earlier today tracking an overnight rise in US Treasury yields, dealers said.
US Treasury yields rose on Monday as investors shifted their focus to US debt ceiling negotiations.
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 169.28 paise, against 167.00 paise on Monday. On an annualised basis, the premium was at 2.02%, against the previous close of 2.01%.
OUTLOOK
On Wednesday, the rupee will take cues from overnight movement in the dollar index and crude oil prices, dealers said.
Traders will also await the minutes of the Federal Open Market Committee’s May policy meeting for further cues about the US central bank’s monetary policy going forward.
“FOMC minutes might be mildly hawkish, I would say. Stating a pause throughout the year but not a rate cut this year,” a dealer at a foreign bank said.
Dealers pegged the immediate key technical support for the rupee at 82.90 a dollar. During the day, the rupee is seen in the range of 82.50-83.00 a dollar.
India Rupee – World FX: Sterling falls on weak UK PMI data; dlr up
NEW DELHI – The pound sterling fell 0.4% against the dollar today after UK’s purchasing manager’s index fell more than expected indicating a slowdown in both manufacturing and services activities.
S&P Global’s flash composite PMI declined to 53.9 in May from a one-year high of 54.9 in April. The preliminary figure is below the market estimate of 54.6 for this month.
The euro also fell 0.3% against the US unit after S&P Global and Hamburg Commercial Bank’s preliminary PMI fell to 53.3 in May from April 54.1.
The dollar index, which measures the strength of the greenback against a basket of six major currencies, strengthened further as market participants wait for a conclusion about the ongoing negotiation on raising the US government’s borrowing limit.
Though US President Joe Biden and House of Representatives Speaker Kevin McCarthy called their meeting on the debt ceiling “productive”, they have not yet reached an agreement.
Traders also await the release of the minutes of the US Federal Reserve meeting in May for further guidance on the US central bank’s monetary policy moving ahead.
At 1528 IST, the dollar index was at 103.48 as against 103.24 on Monday. It was at 103.20 on Friday. (Ananya Chaudhuri)
India Rupee: In thin band; dollar sales likely for RBI, exporters aid
NEW DELHI – The rupee remained in a narrow range against the dollar today as most traders avoided placing fresh bets before the release of the US Federal Reserve’s May meeting minutes for further guidance on the central bank’s monetary policy moving ahead, dealers said.
Market participants also await a conclusion about the ongoing negotiation on raising the US government’s borrowing limit.
Further, dealers said the Reserve Bank of India might have sold the greenback at around 82.84 a dollar level to prevent the rupee from falling bellow the psychologically-crucial level of 83.00 a dollar level.
Some banks also sold the US unit on behalf of exporters, which aided the Indian unit, dealers said. However, the majority of the exporters remained on the sidelines due to caution.
Trade volumes in the currency market also remained lacklustre today. So far, the rupee traded in a tight range of 6 paise.
“Nothing is happening in the market. Today, volume itself is thin,” a dealer at a foreign bank said. “Everyone is just glued to the news to know what’s going to happen with respect to US debt ceiling. Nothing concrete is coming out.”
The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.24 on Monday. It was at 103.20 on Friday.
A rise in domestic share indices supported the Indian unit, dealers said. At 1314 IST, the Nifty 50 and the Sensex were 0.5% and 0.3% higher respectively.
Dealers have pegged the next technical support for the rupee at 82.90 a dollar. During the day, it is seen at 82.60-83.00 a dollar. (Ananya Chaudhuri)
India Rupee – Asia FX: Mixed; traders await FOMC meeting minutes Wed
NEW DELHI – Asian currencies showed a mixed trend against the dollar today as investors await the minutes of the US Federal Open Market Committee’s meeting, scheduled to be released on Wednesday.
The minutes are expected to give clarity on the Federal Reserve’s policy decision at its meeting next month.
Meanwhile, the US Fed St Louis President James Bullard said on Monday that the central bank needs to raise interest rates another two times to tame the stubborn inflation.
Investors also hoped that the US may soon resolve the debt ceiling issue and reach an agreement after House Representative Speaker Kevin McCarthy termed his meeting with President Joe Biden as “productive” and “professional”.
The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.24 on Monday. It was at 103.20 on Friday.
The South Korean won rose 0.5% against the US unit tracking gains in local share indices, and was one of the best performing currencies among peers. At 1126 IST, Kospi was 0.4% higher. The Philippine peso and Indonesian rupiah rose 0.4% and 0.2%, against the greenback.
The Thai baht was the worst performer among Asian currencies, down 0.6% against the dollar on fear that the US Fed may hike interest rates further. The Chinese yuan fell 0.3% as traders remained worried about slow recovery of Chinese economy. (Ananya Chaudhuri)
India Rupee: Largely steady as traders await US FOMC minutes Wed
MUMBAI – The rupee was largely steady against the dollar today as market participants awaited the minutes of the US Federal Open Market Committee meeting and further news on the US debt ceiling issue, dealers said.
The minutes of the Federal Open Market Committee meeting held on May 2-3 are due to be released on Wednesday. Traders await the minutes for clarity on the Federal Reserve’s policy decision in its meeting next month.
Money markets have currently priced in a 25% chance of a 25-basis-point rate hike at next month’s meeting, with the remaining expecting a pause.
Meanwhile, US President Joe Biden and House of Representatives Speaker Kevin McCarthy called their meeting on the debt ceiling issue “productive” but have not yet reached an agreement. “Default is off the table, and the only way to move forward is in good faith towards a bipartisan agreement,” Biden said in a statement after Monday’s meeting.
“So far nothing is happening, we expect rupee to rally to 82.90 levels today, it may even cross the 82.90 level,” said a dealer with a state-owned bank. “Range seen is mostly 82.80-82.90.”
A rise in domestic share indices supported the Indian unit. At 0920 IST, both the Nifty 50 and the Sensex were up 0.3%.
Dealers also said the Reserve Bank of India may sell the greenback to prevent the rupee from falling beyond the psychologically-crucial level of 83.00 a dollar. They have pegged the next technical support for the rupee at 82.90 a dollar. During the day, it is seen at 82.60-83.00 a dollar. (Aiswarya Santhosh)
India Rupee: Expected range for rupee – May 23
MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecasted by leading banks and brokerages in an Informist poll:
(Aiswarya Santosh)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Maheswaran Parameswaran
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