Informist, Thursday, Jun 8, 2023
By Ananya Chaudhuri
NEW DELHI – After moving in a narrow range throughout the day, the rupee ended off its earlier lows against the dollar today as foreign banks persistently sold the greenback for foreign fund inflows, dealers said.
Today, after falling to a low of 82.6125 against the greenback, the Indian unit settled at 82.5625 a dollar, compared to 82.5475 a dollar on Wednesday. The rupee moved in a tight range of 8 paise throughout the day.
The Indian currency started the day lower against the greenback at 82.5900 on concerns that the US Federal Reserve will maintain its hawkish stance at its policy meting on Jun 13-14 as the Bank of Canada and the Reserve Bank of Australia hiked interest rates, indicating that global monetary policy tightening hasn’t peaked yet.
“Everywhere rate pause was estimated, but yesterday and the day before yesterday, Bank of Canada and the Reserve Bank of Australia hiked interest rates,” a dealer at a big state-owned bank said. “That’s why FedWatch tool has increased the expectation of rate hike (by US Fed) to 25-26% for this month which was very lower earlier.”
In a surprise move, Bank of Canada raised its benchmark interest rate by 25 basis points to 4.75% on Wednesday, against market expectation of a pause. Similarly, the Australian central bank hiked its interest rate by 25 bps to 4.1% on Tuesday.
Shortly after opening, the local unit touched the day’s low of 82.6125 against the US currency as banks rushed to purchase the greenback on behalf of importers who expected the rupee to depreciate from here on.
During the day, the Reserve Bank of India’s Monetary Policy Committee held its repo rate unchanged at 6.50% in line with market expectation. Following this, the local unit steadied against the greenback, dealers said.
In a poll by Informist, an overwhelming majority of 29 of the 30 respondents said they expected the domestic rate-setting panel to keep the repo rate unchanged at 6.50% at the end of its three-day meeting.
Further, the rate-setting committee maintained their stance on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
“The point is it (MPC decision) has come out as it was expected, and no position was also made,” a dealer at a foreign bank said. “So, right now everything is stable, no trend is seen now.”
However, dealers said foreign banks stepped in to sell dollars for foreign fund inflows which pushed the rupee to the day’s high of 82.5300 a dollar.
The entire day the Indian currency traded in a thin range of 8 paise against the dollar amid low volumes as most of the traders remained on the sidelines exercising caution ahead of the US Fed policy meeting and US CPI data next week, dealers said. The US CPI data is scheduled to be released on Jun 13.
Meanwhile, a fall in local share indices exerted pressure on the rupee, dealers said. Today, both the benchmark Nifty 50 and Sensex ended 0.5% down.
FORWARDS
Premiums on one-year dollar/rupee forward contracts fell tracking a rise in the US Treasury yields, dealers said.
US Treasury yields rose as market participants expect the US Federal Reserve to remain hawkish in its next policy review meeting on Jun 13-14 after the Bank of Canada and the Reserve Bank of Australia delivered rate hikes one after the other. Further, traders are factoring in a possibility of another 25-basis-point rate hike at the Fed’s July meeting.
According to a CME FedWatch tool, the Fed fund future market is factoring in a 75% probability that the US central bank may skip rate hike in the upcoming meeting, but likely to raise interest rates in July.
The Reserve Bank of India’s Monetary Policy Committee kept its repo rate unchanged at 6.50% and maintained its stance on withdrawal of accommodation to ensure that inflation progressively aligns with the target.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
The premium on the one-year contract was at 146.00 paise as against 147.08 paise on Thursday. On an annualised basis, the premium was at 1.76% as against 1.77% at the previous close.
OUTLOOK
On Friday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said.
Dealer said market participants now look forward to the outcome of the US Federal Reserve’s policy review meeting scheduled to be released on late Wednesday.
Dealers have pegged the immediate key technical resistance for the rupee at 82.3000 a dollar. During the day, the rupee is seen at 82.30-82.80 a dollar.
India Rupee – World FX: Euro rises despite fall in Jan-Mar GDP
MUMBAI – The euro rose 0.3% against the dollar today despite revised GDP data which showed that economic growth in the eurozone for Jan-Mar was lower than previously estimated. Eurozone’s GDP fell 0.1% in Jan-Mar on a quarterly basis compared to the previous estimate of 0.1% rise. This, along with a 0.1% fall in GDP in Oct-Dec, has propelled the area into a technical recession.
Meanwhile, the dollar index fell slightly ahead of the Federal Reserve’s policy decision due next week, where majority of the market participants expect the central bank to keep the interest rate unchanged.
However, the odds that it may raise the interest rate increased after the Bank of Canada and the Reserve Bank of Australia in a suprise move raised their interest rates, indicating global monetary tightening hasn’t peaked yet.
