Informist, Tuesday, Mar 22, 2022
By Pratiksha and Srijonee Bhattacharjee
NEW DELHI/MUMBAI – The rupee pared nearly all of its losses against the US dollar made in early trade today, mirroring a similar move in domestic equities and due to dollar sales, likely for an offshore loan raised by Indian Railways Finance Corp, dealers said.
After falling to a low of 76.4800 a dollar in early trade, the rupee ended at 76.1750 a dollar, against 76.1150 on Monday,
Foreign banks, including a US-based bank, was said to have sold the greenback for Indian Railways Finance Corp’s yen-denominated syndicated offshore loan of $1.1 bln, which helped the rupee recover from its lows and rise to a high of 76.0900 a dollar in the day, dealers said. These sales began at around the lowest levels for the rupee today, 76.4800-76.4500 a dollar. At 76.2500-76.3000 a dollar, stop-losses of most banks were triggered, which led them to cut their long bets on the dollars. This supported the rupee further, dealers said.
The rupee then made its way to 76.0900 a dollar, the day’s high. It was unable to sustainably break the crucial resistance level of 76.0900-76.1000 a dollar.
“After the IRFC flow hit the market, around 76.25-76.30 stop-losses of a lot of banks were triggered. People weren’t expecting such a sharp downward movement (in dollar/rupee) because there weren’t as many reasons to sell (dollars),” a dealer with a private bank said. “Nats (state-owned banks) were on both sides today (selling and buying).”
The Nifty 50 and the Sensex ended 1.2% higher each.
Domestic equities surged as sentiment among investors improved after Ukrainian President Volodymyr Zelenskyy said he was prepared to discuss a commitment from Ukraine to not seek membership to the North Atlantic Treaty Organization in exchange for a ceasefire, the withdrawal of Russian troops, and a guarantee of Ukraine’s security.
Earlier today, the Indian rupee opened lower with a gap of 31 paise at 76.4250 a dollar but recovered to 76.3600 a dollar soon, as some state-owned banks stepped in to sell the US unit on behalf of exporters at relatively higher dollar/rupee levels, said dealers.
Meanwhile, the US unit remained elevated against other major currencies in European trade after US Federal Reserve Chair Jerome Powell hinted at more aggressive monetary policy tightening than expected, to reign in inflation. This led the rupee to open lower for the day, dealers said.
These remarks come less than a week after the US Federal Reserve hiked interest rates by 25 basis points, the first hike in over three years.
At 1700 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 98.64, against 98.50 on Monday.
Powell said inflation was “much too high,” and the central bank might “take the necessary steps to ensure a return to price stability”, according to reports.
“In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so,” Powell said.
FORWARDS
Premiums on forward dollar/rupee contracts fell because recent comments by the US Fed chair led to expectations that the interest rate differential between the US and India would narrow sooner than was expected earlier, dealers said.
The premium on the 1-year, exact-period dollar/rupee contract was at 291.21 paise as against 295.87 paise on Monday. In annualised terms, the premium was at 3.82% as against 3.89% at the previous close.
“I see premiums in a range of 3.75%-3.95% now. These are levels where market should stabilise unless there is paying by the RBI,” a dealer with a state-owned bank said. “On upticks, exporters will come in to receive.”
OUTLOOK
On Wednesday, the rupee is seen tracking overnight movement in the dollar index and Brent crude oil prices, said dealers.
“The further move for rupee is largely dependent on global cues now. There is some selling expected for the year-end flows, but we’ll have to see if that happens,” said a dealer with a private bank.
Dealers have now pegged strong key technical support for the rupee at 76.40 a dollar.
During the day, the rupee is seen in range of 76.0000-76.5000 a dollar.
India Rupee – World FX:Dlr, yen off highs as risk sentiment improves
MUMBAI – The US dollar and Japanese yen, safe-heaven currencies, came off highs today as risk sentiment improved amid hopes of tension between Russia and Ukraine easing.
Reports said Ukrainian President Volodymyr Zelensky was prepared to discuss a commitment not to seek membership to the North Atlantic Treaty Organization in exchange for a ceasefire, withdrawal of Russian troops and a guarantee of the country’s security.
Ukraine’s intention to join NATO was one of the key reasons that led to its conflict with Russia. Following the latest reports, Brent crude oil futures erased their gains and were hovering near $114 per barrel.
