Informist, Tuesday, Jan 9, 2024
By Sourabh Kumar
MUMBAI – The rupee closed steady against the dollar today as dollar purchases of state-owned banks, likely on behalf of the Reserve Bank of India, offset the positive impact of sales of the greenback by a few banks for foreign fund inflows, dealers said.
“There are expected inflows this week, so that might keep the rupee up,” said a dealer with a large state-owned bank. “Today, importers were also hedging when it was 8 or 9 levels (83.08-83.09 a dollar).”
Today, the rupee ended at 83.1150 a dollar, after moving in a range of 10 paise. On Monday, the rupee had closed at 83.1375 a dollar.
The Indian unit opened at 83.0575 a dollar and remained up against the greenback on account of foreign fund inflows, after Bloomberg Index Services Ltd proposed on Monday to include India government bonds in the Bloomberg Emerging Market Local Currency Index.
India’s fully accessible route bonds will be fully capped at 10% weight within the Bloomberg Emerging Market 10% Country Capped Index, according to Bloomberg’s proposal.
Dealers also speculated that India may have seen some inflows due to investment diversion from China, where a wealth management firm dealing with the property market filed for bankruptcy last week.
Such inflows caused the rupee to appreciate in early trade, when it briefly touched the day’s high of 83.0300 a dollar, dealers said.
When the rupee moved above 83.05 to a dollar, state-owned banks started buying dollars, likely on behalf of the RBI, which capped the Indian currency’s gains, dealers said.
Along with dollar buying by the banks, a few importers and oil marketing companies also entered the market for the greenback, which further weighed on the rupee, dealers said.
In early trade, apart from foreign fund inflows, the rupee was supported by a fall in crude oil prices. Crude futures fell yesterday, and were trading at the same lower levels in the morning, after Saudi Arabia announced cuts in the price of its crude exports to Asia. On Sunday, the country announced it had cut prices of the February contract of Arab Light crude, which it exports to Asian customers.
Saudi Aramco reduced the price of its February contract for Arab Light crude by $2 a barrel, which brought prices down to their lowest level in over two years. After the announcement, oil prices fell about 3%, before recovering slightly in the later part of Indian trading hours.
At 1559 IST, the March contract for Brent crude oil on the Intercontinental Exchange was at $77.68 a bbl compared with Monday’s close of $76.12 a bbl, and Friday’s close of $78.76 a bbl.
The dollar index remained largely weak after coming off the three-week high it touched on Friday, which supported the rupee. The index continued to fall after mixed economic data from the US. While the non-farm payrolls data showed an increase in jobs in December, the US non-manufacturing Purchasing Managers’ Index fell, which seemed to give investors more cues for their bets on the greenback.
Investors have continued to factor in these data to assess when the US Federal Reserve will start cutting interest rates. They are now waiting for the US inflation data due Thursday.
At 1600 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.32 compared with 102.28 on Monday. It came down from the over-three-week high of 103.10 it touched on Friday.
According to the CME Group’s FedWatch tool, Fed Fund futures traders now see a 58% chance of rate cuts by the Fed at its March meeting.
FORWARDS
Premiums on one-year dollar/rupee forwards rose to an over-three-month high today, tracking a fall in US Treasury yields, dealers said.
Yields on most US Treasury notes fell on Monday ahead of the release of several key economic data this week, including the inflation data for December.
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 153.25 paise, against 150.42 paise on Monday. On an annualised basis, the premium was 1.83%, compared with 1.80% on Monday.
OUTLOOK
On Wednesday, the rupee will take cues from movement in the dollar index and crude oil prices, dealers said.
During the day, the rupee is seen in a range of 83.00-83.30 a dollar, with key technical resistance pegged at 83.00 a dollar.
India Rupee: Premiums at 3-mo high as US ylds fall ahead of CPI Thu
MUMBAI – The premiums on one year dollar/rupee forwards rose to an over three-month-high today, tracking a fall in US Treasury yields, dealers said.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
Yields on most US Treasury notes fell on Monday ahead of the release of several key economic data this week, including the inflation data for December.
The New York Fed’s survey of consumer expectations revealed that Americans felt more confident about the likelihood that price gains will ease over the short, medium, and long term. Median inflation expectations for the year ahead fell to 3%, the lowest level since January 2021, from 3.4% earlier. Meanwhile, median inflation expectations for the three-year horizon fell to 2.6% from 3% earlier and the five-year period eased to 2.5% from 2.7%.