According to CME Fedwatch tool, market participants have priced in a 67.9% chance that the Fed will pause the interest rate at the Jun 13-14 meeting, while there is a 32.1% possibility that the US central bank will hike the rate by 25 basis points.
At 1519 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.89 as against 104.11 on Wednesday. It was at 104.13 on Tuesday.
The pound sterling was up 0.2% against the greenback. (Aiswarya Santhosh)
India Rupee: In thin band; foreign bks sell dollars for FX inflows
NEW DELHI – The rupee moved in a narrow range against the dollar as most of the traders refrained from placing fresh bets ahead of the US Federal Reserve’s policy meeting, and US CPI data next week, dealers said.
Further, dealers said foreign banks sold dollars for foreign fund inflows which supported the Indian unit.
So far today, the rupee moved in a tight range of 8 paise.
“Market is not decisive now, so we’re not seeing general movement,” a dealer at a big state-owned bank said. “A lot will depend upon the US FOMC (Federal Open Market Committee) meeting and as well as CPI data from US next week.”
The US Fed’s policy meeting is scheduled to take place on Jun 13-14, and CPI data will be published on Jun 13.
At 1330 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.01 as against 104.11 on Wednesday. It was at 104.13 on Tuesday.
Meanwhile, dealers said banks bought dollars on behalf of importers which weighed on the Indian currency.
Dealers have pegged next technical support for the rupee at 82.70 a dollar. During the day, it is seen at 82.30-82.70 a dollar. (Ananya Chaudhuri)
India Rupee: Remains largely steady as MPC outcome on expected lines
NEW DELHI – The rupee remained largely steady against the dollar as the Reserve Bank of India’s Monetary Policy Committee kept its repo rate unchanged at 6.50%, in line with expectation, dealers said.
In a poll by Informist, an overwhelming majority of 29 of the 30 respondents said they expected the domestic rate-setting panel to keep the repo rate unchanged at 6.50% at the end of its three-day meeting.
The committee decided to maintain its stance at withdrawal of accommodation, while supporting growth, to ensure inflation remains within the target going forward.
“It was expected that there would be status quo in MPC policy, and there is no huge surprise, so market is flat only,” a dealer at a private bank said. “Today, inflows (of dollars) are expected. I’m expecting it (rupee) may go up till 82.45 (a dollar) level.”
A rise in domestic equity indices supported the local unit, dealers said. At 1058 IST, the Nifty 60 and Sensex were up 0.3% and 0.2%, respectively.
Dealers have pegged next technical support for the rupee at 82.70 a dollar. During the day, it is seen at 82.30-82.70 a dollar. (Ananya Chaudhuri)
India Rupee: Largely steady on caution ahead of MPC meet outcome
NEW DELHI – The rupee was largely steady against the dollar due to caution ahead of the outcome of the Reserve Bank of India’s Monetary Policy Committee meeting, to be released today, dealers said.
In a poll by Informist, an overwhelming majority of 29 of the 30 respondents said they expect the domestic rate-setting panel to keep the repo rate unchanged at 6.50% at the end of its three-day meeting
The dollar index remained firm around the 104.0 mark due to expectations that the US Federal Reserve may remain hawkish after the Bank of Canada and the Reserve Bank of Australia raised their interest rates, indicating global monetary tightening hasn’t peaked yet. Traders are factoring in an additional rate hike in July even if the US central bank holds its interest rates at the same level in its policy meeting on Jun 13-14.
At 0916 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.01 as against 104.11 on Wednesday. It was at 104.13 on Tuesday.
“It’ll (rupee) be range-bound, but on the downside,” a dealer at a state-owned bank said. “Today’s MPC announcement will decide the course (for rupee).”
Dealers have pegged next technical support for the rupee at 82.70 a dollar. During the day, it is seen at 82.30-82.70 a dollar. (Ananya Chaudhuri)
India Rupee: Expected range for rupee – Jun 8
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)
India Rupee – Asia FX:Dn on weak China econ data, Fed rate hike fears
MUMBAI – Most Asian currencies were down against the dollar as economic data from China came in far weaker than expected, adding to concerns that growth in the world’s second-largest economy could be wavering.
China’s exports fell 7.5% on year to $283.5 bln, customs data showed on Wednesday, far worse than the 0.4% decline predicted by a Reuters poll. The data showed that the value of China’s exports to the US slumped 15.1% in May from a year ago, while exports to the European Union declined 4.9%.
Further, Bank of Canada hiked its overnight rate to a 22-year high of 4.75%. This led to fears of a rate hike by the US Federal Reserve as well, boosting the dollar.
The Malaysian ringgit headlined the losses and was down 0.3% against the dollar. The South Korean won, Thai baht and Indonesian rupiah were all down 0.1% against the dollar. (Kabir Sharma)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Maheswaran Parameswaran
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