Informist, Wednesday, Oct 18, 2023
By Ananya Chaudhuri
MUMBAI – After trading in a tight range for the entire session, the rupee ended steady against the dollar today as sales of the greenback, likely on behalf of the Reserve Bank of India, balanced out dollar purchases by banks for oil marketing companies, dealers said.
Today, the Indian currency settled at 83.2575 against the US unit, unchanged from Tuesday’s close. It traded in a tight range of 5 paise against the dollar throughout the day for two sessions in a row.
The rupee had opened largely steady against the greenback at 83.2250 as a slight fall in the dollar index offset the impact of a surge in crude oil prices, dealers said.
The dollar index fell slightly in early trade despite data showed Tuesday that US retail sales rose 0.7% on month in September, against a 0.3% rise forecast by a Reuters poll.
Market participants now await speeches by several US Federal Reserve officials, especially by Fed Chair Jerome Powell on Thursday, for forward guidance on the central bank’s monetary policy outlook. This supported the Indian currency, dealers said.
The officials’ comments will be important, especially as the Fed’s policy review meeting is due to take place at the end of this month. The central bank’s rate-setting panel is scheduled to deliver its interest rate decision on Nov 1 at the end of a two-day meeting.
According to the CME FedWatch tool, Fed fund futures traders see a 90.1% chance of a pause at the meeting, while 9.9% expect a 25-basis-point rate hike. The current federal funds rate is 5.25-5.50%.
At 1657 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.31 compared with 106.20 on Tuesday. It was at 106.21 on Monday.
Meanwhile, crude oil prices rose as much as 2% today on concerns about supply of the commodity as tension in West Asia heightened after hundreds were killed in a blast at a Gaza Hospital. A higher crude oil price leads to a rise in India’s import bills, which weighs on the local currency.
At 1658 IST, the December contract of Brent Crude Oil on the Intercontinental Exchange was at $92.30 a bbl, against $89.90 a bbl on Tuesday. It was at $89.65 a bbl on Monday.
Further, banks stepped in to purchase the greenback on behalf of oil marketing companies, who expected crude oil prices to rise further from here on, which exerted pressure on the Indian unit, dealers said.
A sharp fall in domestic equity indices also weighed on the rupee, dealers said. Today, the benchmark Sensex and Nifty 50 ended 0.8% and 0.7% down, respectively.
However, state-owned banks rushed to sell the greenback, likely for the RBI, to prevent the rupee from breaching the record low level of 83.29 against the dollar which aided the local unit, dealers said.
“Despite the global pressure that the rupee seems to face, it has been demonstrating remarkable resilience against the dollar. This can be attributed to the consistent intervention by the RBI, which has effectively curbed volatility (of the rupee),” said Amit Pabari, managing director, CR Forex.
FORWARDS
The premium on one-year dollar/rupee forward contracts ended off its day’s low today as banks bought dollars at relatively lower levels for forward delivery on behalf of importers, dealers said.
The premium on one-year dollar/rupee forward contracts fell to a six-week low of 1.66% during the day as banks sold the greenback for forward delivery before maturity of the RBI’s sell/buy swap of $5 bln on Monday, on concerns of a dollar shortage in the system, dealers said.
“Market was still preparing for the $5 bln swap deal due on Monday as uncertainty prevailed as to what the Central Bank would do, roll it over or buy dollars back. Most large banks were receiving premiums to neutralise their position which could arise due to dollar shortage which could happen on Oct 23,” said Anil Kumar Bhansali, head of treasury and executive director,
Finrex Treasury Advisors LLP.
US Treasury yields rose sharply on Tuesday after data showed retail sales for September increased more-than-expected, which exerted pressure on premium one-year dollar/rupee forward contracts. 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 142.14 paise, against 142.47 paise at close on Tuesday. On an annualised basis, the premium was at 1.70%, unchanged from the previous day’s close.
OUTLOOK
On Thursday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said.
