Informist, Thursday, Apr 28, 2022
By Pratiksha and Srijonee Bhattacharjee
NEW DELHI – The rupee bounced back from the day’s low against the dollar today because of persistent greenback sales for overseas investment into the initial public offerings of Campus Activewear Ltd and Rainbow Children’s Medicare Ltd, dealers said.
After falling to a low of 76.7100 a dollar during the day, the rupee bounced back to settle at 76.4800 a dollar.
The Indian currency had opened about 8 paise lower at 76.6100 a dollar, against Wednesday’s closing level of 76.5325 a dollar, as the dollar index rose to a five-year high on expectations that the US Federal Reserve will aggressively increase interest rates at its upcoming meeting, dealers said.
The Fed is largely expected to increase rates by 50 basis points in its meeting on May 3-4, as well as in June and July.
The dollar index rose also due to a rush for safe-haven assets because of concerns about slowing growth in China and Europe, dealers said.
Authorities in Beijing continued to crack down on COVID-19 outbreaks and are trying to avert a city-wide lockdown that has been enforced in Shanghai for a month, according to reports.
However, the rupee rose to 76.5425 a dollar shortly after the opening, as some banks stepped in to sell dollars for foreign fund inflows, dealers said.
The rupee gradually fell to the day’s low of 76.7100 a dollar as the dollar index strengthened further, inching closer to a two decade high as the yen tumbled to its lowest since 2002 after Bank of Japan doubled down on its ultra loose monetary policy.
Bank of Japan today strengthened its commitment to maintain its massive stimulus programme and pledged to keep interest rates ultra low in its policy outcome.
The dollar index, which measures the value of the greenback against six major currencies, rose to 103.70, its highest level in five years. A rise above 103.82 would see it test levels not seen since late 2002.
At 1622 IST, the dollar index was at 103.57, against 102.95 on Wednesday. It was at 102.39 on Tuesday.
The rupee was also weighed down by dollar purchases by some banks on behalf of oil marketing companies, dealers said.
Crude oil prices fell today on caution about decreasing fuel demand in China, the world’s biggest oil importer, due to the economic impact of COVID-19 restrictions.
At 1622 IST, the June contract of Brent crude on the Intercontinental Exchange was at $105.59 a barrel against the previous close of $105.32 a bbl. It had fallen to $103.29 a bbl earlier in the day.
The rupee then began to recover and steadily moved up and breached the technical resistance level of 76.50 a dollar, as some foreign banks stepped in to sell dollars for overseas investment into the public offerings of Campus Activewear and Rainbow Children’s Medicare, dealers said.
The IPO of sports and athleisure footwear brand Campus Activewear opened on Tuesday and will close today. The public issue of Rainbow Children’s Medicare opened for subscription on Wednesday and will close on Friday.
“Even though there was a lot of selling for the IPO flows today, the rupee couldn’t break the crucial 76.40 (a dollar) level which it has been holding for the past few days,” said a dealer with a state-owned bank. “The flows hit the market around the 76.63-65 (a dollar) level and continued throughout the day.”
During the final hours of the trading session, the rupee moved in a narrow range of 76.56-76.44 a dollar, and closed at 76.4800 a dollar.
FORWARDS
Premiums on dollar/rupee forwards were off lows because traders bought the greenback for delivery in a year to lock in on the fall in premiums below the support level of 3.80%, dealers said.
“At these levels the right move is to pay,” said a dealer with a state-owned bank. “3.80% is a good support level and the premium is not sustaining below that. Premiums are relatively low right now. We are also going to hike rates so the differential (US-India interest rate) is not going to narrow.”
The premium on the one-year, exact-period dollar/rupee contract was at 292.10 paise, against 294.58 paise on Wednesday. It had fallen to a low of 286.57 paise earlier today. On an annualised basis, the premium was at 3.82%, against the previous close of 3.83%.
Dealers said that banks also executed sell-buy swaps before the initial public offering of Life Insurance Corp of India that will open on May 4.
In sell-buy swaps, traders sell dollars for immediate delivery and buy them back at a date 15-20 days ahead.
Foreign investors would be executing such swaps when subscribing to the LIC public offer in order to minimise the currency risk.
OUTLOOK
On Friday, the rupee will take opening cues from overnight movement in the dollar index and Brent crude oil prices, said dealers.
Investors will take into account US GDP for Jan-Mar, data for which is due later today.
Traders will also continue to monitor developments in the ongoing Russia-Ukraine war. Russia today started an offensive push into the Donbas region in eastern Ukraine, with intensified assaults in the Slobozhansky and Donetsk operational districts, reports said.
Dealers have now pegged strong key technical support for the rupee at 76.80 a dollar and technical resistance at 76.40 a dollar.
During the day, the rupee is seen in the range of 76.4000-76.8000 a dollar.
