Informist, Thursday, May 25, 2023
By Aiswarya Santhosh
MUMBAI – After trading in a narrow range of seven paise through the day, the rupee ended lower against the dollar today as the greenback strengthened globally to an over two-month high due to safe-haven demand amid concern over the US debt ceiling issue, dealers said.
Volumes in the currency market were dull today due to lack of significant cues, they added.
The Indian unit settled at 82.7400 against the greenback, compared to 82.6600 a dollar on Wednesday.
The rupee opened lower against the dollar today, as the dollar index touched a two-month high after robust US economic data, and due to safe-haven demand as investors were concerned over the lack of definite progress in the US debt ceiling negotiations, as the Jun 1 deadline draws near.
US President Joe Biden resumed the debt ceiling talks with Congressional leaders on Wednesday, but the two sides haven’t been able to reach an agreement yet.
“We’ve made some progress working down there. So that’s very positive,” House of Representatives Speaker Kevin McCarthy told the media after the meeting. “I want to make sure we get the right agreement. I can see that we’re working towards that.”
Meanwhile, minutes of the Federal Open Market Committee’s May meeting, released on Wednesday, showed there was no firm consensus on the central bank’s future course of rate action, with some policymakers favouring further hikes and others opting for a more data-dependent approach.
According to the CME FedWatch tool, market participants have priced in a 34.2% chance that the Fed will raise interest rate at its next policy meeting in June.
During the day, the dollar index strengthened further, climbing to an over two-month high, which weighed on the Indian unit and pushed it to a low of 82.7750 today.
At 1603 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.05, as against 103.88 on Wednesday. It was at 103.48 on Tuesday.
Throughout the day, the rupee moved in a tight range as traders refrained from placing large bets due to lack of significant cues, dealers said. Uncertainty over the US debt ceiling issue as well as over the Federal Reserve’s policy path also weighed on risk sentiment, dealers said.
“Rupee was very range-bound between 82.70 to 82.77 as markets await for the deal in US on the debt ceiling. Indian indices were down 0.20% as global markets were down by 0.20%. Dollar index above 104 level paves way to 105. It looks like a risk-off day,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisory LLP.
However, losses in the Indian unit were limited as banks sold the greenback for some exporters, noting relatively higher dollar/rupee levels, dealers said.
A fall in crude oil prices also supported the Indian unit. Oil prices fell, reversing Wednesday’s gains, due to concern surrounding the US debt ceiling issue. On Wednesday, prices of the commodity rose after crude inventories fell unexpectedly and after comments from Saudi Arabia’s energy minister indicated the possibility of further output cuts by the Organization of the Petroleum Exporting Countries and its allies.
At 1627 IST, the July contract of Brent crude oil on the Intercontinental Exchange was at $77.04 a barrel as against $78.36 on Wednesday. It was at $76.84 a bbl on Tuesday.
A rise in domestic equity indices also supported the Indian unit. Today, both the Nifty 50 and the Sensex closed 0.2% higher.
Dealers also said banks bought dollars for some importers at the 82.70 level, which weighed on the Indian unit. However, they added that the nature of buying and selling was insignificant today.
FORWARDS
The premium on the one-year dollar/rupee forward contract fell, tracking a jump in US Treasury yields, dealers said. US treasury yields rose on Wednesday as the impasse over debt ceiling negotiations continued even as the deadline looms near. If the US defaults on its payment obligations, it would have a catastrophic effect on financial markets across the world.
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 168.27 paise, against 172.00 paise on Wednesday. On an annualised basis, the premium was at 2.03%, against the previous close of 2.06%.
OUTLOOK
On Friday, the rupee will take cues from overnight movement in the dollar index and crude oil prices, dealers said.
“The rupee will be in a similar range tomorrow (Friday), USDINR will likely trade in a range of 82.60-82.85,” said a dealer with a state-owned bank. “News from the US will mainly be the determining factor.”
Market participants await multiple data from the US. The Bureau of Economic Analysis will release the first revision to the first-quarter (Jan-Mar) GDP growth. Data on initial jobless claims and pending home sales for April are also scheduled to be released later today.
Dealers pegged immediate key technical resistance for the rupee at 82.60 a dollar. During the day, the rupee is seen in a range of 82.50-83.00 a dollar.
India Rupee – World FX:Euro dn as Germany enters recession; dlr firm
MUMBAI – The euro was down 0.2% against the dollar as the German economy entered a technical recession in the first quarter of 2023.
