Informist, Friday, Oct 21, 2022
By Richard Fargose
MUMBAI – Despite strong dollar demand from importers, the rupee settled higher today because of continuous dollar sales by the Reserve Bank of India and exporters, dealers said.
The rupee settled at 82.6750 a dollar, as against 82.7600 a dollar at the previous close.
The rupee started the day on a slightly weaker note due to dollar purchases by banks in early trade for importers, and firm US dollar globally.
“There was panic buying among importers,” said dealer with state-owned bank. “They are buying aggressively on every dip.”
Importers bought dollars today also for month-end payables as market liquidity may be thin next week due to a couple of holidays, dealers said.
The persistent demand from oil companies and other importers pushed the Indian unit to the day’s low of 82.9125 in the first hour of the trading today.
Strength in dollar globally continues to weigh on the Indian unit. The dollar remained firm against six major currencies, as the market bet on another 75-bps hike in the November meeting of the Federal Open Market Committee.
Political uncertainty in the UK also boosted the safe-haven demand for the US currency.
Following the resignation of Liz Truss as the UK prime minister, opposition leaders such as the Labour Party’s Keir Starmer and Ed Davey of the Liberal Democrats have called for a general election immediately.
At 1606 IST, the dollar index was at 113.45 as against 112.88 on Thursday.
However, the likely presence of the RBI on the sell side kept the losses limited for the Indian rupee.
“The RBI was present for the entire day ensuring it (rupee) does not suffer any further weakness,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP.
As the rupee remained in a tight range of 82.75-82.90 a dollar for most part of the session, traders avoided building aggressive long dollar bets today.
“Considering it’s Friday and ahead of Diwali, bulls aren’t allowed to blow out,” said a dealer with a private bank. “So, it (rupee) remained pretty well-behaved.”
Noting the RBI’s heavy intervention in the currency market, some exporters also sold dollars, dealers said. However, most exporters are still holding dollars as they expect more depreciation in coming days.
FORWARDS
Premiums on one-year dollar/rupee forward contracts slipped to a fresh 11-year low today as some state-owned banks sold dollars for forward delivery on behalf of the RBI to neutralise the impact of dollar sales in the spot market on liquidity.
The premium on the one-year dollar/rupee contract was at 181.63 paise, against 208.48 paise on Thursday. On an annualised basis, the premium was at 2.19%, against 2.52% the previous day.
Dealers said the central bank has been executing buy-sell swaps for the past few days-–buying dollars immediately and selling them for later delivery–mostly in contracts from December.
Premiums were down also due to a spike in US yields, with the 10-year Treasury yield surging almost 23 basis points in the last two trading days.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. A rise in interest rates in the US would ensure that the spread with rates in India narrows further.
OUTLOOK
On Tuesday, the rupee is likely to remain under pressure due to demand for the greenback from oil marketing companies and other importers, dealers said.
Financial markets in India will remain closed on Monday on account of Diwali festival.
However, market participants expect the central bank to continue its intervention in the currency market to curb volatility.
“The RBI is expected to continue its intervention in the coming week and not let rupee depreciate much,” said Anindya Banerjee, deputy vice-president, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd. “It will also depend on the global outlook and how much the dollar appreciates.”
Dealers peg the immediate technical support for the rupee at 83.25 a dollar and long-term support at 83.50 a dollar.
During the day, the rupee is seen at 82.40-83.20 a dollar.
India Rupee World FX: Sterling slumps on political uncertainty
NEW DELHI – The pound sterling slumped nearly 1% today as the resignation of Liz Truss as UK prime minister escalated the political uncertainty in the country.
Truss’ tenure was marred by turmoil. On Sep 23, Kwasi Kwarteng, then UK chancellor of the exchequer, announced a “mini-budget” that led to a turbulent period for UK bond markets. Kwarteng eventually resigned as chancellor and the mini-budget he presented, which comprised several tax cuts, was reversed by his successor Jeremy Hunt.
Following Truss’ resignation, Opposition leaders such as the Labour Party’s Keir Starmer and Ed Davey of the Liberal Democrats have called for a general election immediately.
The dollar remained firm against six major currencies, as the market bet on another 75-bps hike in the November meeting of the Federal Open Market Committee.
At 1540 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 113.48 compared with 112.88 on Thursday. It was at 112.98 on Wednesday.
The euro depreciated 0.3% against the US dollar after the European Union reported a current account deficit of 26.32 bln euro in August compared to 19.96 bln euro a month ago. High energy prices drove up the bloc’s import bills.