India Rupee – World FX: Dollar index near 20-year high, yen slumps 1.7%
MUMBAI – The dollar index rose to a near 20-year high, a level last seen in December 2002, as concerns about the impact of Russia’s decision to suspend gas supplies to Poland and Bulgaria and lockdowns in China because of rising coronavirus cases led to safe-haven demand.
Russia’s Foreign Affairs Minister Sergei Lavrov on Wednesday said that “NATO, in essence, is engaged in a war with Russia through a proxy and is arming that proxy.”
The dollar index, which measures the greenback’s strength against six major currencies, touched a high of 103.70. At 1535 IST, it was at 103.33 against 102.95 on Wednesday.
The yen tumbled 1.7% against the US dollar due to the contrasting monetary policy paths adopted by the central banks of the two countries.
The US Federal Reserve has adopted an aggressive monetary tightening path, while Bank of Japan has vowed to maintain its ultra-loose monetary policy.
Bank of Japan today stuck to its existing ultra-loose policy stance and announced plans to conduct unlimited fixed-rate bond purchase operations.
Governor Haruhiko Kuroda’s comment that he still believes a weak yen is positive for the Japanese economy on the whole, although excessive moves in exchange rates have negative effects, also dented demand for the yen. (Richard Fargose)
India Rupee: Premiums off lows as traders lock in swaps at low levels
MUMBAI – Premiums on dollar/rupee forwards were off lows because traders bought the greenback for delivery in a year to lock in on the fall in premiums below the support level of 3.80%, dealers said.
“At these levels the right move is to pay,” a dealer with a state-owned bank said. “3.80% is a good support level and the premium is not sustaining below that. Premiums are relatively low right now. We are also going to hike rates so the differential (US-India interest rate) is not going to narrow.”
The premium on the one-year, exact-period dollar/rupee contract was at 293.61 paise, against 294.58 paise on Wednesday. It had fallen to a low of 286.57 paise earlier today. On an annualised basis, the premium was at 3.84%, against the previous close of 3.83%.
Dealers said that banks also executed sell-buy swaps (sell dollars for immediate delivery and buy it back at a date 15-20 days ahead) before the initial public offering of Life Insurance Corp that will open on May 4. Foreign investors would be executing such swaps when subscribing to the issuance in order to minimise the currency risk. (Srijonee Bhattacharjee)
India Rupee: Recovers losses on banks’ dollar sales for IPO inflows
NEW DELHI – The rupee recovered most of its losses against the greenback today as some banks stepped in to sell dollars for overseas investment into Campus Activewear Ltd and Rainbow Children’s Medicare Ltd’s initial public offering, dealers said.
The IPO of sports and athleisure footwear brand Campus Activewear opened on Tuesday and will close today.
Rainbow Children’s Medicare Ltd’s IPO opened for subscription on Wednesday and will close on Friday.
A surge in domestic equity indices also provided support to the Indian unit, according to dealers. At 1310 IST, the Nifty 50 and the Sensex were up 1.2% and 1.3%, respectively.
The rupee is seen at 76.4000-76.8000 a dollar for the rest of the day. (Pratiksha)
India Rupee – Asia FX: Down as dollar rallies on safe haven demand
NEW DELHI – Asian currencies were down as the US dollar gained due to safe haven demand after Russia started an offensive push into the Donbas region in eastern Ukraine, with intensified assaults in the Slobozhansky and Donetsk operational districts.
Expectations of aggressive interest rate hikes by the US Federal Reserve also pushed the greenback to a multi-year high against several major currencies.
The dollar index, which measures the value of the greenback against six major currencies, rose to 103.47 earlier today, its highest level since December 2016. At 1023 IST, the index was at 103.45, against 102.95 on Wednesday. It was at 102.39 on Tuesday.
Most Asian units fell 0.1-0.4% today. The yuan slipped 0.4% as COVID lockdowns and their adverse impact on economic growth has hit sentiment for the Chinese yuan. (Richard Fargose)
India Rupee: Falls as dollar index at 5-year high; FX inflows aid
NEW DELHI – The rupee fell against the greenback today because the dollar index touched a five-year high due to expectations that the US central bank will aggressively hike interest rates at its upcoming meeting, dealers said.
The rise in the dollar index was also on the back of safe-haven flows sparked by concerns about slowing growth in China and Europe, dealers said. The index, which measures the value of the greenback against six major currencies, rose to 103.47 earlier today, its highest level since December 2016.
At 0943 IST, the dollar index was at 103.45, against 102.95 on Wednesday. It was at 102.39 on Tuesday.
Meanwhile, some banks stepped in to sell dollars, likely for foreign fund inflows, which limited losses in the local unit, dealers said.
Gains in domestic and Asian share indices also supported sentiment for the Indian unit, according to dealers. At 0943 IST, the Nifty 50 and the Sensex were up 0.4% and 0.5%, respectively.
The rupee is seen at 76.4000-76.8000 a dollar for the rest of the day. (Pratiksha)
India Rupee: Expected range for rupee – Apr 28
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 and Richard Fargose)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
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