Germany’s gross domestic product contracted by 0.3% in Jan-Mar, following a 0.5% contraction in Oct-Dec, thus entering a recession. A recession typically means two quarters of negative growth.
The dollar index rose to a two-month high due to safe-haven demand amid concerns over the US government’s debt ceiling. US President Joe Biden resumed talks on the debt ceiling with Congressional leaders on Wednesday, but the two sides haven’t been able to reach an agreement yet.
The dollar remained firm ahead of multiple data releases from the US. The Bureau of Economic Analysis will release the first revision to the first-quarter (Jan-Mar) GDP growth. Initial Jobless and Pending Home Sales data for April is also scheduled for release later today.
At 1603 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.05, as against 103.88 on Wednesday. It was at 103.48 on Tuesday. (Kabir Sharma)
India Rupee: In tight range amid low volumes; dlr index strengthens
MUMBAI – The rupee traded in a narrow range against the dollar today amid dull volumes as traders remained largely on the sidelines due to uncertainty over the US debt ceiling issue, dealers said
“Rupee didn’t move much today, as traders are uncertain on whether the Fed will hike rates or not, also the US debt ceiling issue lingers,” said a dealer with a state-owned bank.
The dollar index strengthened further today, rising to over a two-month high on safe-haven demand as risk sentiment among investors was hurt due to the US debt ceiling issue.
US President Joe Biden resumed talks on the debt ceiling with Congressional leaders on Wednesday, but the two sides haven’t been able to reach an agreement yet.
Further, the minutes of the Federal Open Market Committee’s May meeting, released on Wednesday, showed that there was no firm consensus on the central bank’s future course of rate action, with some policymakers favouring further hikes and others opting for a more data-dependent approach.
However, dealers said that banks sold the greenback for some exporters, which supported the Indian unit. They said exporters sold dollars, noting the relatively higher dollar/rupee levels.
They also said banks bought dollars for some importers at the 82.70-a-dollar level. “There is a minimal level of buying and selling in the market, but not much,” a dealer with state-owned bank said.
Dealers have pegged immediate technical support for the rupee at 82.90 a dollar. During the day, the unit is seen at 82.60-82.90 a dollar. (Aiswarya Santhosh)
India Rupee – Asia FX: All down as dlr index touches fresh 2-mo high
NEW DELHI – Asian currencies fell against the greenback today as the dollar index touched a fresh two-month high due to worries over the ongoing debt ceiling negotiations in the US.
Representatives from the White House and the Republicans concluded another round of talks without reaching an agreement on raising the debt ceiling. The ongoing gridlock prompted Fitch Ratings to put the US’s AAA-rated long-term currency issuer under negative watch, warning that it might downgrade the credit rating.
The South Korean won fell 0.6% against the dollar after Bank of Korea held its benchmark interest rate at 3.5% today. The South Korean bank has now kept its benchmark rate unchanged for three consecutive meetings since January.
The Thai baht fell 0.3% against the dollar due to political tensions in Thailand. Thailand’s opposition party Move Forward secured a victory in the general election on May 14, but uncertainty looms over government formation, given the military’s rule in the country.
The rest of the Asian currencies moved 0.1-0.6% lower against the US unit. (Ananya Chaudhuri)
India Rupee:Down as dlr index at 2-mo high on US debt ceiling worries
MUMBAI – The rupee fell slightly against the dollar today as the dollar index rose to a two-month high due to safe-haven demand amid concerns over the US government’s debt ceiling, dealers said.
US President Joe Biden resumed talks on the debt ceiling with Congressional leaders on Wednesday, but the two sides haven’t been able to reach an agreement yet.
“We’ve made some progress working down there. So that’s very positive,” House of Representatives Speaker Kevin McCarthy said to the media after the meeting. “I want to make sure we get the right agreement. I can see that we’re working towards that.”
Losses for the Indian unit were limited as banks sold the greenback, likely for exporters noting the relatively higher dollar/rupee levels, dealers said.
“It might be selling (dollars) for exporters, now USDINR fell slightly,” said a dealer with a private bank. “Range seen today is 82.65-82.85.”
Dealers 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 pegged immediate technical resistance for the rupee at 82.60 a dollar. During the day, the unit is seen at 82.60-82.90 a dollar. (Aiswarya Santhosh)
India Rupee: Expected range for rupee – May 25
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 Avishek Dutta
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