India Rupee Review: Off day’s high as RBI mops up foreign inflow

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Friday, Jun 26

 

By Mimansa Verma

MUMBAI – The ended steady after erasing most gains against the US dollar today on the back of persistent purchases of the greenback by major state-owned banks at multiple levels, likely on behalf of the Reserve Bank of , currency traders said. 

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Facing resistance at technical level around 75.40 a dollar, the Indian currency closed at 75.63 a dollar, compared with 75.66 at 1400 IST on Thursday.

 

“It looked like the RBI was controlling downside (for dollar/rupee) strongly,” a dealer with a state-owned bank said. “Some part of the Jio flow may have come, but all of it has been absorbed… and I guess 90% of buying today was done by them (RBI) at almost every level.”

 

A US-based bank and a big private bank were said to have been major sellers of the greenback.

 

Market players anticipated that foreign fund inflows for investments into Reliance Industries’ subsidiary Jio Platforms today were absorbed by purchases of the US currency through most of the day, dealers said.

 

On Wednesday, the Competition Commission of India approved Jaadhu Holdings LLC’s 9.99% stake buy in Jio Platforms for $5.7 bln. Jaadhu Holdings is a subsidiary of Facebook Inc. Dealers said inflows from the deal, at the dollar/rupee reference rate set by Financial Benchmarks India, will be spread over the coming weeks.

 

Even though dealers expect the impact of the transaction on the rupee’s exchange rate to be minimal, the Indian currency will be anchored above the 76.00-a-dollar mark.

 

Over the last couple of months, multiple global investors namely Public Investment Fund, Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, Abu Dhabi Investment Authority, TPG and L Catterton, have collectively acquired over 22% stake in Jio Platforms for around 1.16 trln rupees.

 

However, the central bank’s dollar-buying interventions in the spot market for more than a month have led to a view that the RBI may not want the rupee to rise sharply. This has also kept back traders from placing big bets in favour of the rupee, dealers said.

 

In the week ended Jun 12, the RBI’s foreign exchange reserves surged nearly $6 bln to a fresh record-high of $507.64 bln as per the data on website. So far in 2020-21 (Apr-Mar), the foreign exchange reserves have increased by over $32 bln.

 

Some importers were also said to have purchased the greenback around 75.45 a dollar after noting that the rupee did not rise above the day’s high of 75.4325 a dollar.

 

Another factor that comforted the Indian currency in early trade was mild optimism among market players across the globe about recovery in economic that was hit by the pandemic. 

 

Even though a second wave of COVID-19 infections may cause impediment to the economic recovery, investors worldwide are banking on monetary and fiscal support by major countries to bolster growth.

 

Late Thursday, the US Federal Reserve relaxed regulations for big banks to make large investments in funds such as venture capital funds that boosted sentiment for riskier assets such as stocks, including domestic . Today, the Nifty 50 and Sensex were up over 0.7% each.

 

On Thursday, the Fed, citing its annual stress test, said US banks were strong enough to endure the COVID-19 crisis, but limited dividend payments and share buybacks would help banks to preserve capital.

 

Despite positives stacked up for the Indian currency today, the rupee failed to sustain its early gains against the greenback.

 

Trade volumes in the currency market were subdued today due to truncated trading hours and also as financial in and Taiwan were shut today, dealers said.

 

“People are not going to trade unless there is a breakout on either side (of the dollar/rupee),” a dealer with a big private bank said. “Intra-day trading is only what makes sense at this point of time because of truncated hours and due to RBI support on both sides.”

 

 

1400 IST

1000 IST

HIGH

LOW  

PREVIOUS

(AT 1400 IST)

75.6300

75.5100

75.4325

75.6550

75.6600

 

FORWARDS MARKET

The premium on the one-year dollar/rupee forward contract ended higher today because banks executed sell/buy swaps–buying dollars immediately and selling at a later date–on the view that the Indian rupee may remain under pressure going ahead, dealers said.

 

Concerns about India’s fragile state of the economy, second wave of COVID-19 cases globally, and simmering tensions between India and China make a case for depreciation in the Indian currency, dealers said. 

 

On an annualised basis, the premium on the one-year exact-period dollar/rupee contract settled at 3.88%, compared to 3.83% at the previous close. 

