Informist, Wednesday, Oct 20, 2021
By Arushi Jain
MUMBAI – The rupee rose sharply against the US dollar today because foreign and private banks persistently sold dollars for overseas investments into Indian companies raising funds through various means, and for deliverables accumulated in their Nostro accounts after Tuesday’s holiday in India.
Amid thin trade, the Indian rupee closed at 74.8700 a dollar today compared with 75.3400 at 1530 IST on Monday. Domestic currency markets were shut on Tuesday on account of Id Milad-Un-Nabi.
The rupee had opened higher at 75.1125 a dollar today because the dollar index remained weak in early trade. Dollar weakened as rising inflation in various global economies is expected to push central bankers for an earlier monetary policy tightening, even outpacing the US Federal Reserve.
However, through intra-day trade, dollar recovered some losses and at 1630 IST, the dollar index–a measure of the greenback’s strength against a basket of six major currencies–was at 93.82 compared with 93.73 on Tuesday, and 93.95 on Monday.
The rupee further found support as prices of Brent crude oil eased a bit and fell below the $85-per-barrel mark, said dealers.
At 1630 IST, the December contract of Brent crude on the Intercontinental Exchange was at $84.07 per barrel, compared with $85.08 a bbl at the previous close.
A US-based bank and two large private banks were among the major sellers of the dollar today, dealers said.
Dealers said a part of these dollar sales also took place after stop-losses got triggered near 74.95-75.00 a dollar.
Dealers said that lack of significant buying of dollars also led to a sharp gain in the rupee and the Indian currency saw the day’s high at 74.8200 a dollar today.
“We expected importers to start buying (dollars) near 74.80/$1 but a lot of buying was not seen today as importers have already booked their positions earlier given the panic of a sharp depreciation in rupee,”said a dealer with a state-owned bank.
Separately, sentiment for the rupee recovered also after China’s property developer Evergrande paid an onshore bond coupon of $19 mln due on Tuesday amid concerns about a potential offshore default.
The liquidity crisis at Evergrande, which has $300 bln in debt and has missed a series in bond payments, has left investors worried globally.
However, gains in the Indian currency were limited because of a sharp fall in equities, dealers said.
The benchmark indices Nifty 50 and Sensex ended down over 0.8% and 0.7%, respectively.
Moreover, a surge in the yield on the 10-year benchmark US Treasury note also weighed on the sentiment for the local unit, said dealers.
Today, yield on the 10-year benchmark US Treasury note rose to fresh multi-month highs and were close to their highest since May 20 after Federal Reserve Governor Christopher Waller’s comments pointed to tapering of the Fed’s stimulus beginning as early as mid-November.
At 1630 IST, yield on the 10-year benchmark US Treasury note was at 1.64% compared with 1.59% on Monday.
“While there is still room to improve on the employment leg of our mandate, I believe we have made enough progress such that tapering of our asset purchases should commence following our (Federal Open Market Committee) next meeting,” Waller said in a speech at Stanford Institute for Economic Policy Research.
The next meeting of the Federal Open Market Committee is scheduled for Nov 2-3.
“If inflation keeps rising at its current pace in the next few months, Fed policymakers may need to adopt a more aggressive policy response next year,” Waller said.
According to economists polled by Reuters, they expect the Fed to wait until 2023 before raising interest rates.
Investors now look ahead to the release of the Fed’s ‘Beige Book’, a report given by the 12 district banks with general commentary on the economic health of their respective districts, later today.
“Now this is a wait-and-watch situation and in the coming days, we expect the dollar/rupee to trade within the range of 74.50/$1 and 75.50/$1,” a dealer said.
FORWARDS
The premium on dollar/rupee forwards contract ended sharply up because some banks purchased dollars for forward delivery on behalf of importers, dealers said.
On an annualised basis, premium on the one-year, exact-period dollar/rupee contract was at 4.52%, against 4.46% on Monday. The premium was at 342.40 paise, compared with 336.31 paise on Monday.
OUTLOOK
On Thursday, rupee will take opening cues from overnight movement in the dollar index and US bond yields.
The rupee may not rise sharply as foreign and state-owned banks are expected to continue to buy dollars on behalf of oil marketing companies, noting elevated Brent crude oil prices, said dealers.
The rupee is seen in the 74.8000-75.3000 a dollar range during the day.
India Rupee – World FX: Pound sterling down after UK CPI edges lower
NEW DELHI – The pound sterling fell 0.2% today after data released showed that the UK’s annual consumer price index inched slightly lower to 3.1% in September from 3.2% in August.
The pound sterling had rallied for the past two sessions after Bank of England Governor Andrew Bailey on Sunday said the bank would “have to act” to deal with rising energy costs in Britain, which threaten a surge in consumer prices.
Meanwhile, the Australian dollar and the New Zealand dollar gained 0.1-0.2% against the US dollar after bond yields surged in both the countries as investors fear the rise in energy prices in global economies is likely to push central bankers to tighten monetary policy at a faster pace than the US Federal Reserve’s. (Pratiksha)
India Rupee – Asia FX: Mixed amid upbeat local shares, rise in US yields
NEW DELHI – Asian currencies were mixed against the dollar in early trade today as a surge in US treasury yields weighed on investor sentiment amid a rise in local equity markets.
Robust corporate earnings and a surge in technology stocks led to a strong opening for Asian equity markets.
The South Korean won jumped the most at 0.3%.
Meanwhile, the Philippine peso and Thai baht fell 0.1% and 0.2%, respectively, as yield on the 10-year US Treasury note rose to fresh multi-month highs after better-than-expected economic data last week and Federal Reserve Governor Waller’s comments pointing to tapering of the US Federal Reserve’s stimulus starting as early as mid-November.
The Bank of England also hinted towards tightening its policy quicker than the Fed, following Governor Andrew Bailey’s comment that the central bank would “have to act” to counter rising inflation.
Asian currencies remained under pressure due to the monetary policy diversion between developed country central banks and emerging economies. (Pratiksha)
India Rupee: Rises as dollar falls globally, risk appetite improves
MUMBAI – The rupee rose against the dollar today because the dollar index remained weak and risk sentiment improved with a rise in equities globally, said dealers.
Dollar weakened because rising inflation amid a surge in energy prices in global economies is expected to push central bankers for a quick monetary policy tightening that may outpace the US Federal Reserve’s.
At 1046 IST, the dollar index–a measure of the greenback’s strength against a basket of six major currencies–was at 93.69 compared with 93.73 on Tuesday, and 93.95 on Monday.
Moreover, Brent crude oil prices eased a bit and fell below the $85-per-barrel mark, which provided further relief to the local unit, said dealers.
However, a sharp rise in the yield on the 10-year benchmark US Treasury note limited any sharp gains in the rupee, said dealers.
Yields rose to multi-month highs as better-than-expected economic data in the US last week and Federal Reserve Governor Christopher Waller’s comments pointed to tapering of the Fed’s stimulus beginning as early as mid-November.
Waller said on Tuesday he thought the criteria of “substantial further progress” in economic conditions had been met to begin scaling back monthly purchases of $120 bln in Treasuries and mortgage-related assets, but added that interest rate hikes were “some time off”.
At 1046 IST, yield on the 10-year benchmark US Treasury note was at 1.65% compared with 1.59% on Monday.
The Indian unit is expected to move in a range of 74.95-75.30 a dollar during the day. (Arushi Jain)
India Rupee: Expected range for rupee – Oct 20
MUMBAI – The following are the expected support and resistance levels for the rupee, as forecast by leading banks and brokerages in an Informist poll:
(Arushi Jain)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Shirsha Thakur
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