Informist, Thursday, Oct 28, 2021
By Arushi Jain
MUMBAI – The rupee rose against the dollar today because private and foreign banks sold the US unit for overseas investments into Indian companies raising funds through initial public offerings, dealers said.
The 60-bln-rupee or nearly $800-mln IPO of FSN E-Commerce Ventures Ltd, the parent company of fashion brand Nykaa, opened today and will close on Monday.
Fino Payment Bank, SJS Enterprises, Policybazaar, Paytm and Anand Rathi Wealth are also set to launch their IPOs in the coming days.
After moving in a range of nearly 19 paise in a thin trade today, the local unit closed at 74.9200 a dollar compared with 75.0250 at 1530 IST on Wednesday.
The sentiment for the Indian unit lifted further after prices of Brent crude oil fell on Wednesday noting a higher-than-expected rise in US stockpiles, said dealers.
Crude oil inventories in the country rose by 4.3 mln barrels last week, sharply higher than expectation of a 1.9-mln-bbl rise, according to the US energy department.
Moreover, yields on the US benchmark 10-year treasury note slumped as investors expected further tightening of the monetary policies by key global central banks, which further supported the rupee.
At 1605 IST, yields on US benchmark 10-year treasury note were at 1.54% against 1.63% on Tuesday.
Today, the rupee hit the day’s high at 74.7600 a dollar.
On the flip side, a slump in local equity indices limited further gains in the local unit, said dealers. Both the Nifty 50 and the Sensex ended down by nearly 1.9% each.
Some foreign and state-owned banks purchased the dollar for outflows from Indian equities which dampened the sentiment for the rupee, according to dealers.
Equity markets fell due to concern that high inflation may lead central banks to tighten their monetary policies, which could in turn slow down the pace of economic growth.
The Indian rupee fell to the day’s low of 74.9450 a dollar today.
Globally, investors reassessed when the US Federal Reserve is likely to raise interest rates, as they were unsure about sustainability of high policy rates, given the uncertainty over recovery in the US economy.
While The Bank of Canada on Wednesday ended its weekly $2 bln quantitative easing programme, the Bank of Japan retained its easy monetary policy settings earlier today and projected inflation at well below its 2% target for at least two more years.
Investors now await the monetary policy outcome of the European Central Bank meeting that is scheduled later today and outcome of the US Federal Open Market Committee’s meeting next week.
“The FOMC is most likely to announce stimulus withdrawal at its next week’s policy meeting, market participants would be more interested to get cues about the beginning and pace of the monetary tightening cycle with the Fed funds rate futures now pricing up to two rate hikes before the end of 2022,” said a dealer with a brokerage.
Dollar gained in the European trade ahead of the crucial central bank meetings, which weighed on the sentiment for the rupee, said dealers.
At 1605 IST, the dollar index, which measures strength in the US currency against a basket of six major currencies, was at 93.86 compared with 93.80 on Wednesday. It was at 93.95 on Tuesday
Investors also await crucial GDP data in the US, scheduled for release on Friday.
Meanwhile, some investors doubt if the US Fed will aggressively tighten monetary policy due to fears of a slowdown in economic recovery in the world’s largest economy.
“We aren’t expecting any drastic change in the policy this time. Most probably, it will be deferred until February,” said a dealer with a state-owned bank. “Initially, the announcement (on bond tapering) was expected in November but noting the current market condition, it is not expected immediately.”
Fed Chairman Jerome Powell and other policymakers have indicated over the course of time that they are preparing to start reducing the $120 bln monthly purchases with Powell saying that the Fed can be patient with raising rates and allow the labour market to heal.
FORWARDS
The premium on dollar/rupee forwards contract ended higher because banks purchased dollars for forward delivery on behalf of importers and likely the Reserve Bank of India, dealers said.
On an annualised basis, premium on the one-year, exact-period dollar/rupee contract was at 4.66%, against 4.65% on Wednesday. The premium was at 349.48 paise compared with 350.00 paise on Wednesday.
OUTLOOK
On Friday, the rupee may take cues from the movement in the dollar index and US bond yields.
Private and foreign banks are expected to continue to sell dollars for overseas investors for the ongoing and upcoming IPOs of various Indian companies, which may provide support to the rupee, dealers said.