Earlier today, the dollar rose against other major currencies after US Federal Reserve Chair Jerome Powell hinted at more aggressive monetary policy tightening to combat inflation.
At 1545 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 98.65, against 98.50 on Monday. It had touched day’s high of 98.96 today. (Richard Fargose)
India Rupee: Premiums fall; US-India rate gap seen narrowing fast
MUMBAI – Premiums on dollar/rupee forward contracts declined on surmise that the differential between Indian and US interest rates may shrink sooner than expected, said dealers.
Premium on the one-year, exact-period dollar/rupee contract was 291.43 paise as against 295.87 paise on Monday. On an annualised basis the premium was 3.83% as against 3.89% the previous day.
On Monday, US Federal Reserve Chair Jerome Powell said inflation is “much too high” and to reign it in, the central bank may raise interest rates by a bigger quantum if required.
“In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so,” Powell said.
These remarks come less than a week after the US Federal Reserve hiked interest rates–by 25 basis points–for the first time in over three years.
The forward premium on a currency pair reflects the interest rate differential between the two countries. (Srijonee Bhattacharjee)
India Rupee: Off lows as local equities rebound, IRFC inflows aid
NEW DELHI – The rupee came off earlier lows against the dollar today because domestic share indices recovered from losses incurred earlier and rose sharply in intraday trade, said dealers.
Domestic equities rose as sentiment among investors improved after Ukrainian President Volodymyr Zelenskyy said that he was prepared to discuss a commitment from Ukraine to not seek North Atlantic Treaty Organization membership in exchange for a ceasefire, the withdrawal of Russian troops and a guarantee of Ukraine’s security.
At 1341 IST, the Nifty 50 and Sensex were 0.9% higher each.
Moreover, some foreign banks stepped in to sell the greenback for Indian Railways Finance Corp’s yen-denominated syndicated offshore loan of $1.1 bln, said dealers. This further provided support to the Indian rupee, dealers said.
“IRFC inflows also hit the market around the same time when (equity) indices rebounded,” said a dealer at a state-owned bank. “A large US-based bank sold dollars for IRFC inflows from 76.40/$1 onwards.”
The rupee is seen at 76.0000-76.4000 a dollar for the rest of the day. (Pratiksha and Richard Fargose)
India Rupee: Down as dollar, crude oil rise, domestic equities fall
NEW DELHI – The rupee fell sharply against the dollar today because the US unit surged against other major currencies after the US Federal Reserve Chair Jerome Powell hinted at more aggressive monetary policy tightening than expected, to combat inflation, said dealers.
Powell said inflation is “much too high,” and the central bank may “take the necessary steps to ensure a return to price stability”, according to reports.
At 1039 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 98.80, against 98.50 on Monday.
Further, prices of Brent crude oil remained elevated and were near $118 a barrel on speculation that the European Union may consider joining the US on imposing an embargo on Russian oil. This also weighed on sentiment for the Indian unit, said dealers.
At 1039 IST, the May contract of Brent crude on the Intercontinental Exchange was at $118.88 a bbl, against the previous close of $115.62 per bbl.
Moreover, a fall in domestic equity indices on concerns over rising crude oil prices also weighed on sentiment for the local unit, said dealers.
At 1039 IST, the Nifty 50 and the Sensex were nearly 0.6% lower each.
“I think the rupee will appreciate from here as the market is expecting RBI’s (Reserve Bank of India) intervention to sell (dollars) at the 76.50 (a dollar) level,” said a dealer with a state-owned bank.
The rupee is seen at 76.0000-76.6000 a dollar for the rest of the day. (Pratiksha)
India Rupee: Expected range for rupee – Mar 22
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: Fall; dlr surges on Powell’s hawkish comments
MUMBAI – Asian currencies fell against the dollar today as the US unit strengthened against other major currencies after comments from US Federal Reserve Chair Jerome Powell signalled a more aggressive monetary policy path for the US central bank.
Powell said that the central bank must move “expeditiously” to raise rates and possibly “more aggressively” to keep an upward price spiral from getting entrenched.
“In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so,” Powell added.
Last week, the Fed raised the federal funds rate target range by 25 basis points to 0.25-0.50% and projected 150 bps of more rate hikes in 2022.
At 0938 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 98.62, against 98.50 on Monday.
Among the major laggards were the South Korean won and the Thai baht, which fell nearly 0.4% and 0.3% against the dollar, respectively. (Arushi Jain)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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