OUTLOOK

On Monday, the rupee may take cues from global developments related to COVID-19 over the weekend, dealers said. Overnight movement in the and global risk sentiment early Monday are likely to guide the Indian currency at open.

 

While of foreign fund inflows may support the rupee, traders are expected to refrain from placing big bets in favour of the Indian currency given that the RBI’s intervention strategy has signalled a barrier to the rupee’s rise beyond 75.40 a dollar level, dealers said.

 

The rupee is likely to move in a range of 75.45-75.65 a dollar on Monday.


India Rupee: Premiums up as rupee seen under pressure; volumes low

 

 

AT 1345 IST

OPEN

HIGH

LOW

PREVIOUS

Spot rupee

per $1

75.6350

75.5100

75.4125

75.6350

75.6600

1-year fwd premium
(exact period)

3.88%

3.89%

3.91%

3.88%

3.83%

 

MUMBAI–1345 IST–The premium on the one-year dollar/rupee forward contract rose today because banks executed sell/buy swaps–buying dollars immediately and selling at a later date–on the view that Indian rupee may remain under pressure going ahead, dealers said.

 

On an annualised basis, the premium on the one-year exact-period dollar/rupee contract was 3.88%, compared to 3.83% at the previous close. At 1345 IST, the one-year month-end dollar/rupee contract was at 294.50 paise, against 269.00 paise at the previous close. 

 

Trade volumes, however, were low in the forwards segment in the absence of any directional triggers, dealers said.

 

Concerns about the pace of economic recovery due to second wave of COVID-19 cases globally, along with the Reserve Bank of India’s dollar-buying interventions in the spot market have led to a view that the rupee may not rise sharply above 75.40 a dollar in coming days, dealers said.

 

Currency traders remained cautious about tensions between India and China, thereby refraining from placing big bets in favour of the greenback even though foreign fund inflows kept the rupee supported, dealers said. 

 

Today, the rupee erased most gains against the greenback because major state-owned banks purchased dollars, likely on behalf of the central bank at multiple levels, dealers said.

 

For the rest of the day, the premium on the one-year exact-period dollar/rupee forwards contract is seen at 3.88-3.91%.  (Mimansa Verma)


India Rupee – F&O: Dollar/rupee rises as spot rupee pares gains

 

MUMBAI – The one-month dollar/rupee July contract rose as rupee pared most gains against the US dollar in the spot market, dealers said. 

 

Open interest in the contract was up 11.08%.

 

The one-month dollar/rupee contract for June expired earlier today. 

 

JULY FUTURES NSE BSE   MSE
Volume 1,181,116 494,135 13,200
Open interest 1,703,772 2,083,232 11,087

(Akansha Victor)


India Rupee – NDF: Dollar/rupee falls as Indian unit rises in spot

MUMBAI – The dollar/rupee rate for the one-month offshore non-deliverable forwards contract fell tracking rates in the onshore market, where the rupee strengthened against the greenback.

 

At 1235 IST, the one-month dollar/rupee offshore contract was at 75.65, compared with 75.71 on Thursday. In the spot market, the rate was at 75.49 as against 75.66 on Thursday. 

 

The Indian currency rose tracking gains in local equities and on hope of foreign fund inflows, dealers said. 

 

Dollar inflows for a massive stake sale by Jio Platforms are expected to be in the pipeline, dealers said. 

 

Further, despite concern over COVID-19 cases surging globally, foreign portfolio investors have net bought $544.42 mln of Indian financial assets so far this week, according to data on National Securities Depository Ltd. 

 

At 1235 IST, the Nifty 50 and Sensex were over 0.8% higher.

 

Global investors pinned their hopes on more stimulus measures by central banks and governments across the world to support growth as virus cases continue to soar. Concern that the plans of resuming economic activity could be disrupted given the surge in coronavirus infections has kept market players on edge. 

 

Global equities edged higher as US regulators relaxed some capital requirements for banks, reports said. (Akansha Victor)


India Rupee: Over 3-wk high tracking local equities, foreign inflows

 

  At 1120 IST 1000 IST HIGH LOW

PREVIOUS

(at 1400 IST)

Spot rupee per $1 75.4600 75.5100 75.4600 75.5425 75.6600

 

 

MUMBAI–1120 IST–The rupee rose to its highest level in over three weeks against the US dollar today, tracking rise in domestic equities and expectations of overseas investments into Reliance Industries’ subsidiary Jio Platforms, currency traders said.