The rupee is seen in a range of 74.6000-75.1000 a dollar on Friday.
India Rupee – World FX: Dollar, yen gain as equity slumps globally
NEW DELHI – The US dollar and Japanese yen gained against other major currencies as a sharp fall in equities globally boosted demand for safe haven assets.
Equity markets slumped as fears over rising inflation and pressure on central banks to tighten their monetary policies weighed on the sentiment, while resurfacing COVID-19 worry cast doubt over economic recovery globally.
At 1500 IST, the dollar index, which measures the strength of the US currency against six other major units, was at 93.92, compared with 93.80 on Wednesday. It was 93.95 on Tuesday.
Traders await the European Central Bank policy decision due later today for policymakers’ views on inflation forecast and an expected pushback against rising interest rate projections.
Earlier today, the Bank of Japan decided to continue its easy monetary policy settings and projected inflation at well below its 2% target for at least two more years.
The yen gained today although Bank of Japan Governor Haruhiko Kuroda favoured weak Japanese currency.
“I don’t think the yen’s recent slight decline is bad for Japan’s economy. It helps boost the yen-based profits Japanese companies earn overseas. What’s important is for currency rates to move stably reflecting economic fundamentals,” Governor Haruhiko Kuroda said today after the meeting.
Meanwhile, the pound sterling was slightly up after UK Finance Minister Rishi Sunak’s upbeat economic assessment during the annual budget presentation on Wednesday. Expectations of an interest rate hike by the Bank of England further supported on the currency. (Pratiksha)
India Rupee:Rises on likely IPO inflows; Brent prices come off highs
MUMBAI – The rupee rose sharply against the dollar today because foreign banks sold the US unit for overseas investments into Indian companies raising funds through initial public offerings, dealers said.
The 60-bln-rupee or nearly $800-mln IPO of FSN E-Commerce Ventures Ltd, the parent company of fashion brand Nykaa, opened today and will close on Monday.
Companies like SJS Enterprises, Policybazaar, Paytm and Anand Rathi Wealth are also set to launch their IPOs in the coming days, said dealers.
Prices of Brent crude oil fell on Wednesday noting a higher-than-expected rise in US stockpiles, which further lifted sentiment for the Indian unit, said dealers.
According to the US energy department, crude oil inventories in the country rose by 4.3 mln barrels last week, sharply higher than expectations of 1.9-mln-bbl rise.
At 1033 IST, the December contract of Brent crude on the Intercontinental Exchange was at $82.97 per bbl compared with $84.58 a bbl at close on Wednesday.
However, a sharp fall in local equity indices limited further gains in the local unit, said dealers. At 1033 IST, both the Nifty 50 and the Sensex were down by nearly 0.7% each.
On the data front, investors await crucial GDP data in the US, scheduled to be released on Friday.
With immediate key technical resistance seen at 74.7000 a dollar, the Indian unit is expected to move in a range of 74.6000-75.0000 a dollar during the day. (Arushi Jain)
India Rupee – Asia FX: Most down tracking equities, firm dollar
NEW DELHI – Most Asian currencies were down in early trade today tracking losses in equity markets due, to concern that high inflation may prompt central banks to tighten the monetary policies, which could in turn slow down the pace of economic growth.
The Canadian central bank on Wednesday moved to unwind its quantitative easing, joining an array of central banks that are looking to end their programmes as well.
A firm US dollar also weighed on the Asian currencies. At 0936 IST, the dollar index, which measures the strength of the US currency against six other major units, was at 93.84, compared with 93.80 on Wednesday. It was 93.95 on Tuesday.
However, a fall in crude oil prices supported the currencies. At 0938 IST, the December contract of Brent crude on the Intercontinental Exchange was at $82.67 per barrel compared with $84.58 a bbl at close on Wednesday.
The Taiwan dollar and the Chinese yuan were both down over 0.1% with the Indonesian rupiah falling 0.2% in early Asian trade.
Bucking the trend, the Thai baht rose 0.1% after data showed the country’s manufacturing production index had a smaller-than-expected year-on-year drop of 1.28% in September. Owing to improving economic signals, economists now expect the Thai economy to expand by 3% in 2022. (Shubham Rana)
India Rupee: Expected range for rupee – Oct 28
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 Akul Nishant Akhoury
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