Premiums on near-term forward contracts also rose, as banks bought dollars for forward delivery on behalf of importers, noting appreciation in the Indian unit, dealers said.
“We are seeing the rupee appreciating in the near term, so you can see the short term forwards will continue to rise,” a dealer at a big state-owned bank said.
The premium on the one-month dollar/rupee contract rose to 9.47 paise today. At 1459 ISt, it was 8.72 paise, against 9.12 paise on Monday. On an annualised basis, the premium was at 1.21%, against the previous close of 1.22%.
Banks bought dollars for forward delivery due to expectation of a further rise in dollar/rupee forward premium levels going ahead, dealers said. The rupee rose to a high of 83.0300 a dollar today on foreign fund inflows into domestic equities.
Market participants see premiums rising going ahead on the expectation that the US Federal Reserve may start cutting interest rates as early as March. A cut in interest rates in the US would increase the spread between India and US interest rates.
Market participants are pricing in about 61% chance of a rate cut by the US central bank in March, according to the CME FedWatch tool.
At 1432 IST, the premium on the one-year, exact-period dollar/rupee forward contract was 153.50 paise, against 150.42 paise at Monday’s close. On an annualised basis, the premium was at 1.83%, against the previous close of 1.80%. Market participants see strong technical support for the one-year dollar/rupee forward premium at 1.80%. (Kabir Sharma)
India Rupee – World FX: Australian dlr down ahead of CPI data due Wed
MUMBAI – The Australian dollar fell 0.3% against the greenback, as traders await CPI data due on Wednesday for further cues on the Reserve Bank of Australia’s interest rate trajectory.
The Australian currency fell despite its retail sales beating expectations. Australia’s Bureau of Statistics showed that the seasonally adjusted retail sales for November rose by 2.0% on month, more than the expected rise of 1.2%.
The euro was down 0.1% against the dollar after Germany’s industrial activity declined in November. On an annual basis, industrial production in the Eurozone’s largest economy tumbled 4.8% in November, against a drop of 3.4% in October, according to the figures released by Destatis.
On a month-on-month basis, Germany’s Industrial Production data fell 0.7%. That is compared with the 0.2% expected rise for the month, and a 0.3% decline seen in October.
The Canadian dollar fell 0.1% against the greenback, tracking a fall in crude oil prices. Crude oil prices fell after Saudi Arabia slashed prices of crude it exports to Asia. That led to a decline in other benchmark oil prices. Canada is a major oil exporter to the US.
The pound sterling and Japanese yen fell 0.1% each against the dollar. (Sourabh Kumar)
India Rupee: Erases most gains on PSU banks’ dlr buys likely for RBI
MUMBAI – The rupee erased most gains against the dollar as a few state-owned banks bought the greenback likely on behalf of the Reserve Bank of India, dealers said.
“Like yesterday (Monday), today too we are seeing some resistance at 83.05 level. We have seen some inflows since the morning after the Bloomberg index news,” a dealer with a large state-owned bank said.
On Monday, there was a proposal by Bloomberg to include Indian government bonds in the Bloomberg Emerging Market Local Currency Index. India’s fully accessible route bonds will be fully capped at 10% weight within the Bloomberg Emerging Market 10% Country Capped Index, according to Bloomberg’s proposal.
Moreover, dealers anticipated that India may also see some inflows due to investment diversion from China, as foreign funds could divert their investments due to a Chinese wealth management firm filing for bankruptcy. Zhongzhi Enterprise Group, a wealth manager in China, has filed for bankruptcy after it failed to repay debt, as the firm dealt with a deepening property market, Reuters quoted the firm as saying on Friday.
Such inflows led to an appreciation in the rupee, dealers said. So far, the rupee has hit a high of 83.0300 briefly, which led to a few banks buying the greenback, likely for the RBI.
Along with dollar buying by such banks, a few importers and oil marketing companies also entered the market and bought dollars, which further weighed on the rupee, dealers said.
Crude futures fell after Saudi Arabia announced cuts in the price of its crude exports to Asia. On Sunday, the country announced it had cut prices of the February contract of Arab Light crude, which it exports to Asian customers.
A fall in crude prices generally support the rupee. However, oil marketing companies’ dollar demand due to low oil prices limited gains for the Indian unit, dealers said.
