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India Rupee Review: Up but trims gains on dlr buys by FIIs, oil cos

Informist, Thursday, Jul 7, 2022

 

By Pratiksha and Srijonee Bhattacharjee

 

NEW DELHI – Even as the rupee ended higher against the dollar today, it erased a considerable portion of its gains as foreign institutional investors and oil marketing companies purchased the greenback continuously, dealers said.

 

Having touched a high of 78.8975 a dollar during the day, the rupee settled at 79.1750 a dollar, against 79.3025 a dollar on Wednesday. It moved in a wide range of 35 paise today.

 

The Indian currency opened 21 paise higher at 79.0950 a dollar as the sentiment among investors improved after the Reserve Bank of India on Wednesday announced a series of measures to enhance foreign exchange inflows, dealers said. 

 

The central bank announced a slew of exemptions for banks raising foreign currency deposits in an attempt to protect the rupee from significant depreciation in the face of outflow of foreign portfolio investments from Indian markets. 

     

The steps include exempting some foreign exchange bank deposits from cash reserve ratio and statutory liquidity ratio requirements and temporarily allowing banks to raise fresh foreign exchange deposits without reference to the extant regulations on interest rates.

 

The RBI also relaxed some norms for foreign portfolio investment in short-term government and corporate debt securities.

 

Dealers said RBI’s measures will limit speculative trading and reduce the volatility in the foreign exchange market.

 

Shortly after opening, the rupee ascended to 78.8975 a dollar as stop losses were triggered around the 79.9800 a dollar level and banks cut long dollar bets placed earlier, dealers said. 

 

Dealers said stop losses were triggered after traders sold dollars to cover their existing bets placed in favour of the US unit.

 

“After the big announcement, people started the day with trading on the short side but then they realised that nothing’s going to change in the short term, and the demand (of dollars) is still there,” a dealer with a private bank said. “The demand has not changed at all.” 

 

However, some banks purchased the greenback on behalf of importers who wanted to take advantage of the relatively lower dollar/rupee levels, which weighed on the Indian unit and dragged it below the 79-per-dollar mark, dealers said.

 

Moreover, overseas banks continuously purchased dollars on behalf of foreign institutional investors, which heavily weighed on the Indian currency, dealers said. 

 

Dealers said banks purchased the US unit on behalf of oil marketing companies, which dragged the Indian unit to the day’s low of 79.2525 a dollar. 

 

Prices of crude oil fell about 2% to a 12-week low on Wednesday, as investors grew more concerned that energy demand would take a hit in case there is global recession. 

 

At 1705 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $101.41 a barrel against the previous close of $100.69 a bbl. It was at $102.77 a bbl on Tuesday.

 

“The RBI announcement has been purely sentimental for the market since the demand has not died down,” a dealer with a foreign bank said. “Importers were bound to come at these levels.”

 

Meanwhile, the dollar continued to hover around a near two-decade high as investors flocked to the safe haven unit amid growing concerns over a global recession.

 

This also weighed on the domestic unit, dealers said. 

 

The dollar index, which measures the strength in the US currency against a basket of six major currencies, rose to 107.26 on Wednesday, its highest level since December 2002. 

 

At 1705 IST, the dollar index, was at 106.92 compared with 107.10 on Wednesday. It was at 106.54 on Tuesday.

 

Domestic share indices moved in the green throughout the day, which supported the sentiment for the Indian unit, dealers said. The Nifty 50 and the Sensex closed 0.9% and 0.8% higher, respectively.

 

“The exporters may start coming in now, since the 80 (a dollar) level has been pushed for some time after the RBI’s steps,” a dealer with a state-owned bank said. 

 

Some dealers said banks sold dollars on behalf of the RBI, who wanted to prevent the rupee from breaching the technical support of 79.30 a dollar. 

 

 

AT 1530 IST

AT 0900 IST

HIGH

LOW

PREVIOUS

(AT 1530 IST)

Spot rupee per $1

79.175079.095078.8975 79.252579.3025

 

FORWARDS

Premiums on dollar/rupee forwards were off the day’s highs because banks and exporters sold dollars for forward delivery noting a spike in levels in early trade, dealers said. 

 

The premium on the one-year, exact-period dollar/rupee forward contract was at 240.65 paise, off the day’s high of 251.17 paise, as against 232.93 paise at Wednesday’s close. On an annualised basis, the premium was at 3.04% as against 3.00% at the previous close, after having risen to a high of 3.18% earlier in the day.

 

Premiums rose significantly earlier in the day because market participants expect an inflow of foreign funds in the near future after the Reserve Bank of India announced measures to encourage banks to raise foreign currency deposits, dealers said. 

 

Raising deposits in dollars would lead to an inflow of dollar funds thus supporting the rupee at a time when the currency has plummeted to record lows amid outflow of foreign portfolio investments. On accepting dollar deposits, banks would execute a sell/buy swap, selling the dollars for rupees in order to allocate the funds as loans and buy them back for a date that the deposits would be up for maturity.

 

Anticipating such sell/buy swaps in the future, traders executed sell/buy swaps today pushing premiums up early in the session.

 

OUTLOOK

On Friday, the rupee will take cues from overnight movement in the dollar index and Brent crude oil prices, dealers said. 

 

“The rupee may consolidate in this 78.80-79.50 range for the short term,” a dealer with a private bank said.

 

Investors now await US crude supply data from the US Energy Information Administration, which will be released later in the day.

 

Dealers have pegged immediate key technical support for the rupee at 79.30 a dollar and technical resistance at 78.80 a dollar.

 

During the day, the rupee is seen in the range of 78.80-79.30 a dollar.

