Informist, Monday, Oct 31, 2022
NEW DELHI – The rupee pared gains and closed sharply lower against the dollar today because of continuous dollar purchases by oil marketing companies and importers, dealers said.
A rise in the dollar index in European trade and weakness in the Chinese yuan in the offshore market also weighed on the Indian currency, dealers said.
The rupee settled at 82.7800 a dollar, off the day’s high of 82.3225 a dollar. The unit moved in a broad range of 46 paise throughout the day.
The rupee had opened about 10 paise stronger at 82.3700 a dollar, as prices of crude oil settled 1% lower on Friday after top crude importer China tightened its COVID-19 curbs, dealers said.
A fall in crude oil prices lowers India’s import bill, which supports the currency.
China reported 1,506 new COVID-19 cases on Thursday, which led to authorities in the country imposing fresh lockdowns in a number of cities, maintaining the country’s ‘zero-COVID’ policy, which has contributed to a reduction of economic activity in the world’s largest importer of crude.
At 1630 IST, the November contract of Brent crude oil on the Intercontinental Exchange was at $94.49 a barrel as against $95.77 a bbl on Friday. On Thursday, the contract had settled at $96.96 a bbl.
The Indian unit traded in a narrow range of 82.37-82.45 a dollar for almost five hours, weighed down by dollar purchases by state-owned and foreign banks on behalf of oil marketing companies and other importers, dealers said.
Dealers said importers and oil marketing companies wanted to take advantage of the relatively lower dollar/rupee levels.
As oil importers stepped up their dollar purchases, the local unit breached the immediate support level of 82.50 a dollar, which led to stop-losses being triggered on short dollar bets around the 82.55-a-dollar level, dealers said.
“The market was overall buying on dips (in dollar/rupee) since morning,” a dealer with a state-owned bank said. “Oil importers were the main buyers. Once the key 82.50 level was breached, stop-losses were triggered.”
Some dealers said a large state-owned bank bought dollars, likely for the government’s defence-related payments, which also weighed on the Indian currency, and it fell to the day’s low of 82.7850 a dollar.
Meanwhile, the dollar index rose above 111.00 in European trade, as the market expects another 75-bps rate hike at the Federal Open Market Committee’s two-day meeting starting Tuesday. The market expects the Fed to be hawkish, as US consumer spending data, released on Friday, showed the underlying price pressure was likely to remain high.
At 1630 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 111.20 compared with 110.75 on Friday. It was at 110.58 on Thursday.
Moreover, the offshore Chinese yuan slumped after data released today showed China’s factory activity unexpectedly fell in October, weighed down by softening global demand and strict domestic COVID-19 curbs. This also weighed on the domestic unit, dealers said.
Lack of dollar sales on behalf of exporters also weighed on the Indian unit, dealers said.
“Since the rupee has already touched 83 level before, exporters are rigid on such levels now,” a dealer with a state-owned bank said. “Only when it (rupee) hovers around the 83 level again, will exporters come in aggressively.”
A surge in domestic share indices provided support to the Indian unit, dealers said. Today, the Nifty 50 and the Sensex ended 1.3% higher each.
Premiums on dollar/rupee forwards ended steady today. Premiums rose earlier in the day as importers bought dollars for forward delivery at relatively lower levels, following a sharp fall in premiums in the last few weeks, dealers said.
On Oct 21, premiums on one-year dollar/rupee forward contracts had slipped to a fresh 11-year low 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 on liquidity in the spot market.
The premium on the one-year, exact-period dollar/rupee forward contract was at 199.01 paise as against 198.25 paise at Friday’s close. On an annualised basis, the premium was at 2.40%, unchanged against the previous close.
Forward premiums opened slightly lower today, tracking a rise in US Treasury yields, dealers said.
The yield on the benchmark 10-year US Treasury note rose after data showed inflation pressures remain elevated, suggesting that the Fed would move forward with its aggressive interest rate hiking cycle.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
On Tuesday, the rupee will take cues from overnight movement in the dollar index and crude oil prices, dealers said.
Traders are expected to remain cautious ahead of the US Federal Open Market Committee’s meeting starting Tuesday and the Reserve Bank of India’s Monetary Policy Committee meeting on Thursday.
“Rupee is expected to move in a range of 82.50 to 83.00 tomorrow after remaining above 82.50 for the entire last week,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP.
During the day, the rupee is seen at 82.50-83.00 a dollar.
India Rupee – World FX: Dollar firm ahead of FOMC meet, euro down
NEW DELHI – The greenback was up against six major currencies as the market expects another 75-bps rate hike at the Federal Open Market Committee’s two-day meeting starting Tuesday.
The market expects the Fed to be hawkish, as US consumer spending data, released on Friday, showed the underlying price pressure was likely to remain high.
At 1530 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 111.04 compared with 110.75 on Friday. It was at 110.58 on Thursday.
The euro fell 0.4% against the dollar today. The market is closely eyeing inflation data for the Eurozone for October, as well as GDP data for the Jul-Sep quarter, due later today.
The pound sterling fell 0.6 against the US dollar.
The Japanese yen was down 0.4% against the US dollar as factory output in Japan fell 1.6% in September, more than the expected fall of 1.0%, and the Bank of Japan retained its loose policy stance. (Ananya Chaudhuri)
India Rupee: Rises as crude oil prices fall, domestic shares gain
NEW DELHI – The rupee rose against the greenback today as prices of crude oil settled 1% lower on Friday after top crude importer China tightened its COVID-19 curbs, dealers said.
A fall in crude oil prices lowers India’s import bill, which subsequently supports the currency.
China reported 1,506 new COVID-19 cases on Thursday, which led to the Chinese authorities impose fresh lockdowns in a number of cities, maintaining the country’s Zero-COVID policy, which has contributed to a reduction of economic activity in the world’s largest importer of crude.
At 0936 IST, the November contract of Brent crude oil on the Intercontinental Exchange was at $95.27 a barrel as against $95.77 a bbl on Friday. On Thursday, the November contract settled at $96.96 a bbl.
Moreover, domestic and Asian share indices rose tracking most global markets, which further supported the local currency, dealers said. At 0936 IST, both benchmark equity indices Sensex and Nifty 50 rose 1.0% each.
“In the near-term, the 82.25 (a dollar) level is being watched, after it is breached, importers may come in aggressively,” a dealer with a state-owned bank said. “Overall, caution may persist before the Fed decision and the rupee may move in a range of 82.25-82.55 (a dollar).”
Market participants are now waiting for the outcome of the US Federal Reserve’s Nov 1-2 meeting, dealers said. They expect a rate hike of 75 basis points from the US Federal Open Market Committee.
Dealers have pegged immediate technical resistance for the rupee at 82.10 a dollar, and support at 82.50 a dollar.
For the rest of the day, the Indian unit is seen at 82.1000-82.5000 a dollar. (Pratiksha)
India Rupee: Expected range for rupee – Oct 31
MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecasted by leading banks and brokerages in an Informist poll:
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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