Market participants will closely monitor Fed officials’ speeches at the US Economic Club of New York event for further cues on the central bank’s rate trajectory.
Dealers have pegged key technical support for the rupee at 83.30 a dollar, a breach of which could push the rupee to 83.50 a dollar. During the day, the rupee is seen in the range of 83.00-83.50 a dollar.
India Rupee – World FX: Australian dlr up post hawkish policy minutes
MUMBAI – The Australian dollar strengthened 0.3% against the dollar after the country’s indices rose 0.4%, following the Reserve Bank of Australia’s hawkish tone in its monetary policy minutes published Tuesday.
Members of the rate-setting panel considered two options for monetary policy in the meeting–raising the cash rate target by a further 25 basis points or holding the cash rate target steady–according to the minutes published on the central bank’s website.
The pound sterling also rose 0.1% against the greenback after data from the Office for National Statistics showed on Wednesday that annual UK CPI inflation was higher than expected at 6.7% in September, against the Wall Street Journal’s forecast of 6.6%.
The Canadian dollar rose 0.2% against the greenback on rising crude oil prices, which offset the mild inflation data from the country. Canada’s inflation growth for September eased to 3.8%, against a Reuters forecast of 4%, data from Statistics Canada showed on Tuesday. The low inflation data was overshadowed by a higher West Texas Intermediate crude price, which rose 2.3% today.
At 1535 IST, December futures for WTI crude were at $87.75 a bbl, against $85.44 a bbl on Tuesday. It was $85.26 a bbl on Monday.
Crude oil prices rose as data showed a higher-than-expected drawdown in US crude stocks amid supply disruption concerns due to the Israel-Hamas war, following an explosion at a hospital in Gaza.
The Japanese yen rose slightly by 0.1% against the greenback as the Bank of Japan is expected to raise its inflation forecast for the year-ending March 2024, in its policy meeting due later this month, people familiar with the matter told Reuters.
Meanwhile, the euro slipped 0.2% and struggled against the US unit after the CPI data came in at 4.3% on year and was down from 5.2% in August, matching expectations, data from the European Union statistics body Eurostat showed. Investors also await data from the European Central Bank, due later today, on underlying inflation metrics, which would provide further insight on the pace of disinflation in the Euro area.
Market participants are now looking forward to speeches by US Federal Reserve officials this week, especially focussing on Fed Chair Jerome Powell’s speech on Thursday, for guidance on the central bank’s interest rate policy. (Vaishali Tyagi and Sourabh Kumar)
India Rupee: Remains largely steady; banks sell dlrs likely for RBI
MUMBAI – The rupee traded in a narrow range of 4 paise against the dollar as banks sold the US unit likely on behalf of the Reserve Bank of India, which offset the dollar purchases by oil marketing companies, dealers said.
Further, the dollar index declined slightly ahead of speeches by several US Federal Reserve officials, especially by Fed Chair Jerome Powell on Thursday, for forward guidance on the central bank’s monetary policy outlook. This supported the Indian currency, dealers said.
At 1359 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 106.21 against 106.20 on Tuesday. It was at 106.21 on Monday.
“The rupee is expected to trade in a range of 4–5 paise today. The overall volume in the market is also very low,” said a dealer with a private bank.
However, banks bought dollars on behalf of oil marketing companies who expected crude oil prices to rise further from here on, which exerted pressure on the Indian unit, dealers said.
Crude oil prices continued to rise today due to supply concerns after data showed a higher-than-expected draw in US crude stocks amid fears of supply disruptions from West Asia due to the ongoing Israel war.
A higher crude oil price leads to a rise in India’s import bills, which weighs on the local currency. At 1359 IST, the December contract of Brent Crude Oil on the Intercontinental Exchange was at $91.68 a bbl, against $89.90 a bbl on Tuesday. It was at $89.65 a bbl on Monday.