“There were some support to the rupee as oil prices were down, but some big oilers were buying dollars, so that had an effect on the rupee as well later on,” a dealer with a state-owned bank said.
The dollar index remained weak after it came off the three-week high touched on Friday, which supported the rupee.
At 1308 IST, the March contract for Brent crude oil on the Intercontinental Exchange was at $76.39 a bbl compared with Monday’s high of $78.94 a bbl, and $78.76 a bbl when it closed on Friday.
For the rest of the day, the rupee is seen in a range of 82.90-83.30 against the dollar, with dealers pegging key technical resistance for the rupee at 83.00 a dollar (Sourabh Kumar)
India Rupee: Tad up on bks’ dlr sales for FX inflows; weak dlr aids
MUMBAI – The rupee was up against the dollar today as banks sold the greenback for foreign fund inflows into the domestic equities market, dealers said.
“I think right now we are seeing inflows, also due to sentiment. I think oil bids will come, which will drive the rupee to 13-15 levels (83.13-83.15 a dollar). Yesterday (Monday) also, we saw oil bidding later after opening,” a dealer with a state-owned bank said.
India may also see some inflows as foreign funds could divert their investments due to a Chinese wealth management firm filing for bankruptcy, a dealer said. Zhongzhi Enterprise Group, a wealth manager in China, has filed for bankruptcy after it failed to repay debt, as the firm dealt with a deepening property market, Reuters quoted the firm as saying on Friday.
Apart from foreign fund inflows, the rupee was also supported by a fall in crude oil prices. Crude futures fell after Saudi Arabia announced cuts in the price of its crude exports to Asia. On Sunday, the country announced it had cut prices of the February contract of Arab Light crude, which it exports to Asian customers.
Since the announcement, oil prices have fallen about 3%. Saudi Aramco reduced the February contract for Arab Light crude prices by $2 a barrel, which brought down prices to the lowest level in over two years.
A fall in the prices of Arab Light crude resulted in the easing of Brent crude prices as well. At 0940 IST, the March contract for Brent crude oil on the Intercontinental Exchange was at $76.29 a bbl compared with Monday’s high of $78.94 a bbl, and $78.76 a bbl when it closed on Friday.
The dollar index remained weak after it came off the three-week high touched on Friday, which supported the rupee. The dollar index continued to fall after mixed data from the US. While the non-farm payrolls data showed an increase in jobs in December, the US non-manufacturing purchasing managers’ index fell, which seemed to have provided investors more cues for their bets on the greenback.
Investors have continued to factor in these data to assess their expectations of when the US Federal Reserve will start cutting rates. They are now waiting for the US inflation data due Thursday.
At 0936 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.16 compared with 102.28 on Monday. It came down from the over-three-week high of 103.10 it touched on Friday.
According to the CME Group’s FedWatch Tool, Fed funds futures traders expect a 59% chance of rate cuts by the Fed at its March meeting.
For the rest of the day, the rupee is seen in a range of 82.90-83.30 against the dollar, with dealers pegging key technical resistance for the rupee at 83.00 a dollar. (Sourabh Kumar)
India Rupee – Asia FX:Most up as dlr eases ahead of US inflation data
MUMBAI – Most Asian currencies rose against the dollar as the greenback eased ahead of the release of US inflation data, due Thursday, and other economic data.
The dollar eased from the three-week high it had touched last week as investors assessed mixed economic data in the US and looked forward to the country’s inflation reading for fresh cues on when the Federal Reserve is likely to begin cutting interest rates.
At 0854 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 102.15 as against 102.28 on Monday. It was 102.44 on Friday.
According to the CME Group’s FedWatch Tool, Fed funds futures traders expect a 60% chance of rate cuts by the Fed at its March meeting.
Investors also assessed the December inflation data for Japan’s capital Tokyo, an indicator for nationwide inflation. Tokyo’s inflation rate slowed to 2.4% in December from 2.6% the previous month. Core inflation, which strips out prices of fresh food, remained unchanged at 2.1% and was in line with expectations.
The South Korean won rose 0.5% against the dollar. The Malaysian ringgit and Thai baht rose 0.2% each against the dollar.
Bucking the trend, the Philippines peso was down 0.2% against the greenback. (Kabir Sharma)
India Rupee: Expected range for rupee – Jan 9
MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecast by leading banks and brokerages in an Informist poll:
(Sourabh Kumar)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Rajeev Pai
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