The Japanese yen stayed at a 32-year low, and was down 0.4% against the dollar. Japan reported 3% core inflation, an eight-year-high, in September. The high inflation led to speculation that Bank of Japan might backtrack from its loose monetary policy stance. (Ananya Chaudhuri)
India Rupee:Recovers on likely RBI intervention, exporters’ dlr sales
NEW DELHI – The rupee recovered slightly today as likely support from the Reserve Bank of India prompted some exporters to sell dollars, dealers said.
Though the RBI’s suspected intervention was keeping the rupee within a range, it wasn’t as strong as on Thursday, said dealers.
However, as the rupee remained in a tight range of 82.75-82.90 a dollar for almost four hours, a few exporters stepped up dollar sales of the extended weekend.
“Now, only the break of 82.50 level will take the pair further lower, otherwise the pressure remains upward for the dollar/rupee,” said a dealer with a brokerage firm.
A firm dollar amid weakening of the pound sterling and the euro weighed on the Indian unit.
Dealers have pegged immediate support for the rupee at 82.95 a dollar, and then at 83.25 a dollar.
For the rest of the day, the Indian unit is seen at 82.5500-82.9500 a dollar. (Ananya Chaudhuri and Kabir Sharma)
India Rupee: Premiums at 11-yr low as RBI sells fwd dlrs, US ylds up
MUMBAI – Premiums on one-year dollar/rupee forward contracts slipped to a fresh 11-year low today as some state-owned banks sold dollars for forward delivery on behalf of the Reserve Bank of India to neutralise the impact of dollar sales in the spot market on liquidity.
The premium on the one-year dollar/rupee contract was at 188.93 paise, against 208.48 paise on Thursday. On an annualised basis, the premium was at 2.24%, against 2.52% the previous day.
Dealers said the central bank has been executing buy-sell swaps for the past few days – buying dollars immediately and selling them for later delivery, mostly in contracts from December.
“Systemic liquidity is in deficit mode today, hence they (RBI) need to intervene in forward market to ensure there is no more fall in liquidity during festive season due to dollar sales in spot,” said a dealer with a state-owned bank.
Liquidity in the banking system is currently estimated to be in a deficit of over 138.88 bln rupees, against a surplus of a 64.37 bln rupees on Thursday. The deficit may widen due to outflows for goods and service tax payments, higher credit demand, and an increase in currency in circulation during the festival season, market participants said.
Premiums were down also due to a spike in US yields, with the 10-year Treasury yield surging almost 23 basis points in the last two trading days.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. A rise in interest rates in the US would ensure that the spread with rates in India narrows further. (Richard Fargose)
India Rupee – Asia FX: Most down as dlr firm amid Fed rate hike view
MUMBAI – Most Asian currencies were down today as the dollar remained firm globally due to expectations of continued aggressive policy rate hikes by the US Federal Reserve.
On Thursday, Philadelphia Federal Reserve President Patrick Harker said the US central bank would continue its aggressive rate tightening until inflation was tamed, with the policy rate likely to reach above 4% within this year itself. His comments led to US Treasury yields rising by 10 basis points on Thursday.
Asian currencies were also weighed down by a weakening yuan as China tightened its COVID regulations with increasing public checks and imposition of lockdowns on residential areas as cases continue to rise in the country. The yuan was down 0.5% against the US dollar today.
The Malaysian ringgit was at an all-time low owing to uncertainty around general elections in the country on Nov 19. (Aiswarya Santhosh and Kabir Sharma)
India Rupee:Steady; importers’ dollar demand, firm US unit may weigh
MUMBAI – The rupee was steady in early trade today amid dollar purchases by banks, likely for oil companies and other importers, dealers said.
Market participants expect exporters to step up dollar sales, noting attractive dollar/rupee levels.
A firm US dollar globally is also seen weighing on the Indian currency, dealers said.
The dollar was firm today amid expectations that the US Federal Reserve would continue its rate tightening with an expected hike of 75 basis points at the November meeting of the Federal Open Market Committee.
“As emerging market currencies are currently sailing through turbulent times due to increased uncertainty and flight to safety, Indian rupee would be no exception to it,” said Amit Pabari, managing director of CR Forex Advisors Ltd.
At 0945 IST, the dollar index was at 113.06 as against 112.88 on Thursday. On Wednesday, it was at 112.98.
Dealers expect the Reserve Bank of India to intervene if the rupee falls to 82.95 a dollar. They have pegged immediate support for the rupee at 82.95 a dollar, and then at 83.25 a dollar.
For the rest of the day, the Indian unit is seen at 82.6000-83.2500 a dollar. (Richard Fargose)
India Rupee: Expected range for rupee – Oct 21
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 and 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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