Local share indices were down, which also put pressure on the Indian unit, dealers said. At 1359 IST, the benchmark Sensex and Nifty 50 were 0.6% and 0.5% lower respectively.
Dealers see immediate technical support for the rupee at 83.30 a dollar. During the day, the rupee is seen in the range of 83.00-83.30 a dollar. (Sourabh Kumar)
India Rupee: Asia FX: S Korean won rises on hope of more FII inflows
MUMBAI – The South Korean won rose 0.3% against the dollar today, the most amongst Asian currencies, after multiple overseas financial institutions have shown interest in directly participating in the country’s foreign exchange market, raising hopes for more dollar inflows into South Korea. The country has been making efforts to invite investment from overseas by easing regulatory requirements.
According to the Bank of Korea, around 30 foreign financial institutions intend to register with the country’s foreign exchange authorities for trading of currency forwards, swaps and spots in the inter-bank currency market.
Also, investor attention is on the Bank of Korea’s policy meeting on Thursday, where the central bank is expected to keep its policy rate unchanged, according to a Reuters survey.
Meanwhile, the Indonesian rupiah fell 0.1% against the dollar on caution ahead of its central bank’s policy meeting, due Thursday. The Indonesian central bank is expected to leave interest rates unchanged, according to Reuters polls. The Malaysian Ringgit also fell 0.1% against the dollar.
The Thai baht and the Philippine peso remained flat against the dollar.
Meanwhile, the dollar index remained flat, despite strong US retail sales data, which provided some respite to Asian currencies. Data released by the US showed that retail sales rose 0.7% on-month in September as households increased purchases of motor vehicles and spent more at restaurants and bars. Economists polled by Reuters had forecast retail sales rising 0.3% in September.
Market participants turned their attention to speeches by US Federal Reserve officials, due this week.
At 1008 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.18, as against 106.20 on Tuesday. It was at 106.21 on Monday. (Vaishali Tyagi)
India Rupee: Largely steady on caution before US Fed officials’ speech
MUMBAI – The rupee was largely steady against the dollar as traders exercised caution ahead of speeches by several US Federal Reserve officials, including one by Chair Jerome Powell on Thursday, for further cues on the central bank’s monetary policy outlook, dealers said.
The officials’ comments will be important, especially as the Fed’s policy review meeting is due to take place at the end of this month. The central bank’s rate-setting panel is scheduled to deliver its interest rate decision on Nov 1 at the end of a two-day meeting.
According to the CME FedWatch tool, Fed fund futures traders see a 90.1% chance of a pause at the meeting, while 9.9% expect a 25-basis-point rate hike. The current federal funds rate is 5.25-5.50%.
“As of now, the market is expecting a status quo (at the Fed’s policy review meeting), and nothing significant from it. The market is also seeing where this war between Israel and Palestine will go, so they (traders) are in wait-and-watch mode,” a dealer at a state-owned bank said. “Expecting it (rupee) to be flat, anywhere between 83.20-83.30 (a dollar).”
Meanwhile, the dollar index remained muted despite data showing US retail sales rose 0.7% in September, as against a 0.3% rise forecast by a Reuters poll. At 0933 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.19 compared with 106.20 on Tuesday. It was at 106.21 on Monday.
Crude oil prices rose over 2% in early trade today after data showed US crude stocks fell more than expected, which darkened the supply prospects for the commodity amid fears of supply disruptions from West Asia due to a heightening Israel war.
A rise in crude oil prices increases India’s import bill, which subsequently weighs on the Indian currency. At 0933 IST, the December contract of Brent crude oil on the Intercontinental Exchange was at $91.57 a bbl, as against $89.90 a bbl on Tuesday. It was at $89.65 a bbl on Monday.
Dealers see immediate technical support for the rupee at 83.30 a dollar. During the day, the rupee is seen in the range of 83.00-83.30 a dollar. (Ananya Chaudhuri)
India Rupee: Expected range for rupee – Oct 18
MUMBAI – 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 Manisha Baxla
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