 

Even though a second wave of COVID-19 infections poses a threat to global economic recovery, investors worldwide are banking on monetary and fiscal support by major countries to bolster growth.

 

Equities were up globally after the US Federal Reserve relaxed regulations for big banks to make large investments in funds such as venture capital funds. The rise in global indices was mirrored by local equities. The Nifty 50 and Sensex were up nearly 1% today.

 

On Thursday, the Fed, citing its annual stress test, said US banks were strong enough to endure the COVID-19 crisis, but limited dividend payments and share buybacks would help banks to preserve capital.

 

Back home, the Competition Commission of India on Wednesday approved Jaadhu Holdings LLC’s 9.99% stake buy in Jio Platforms for $5.7 bln. Jaadhu Holdings is a subsidiary of Facebook Inc.

 

Dealers said inflows from the deal, at the dollar/rupee reference rate set by Financial Benchmarks India, will be spread over the coming weeks.

 

Impact of the transaction on rupee’s exchange rate is likely to be minimal, but the Indian currency will be anchored above 76.00-a-dollar mark.

 

“Yesterday (Thursday), there were about $600 mln inflow for Reliance flow (Jio Platforms),” a dealer with a state-owned bank said. “The fixing rate is also going to come lower… people must be frontrunning the flow. It is a flow-driven market, there are hardly any speculative positions they are taking.”

 

Over the last couple of months, multiple global investors have collectively acquired over 22% stake in Jio Platforms for around 1.16 trln rupees.

 

Earlier this week, Bloomberg reported that ICICI Bank is considering a share sale of $3 bln as early as September.

 

However, the Reserve Bank of India is expected to purchase the greenback around 75.40 a dollar to check any sharp rise in the Indian currency, dealers said.

 

The RBI has been standing in the way of rupee’s appreciation for more than a month in view of heavy dollar inflows from overseas investors. This has led to the view that the central bank may not want the rupee to rise sharply, dealers said.

 

This has also kept back traders from placing big bets in favour of the rupee, dealers said.

 

In the rest of the day, dealers expect the currency pair to move in a he narrow range of 75.40-75.55 a dollar.   (Mimansa Verma)


India Rupee – Asia FX: S Korea Won up on upbeat econ data, dlr falls

MUMBAI – Asian currencies traded on a mixed note against the US dollar today. The South Korean won rose on the back of upbeat consumer confidence data released earlier today that showed the index jumped to 81.8 in June from 77.6 in the previous month.

 

On Thursday, South Korean President Moon Jae-in urged North Korea to formally end the conflict, commemorating the 70th anniversary of the Korean War.

 

Financial markets in China and Taiwan are closed today on account of Dragon Boat Festival.

 

The Malaysian ringgit was lower against the greenback.

 

Market players across the globe remained optimistic about swift economic recovery worldwide, but a second wave of COVID-19 cases checked such hopes. Rise in global share indices also supported the sentiment for Asian currencies.  (Mimansa Verma)


India Rupee: Technical Levels for rupee – Jun 26

 

MUMBAI – At 1000 IST, the rupee was at 75.5200 dollar, compared with 75.6600 a dollar on Thursday at 1400 IST. At 1030 IST, the rupee was at 75.5300 per dollar.

 

Following are key support and resistance levels for the rupee as predicted by leading banks and brokerages:

 

  S1 S2 R1 R2
Big private bank 75.67 75.75 75.43 75.32
Private bank 75.60 75.75 75.40 75.35
Private bank 75.65 75.50 75.45
Private bank 75.65 75.73 75.40 75.32
State-owned bank 75.65 75.70 75.53 75.45

(Akansha Victor and Mimansa Verma)


India Rupee: Expected range for rupee – Jun 26

 

MUMBAI – Following are expected support and resistance levels for the rupee, as forecast by leading banks and brokerages in a Cogencis poll:

 

  SUPPORT RESISTANCE
Big state-owned bank 75.79 75.46
Big state-owned bank 75.80 75.40
State-owned bank 75.80 75.30
Private bank 75.75 75.40
Private bank 75.70 75.40

(Akansha Victor)

 

End

 

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

 

Edited by Ramya J.S. D’Rozario

 

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Source: Cogencis

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