India Rupee – World FX: Sterling gains after UK PM agrees to resign

 

 AT 1620 ISTHIGHLOWPREVIOUSGBP/USD 1.19931.20231.19101.1917EUR/USD 1.01891.02211.01751.0184NZD/USD 0.61820.61950.61410.6148AUD/USD 0.68410.68480.67650.6782USD/JPY 135.8700136.2230135.5540135.9130USD/CAD 1.29821.30551.29801.3034EUR/JPY 138.4200139.0700138.0770138.4040CHF/USD 1.02751.03291.02741.0301EUR/CHF 0.99140.99320.98750.9881

 

 

MUMBAI – The pound sterling gained 0.5% after reports surfaced that UK Prime Minister Boris Johnson has agreed to step down, following a string of ministerial resignations, including by several Cabinet ministers.

 

The resignations started pouring in after former UK chancellor of the exchequer Rishi Sunak and former health secretary Sajid Javid stepped down on Tuesday.

 

Johnson agreeing to resign reduced the chances of an unpleasant and disorderly departure of the leader from the prime minister’s office, and this boosted the UK currency.

 

Johnson will stay on as prime minister till a new party leader is elected.

 

Meanwhile, the dollar index remained near a 20-year high as recession fears supported the demand for the safe-haven currency.

 

At 1620 IST, the index was at 106.90 compared with 107.10 on Wednesday. (Richard Fargose)

India Rupee: Erases some gains as banks buy dollars for FIIs, oil cos

 

 

AT 1340 IST

AT 0900 IST

HIGH

LOW

PREVIOUS

(AT 1530 IST)

Spot rupee per $1

79.160079.095078.8975 79.170079.3025

 

India Rupee: Erases some gains as banks buy dollars for FIIs, oil cos

 

NEW DELHI – The rupee erased some gains against the greenback as some overseas banks purchased dollars on behalf of foreign institutional investors, dealers said. 

 

Moreover, banks purchased the US unit on behalf of oil marketing companies, which also weighed on the Indian unit, dealers said. 

 

Prices of crude oil fell about 2% to a 12-week low on Wednesday, as investors grew more concerned that energy demand would take a hit in a potential global recession. 

 

Prices rose slightly today and at 1340 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $101.37 a barrel against the previous close of $100.69 a bbl. It was at $102.77 a bbl on Tuesday.

 

For the rest of the day, the Indian unit is seen at 78.8000-79.3000 a dollar.  (Pratiksha)

India Rupee – Asia FX: Mixed; global recession worries loom large

 

NEW DELHI – Asian currencies moved on a mixed note today as investors assessed concerns that sharp rate hikes by central banks, aimed at curbing the mounting inflation, will lead to a global recession.

 

These concerns come amid a growing energy crisis in Europe and a fresh flare-up of COVID-19 cases in parts of China.

 

Minutes of the Federal Open Market Committee’s June meeting, released on Wednesday, indicated that policymakers intend to stick with a 50 bps or 75 bps rate hike in the upcoming meeting.

 

The minutes warned that the central bank could pursue a more restrictive monetary policy approach to deal with the rise in inflation.

 

Last month, the Federal Reserve had raised its benchmark interest rate by 75 basis points, the largest increase in almost 30 years, in an attempt to control the rise in prices.

 

The gains in select Asian currencies were due a rise in local equities. 

 

The South Korean won rose 0.7% against the greenback, while the Philippines peso fell 0.3% against the dollar. (Pratiksha)

India Rupee: Rises sharply after RBI’s steps to improve FX inflows

 

 

AT 1000 IST

AT 0900 IST

HIGH

LOW

PREVIOUS

(AT 1530 IST)

Spot rupee per $1

79.035079.095078.8975 79.095079.3025

 

NEW DELHI – The rupee rose sharply against the greenback today as investors’ sentiment improved after the Reserve Bank of India on Wednesday announced a series of measures to enhance foreign exchange inflows, dealers said. 

 

The measures include exempting some foreign exchange bank deposits from cash reserve ratio and statutory liquidity ratio requirements and temporarily allowing banks to raise fresh foreign exchange deposits without reference to the extant regulations on interest rates.

 

The RBI also relaxed some norms for foreign portfolio investment in short-term government and corporate debt securities.

 

The Indian currency opened 21 paise higher at 79.0950 a dollar and then rose further to 78.8975 a dollar after stop losses were triggered around the 79.98 a dollar level, dealers said. 

 

Dealers said stop losses were triggered after traders sold dollars to cover their existing bets placed in favour of the US unit.

 

Gains in domestic equity indices also supported the rupee, according to dealers. At 1000 IST, the Nifty 50 and the Sensex rose 0.6% and 0.4%, respectively.

 

However, some banks purchased the greenback on behalf of importers who wanted to take advantage of the relatively lower dollar/rupee levels, which weighed on the Indian unit and dragged it below the 79-per-dollar mark, dealers said.

 

“The overall sentiment in the market has obviously improved after the RBI’s announcement, but we still can’t ignore the amount of demand (of dollars) that is there in the market,” a dealer with a state-owned bank. “The 78.60 (a dollar) level on the upper side is being watched closely.”

 

For the rest of the day, the Indian unit is seen at 78.8000-79.3000 a dollar.  (Pratiksha)

India Rupee: Expected range for rupee – Jul 7

 

NEW DELHI – Following are the expected support and resistance levels for the rupee, as forecasted by leading banks and brokerages in an Informist poll:

 

Participants

SUPPORT

RESISTANCE

State-owned bank79.2078.80State-owned bank79.2578.80Private bank79.2078.80Private bank79.3078.92Foreign bank79.3878.80Brokerage firm79.4078.70Brokerage firm79.2078.95

(Pratiksha and Richard Fargose)

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Maheswaran Parameswaran

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

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Send comments to [email protected]

 

© Informist Media Pvt. Ltd. 2022. All rights reserved.

Source: Cogencis

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