Informist, Tuesday, Jan 18, 2022
By Pratiksha and Arushi Jain
NEW DELHI – The rupee today slumped to its lowest level against the dollar in nearly three weeks because state-owned and foreign banks persistently purchased the US unit on behalf of oil marketing companies, noting elevated Brent crude oil prices, said dealers.
“There was aggressive buying (of dollars) by oil importers at the 74.46/$1 level, which pushed the rupee to the 74.60/$1 level,” said a dealer with a state-owned bank.
The rupee settled at 74.5700 a dollar today, against 74.2375 a dollar at 1530 IST on Monday, the lowest level since Dec 29 2021.
Prices of crude oil rose sharply and touched the $88-per-barrel mark today as investors expected supply to remain tight amid restrained output by major producers with global demand unperturbed by the Omicron variant.
At 1610 IST, the March contract of Brent crude on the Intercontinental Exchange was at $87.49 per bbl. It was at $86.06 per bbl on Friday.
Moreover, Brent crude futures touched their highest levels since October 2014 earlier today. Prices of Brent crude rose to as much as $88.13 per bbl today. Crude oil prices jumped today after Yemen’s Houthi group attacked storage facilities in the United Arab Emirates, escalating tensions in the region and raising concerns over supply.
According to reports, investment banking company Goldman Sachs expects oil prices to hit the $100-per-bbl mark in the second half of this year, citing a lower than expected downfall in demand due to the Omicron coronavirus variant, coupled with increased supply disruptions worldwide.
A slump in domestic equity indices also dampened sentiment for the local unit, said dealers. Both the Nifty 50 and the Sensex fell nearly 1%.
Further, sentiment for the local currency was dampened because the dollar index remained elevated globally following hawkish statements by senior Federal Reserve officials in recent weeks ahead of the Jan 25-26 Federal Open Market Committee meeting, according to dealers.
Market participants expect the Fed to raise interest rates in March, for the first time since the start of the COVID-19 pandemic. Investors are also pricing in four rate hikes in 2022, said dealers.
At 1622 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 95.36 against 95.26 on Monday. It was at 95.17 on Friday.
It had risen to as much as 95.44 earlier today.
Moreover, yield on the US benchmark 10-year bonds rose to as much as 1.86% today, their highest since Jan 2020, as market participants anticipated a hike in March by the Fed, which further weighed on the Indian unit, said dealers.
Today, the local currency fell to the day’s low of 74.6000 a dollar.
Investors are likely to watch out for the Organization of the Petroleum Exporting Countries’ monthly oil market report due to be released later today for cues on the global oil demand being affected by the surge in COVID cases around the world, said dealers.
FORWARDS
Premium on the dollar/rupee forwards contract settled higher due to dollar purchases by foreign and state-owned banks on behalf of importers, dealers said.
On an annualised basis, premium on the one-year, exact-period dollar/rupee contract was at 4.73%, compared with 4.72% on Monday. The premium was at 352.68 paise compared with 350.33 paise on Monday.
OUTLOOK
On Wednesday, the rupee may take opening cues from overnight movement in the dollar index and Brent crude oil prices, said dealers.
“$94/bbl-$95/bbl could be the next crucial level for Brent crude prices,” said a dealer with a brokerage. “Rupee should test 74.75/$1 level in this week and may touch the 75.00/$1 level by next week”.
Dealers now see strong key technical support for the rupee at 75.00 a dollar.
During the day, the rupee is seen at 74.2000-74.8000 a dollar.
India Rupee: Falls on oil cos’ dollar demand, strength in US unit
NEW DELHI – The rupee fell sharply against the dollar today because some foreign banks stepped in to purchase the US unit on behalf of oil marketing companies, noting elevated Brent crude oil prices, said dealers.
“Oil importers are finding the current prices to be very good levels to buy (dollars), that’s why we are seeing an aggressive (dollar) buying,” said a dealer with a state-owned bank.
Prices of crude oil rose sharply and breached the $87 per-barrel mark today as investors expected supply to remain tight amid restrained output by major producers with global demand unperturbed by the Omicron variant, said dealers.
At 1045 IST, the March contract of Brent crude on the Intercontinental Exchange was at $87.29 per bbl. It was at $86.06 per bbl on Friday.
Moreover, the dollar index remained elevated globally following hawkish statements by senior Federal Reserve officials in recent weeks ahead of the Jan 25-26 Federal Open Market Committee meeting, which further weighed on the Indian unit, according to dealers.
While market participants do not expect an interest rate hike next week, they are anticipating that the central bank will start policy tightening in March, said dealers.
At 1045 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 95.34 against 95.26 on Monday. It was at 95.17 on Friday.
A slump in domestic equity indices also dampened sentiment for the local unit, said dealers. At 1041 IST, the Nifty 50 and the Sensex were nearly 0.4% lower each.
The rupee is seen moving in a range of 74.1000-74.5000 a dollar during the day. (Pratiksha and Arushi Jain)
India Rupee: Expected range for rupee – Jan 18
NEW DELHI – The following are the expected support and resistance levels for the rupee, as forecasted by leading banks and brokerages in an Informist poll:
(Pratiksha)
India Rupee – Asia FX: Mixed; China’s upbeat GDP data supports
NEW DELHI – Asian currencies moved on a mixed note against the dollar today as investors evaluated the economic recovery from the pandemic after China’s GDP data on Monday showed that the world’s second-largest economy grew faster-than-expected in Oct-Dec.
Data released on Monday showed that China’s GDP grew 4% year-on-year in Oct-Dec, against market expectation of 3.8%.
Sentiment for the Asian units was also supported after China’s central bank on Monday unexpectedly cut borrowing costs of its medium-term loans for the first time since April 2020.
The People’s Bank of China said it was lowering the interest rate on 700 bln yuan worth of one-year medium-term lending facility loans to some financial institutions by 10 basis points to 2.85%.
The Thai baht rose 0.4% against the greenback, after the health ministry of the country declared that it was considering bringing back a quarantine waiver for vaccinated visitors, as part of a proposed easing of some COVID-19 measures later this week.
On other hand, the Indonesian baht was up 0.1% against the US unit, ahead of its monetary policy meeting on Wednesday-Thursday. A Reuters poll said that Indonesia’s central bank will wait until the second half of the year before hiking rates to support economic growth.
Meanwhile, the Malaysian ringgit fell 0.1% against the dollar ahead of Bank Negara Malaysia’s monetary policy meeting on Jan 20, where no policy change is expected.(Pratiksha)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Michael Correya
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