Informist, Monday, May 9, 2022
By Srijonee Bhattacharjee and Pratiksha
MUMBAI/NEW DELHI – The rupee saw record low closing levels against the US dollar today, taking cues from most its Asian peers, because of broad based strength in the US unit, dealers said.
The Indian unit fell to a record low of 77.5250 a dollar during the day but found support in sales of the greenback by the Reserve Bank of India in the spot market, the domestic futures market, and the offshore non-deliverable forwards market, dealers said.
The rupee closed 0.7% lower today at 77.4650 a dollar.
At 1640 IST, the dollar index was at a near two-decade high of 103.78, against 103.66 on Friday, due to a sharp rise in US Treasury yields and as investors rushed to the safe haven currency due to concerns over global growth amid lockdowns in China, the Russia-Ukraine conflict, and higher interest rates.
The dollar index has been gaining for five weeks and touched an almost 20-year high last week after the US Fed hiked its benchmark funds rate by 50 basis points, and strong jobs data reinforced bets on further big hikes.
The rupee opened at a record low of 77.1250 a dollar, down with a gap of 21 paise today, due to strength in the dollar, and after it crossed 77.2000 a dollar, stop-losses of many banks were triggered, exacerbating the Indian unit’s fall, dealers said.
“This is part of the overall global risk-off sentiment that’s happening, so we’re seeing this across emerging markets. India will get a little more impacted because oil prices are pretty high,” said Ashhish Vaidya, managing director and country treasurer, DBS Bank India Ltd.
“The risk sentiment across the world has taken a beating, and that coupled with the fact that oil is fairly elevated is the reason why the rupee is here.”
Dollar purchases by importers of oil weighed on the Indian unit through the day and despite sales of dollars by the RBI and even exporters, the Indian unit only weakened through the day.
“There was oil buying which was as heavy as every day,” a dealer with a state-owned bank said. “Today however, the trouble is that since the central bank has already spent a considerable portion of its reserves on supporting the rupee, the market has started to feel that it won’t defend the rupee very strongly and that is why people are panicking.”
Banking sources told Informist today that the RBI was aggressively intervening across foreign exchange markets, but with specific focus on the offshore non-deliverable forward markets where it is unhappy with the positions taken by some Indian banks.
The source also said that, in what may be an unprecedented defence of a particular level of the Indian currency, the central bank is taking steps to prevent the rupee from falling below 77.50 against the dollar.
The RBI traditionally states that it is not looking to target any specific level of the currency, and only intervenes to tackle undue volatility.
While the rupee may have been “protected” from sustainably falling beyond the crucial support mark today, dealers fear the currency could fall to 78 a dollar in the coming days if the central bank does not support it in an unyielding manner in the spot market. Even today, the central bank was said to have sold the greenback more heavily in the futures market than in the spot market.
Dollar sales by exporters at these unprecedented low levels for the rupee also supported the Indian unit right from the start of trade.
FORWARDS
Premiums on dollar/rupee forward contracts fell because exporters sold the greenback for forward delivery across tenures to lock in contracts at high levels, dealers said.
The premium on the one-year, exact-period dollar/rupee contract was at 321.32 paise, against 324.93 paise on Friday. On an annualised basis, the premium was at 4.15%, against the previous close of 4.22%.
For exporters, even spot rupee levels were attractive to book forward contracts as the rupee fell to a record low of 77.5250 a dollar, dealers said.
Premiums had risen sharply last week as the interest rate differential between India and the US adjusted after the rate hikes made by central banks of both countries. Premiums on swaps/forward contracts of any currency pair mirror the differential in interest rates between the two countries.
Today too, premiums were off the day’s lows as once exporters stopped selling the greenback for forward delivery, banks resumed to reverse short forward dollar positions placed earlier.
Dealers said banks were rolling back some short positions placed earlier due to expectations that the RBI would continue to raise interest rates.
“It is just that people had built receive positions very heavily when the RBI wasn’t reacting to the US rate hikes,” a dealer with a state-owned bank said. “Now that the RBI has started hiking everybody is covering those positions even now.”
OUTLOOK
On Tuesday, the rupee will take cues from overnight movement in the dollar index, dealers said.
There is fear that it may open below the 77.50-a-dollar mark unless the central bank intervenes heavily in the non-deliverable forwards market to curb speculation, before trade begins on the domestic market.
The local unit will also take cues from movement in Brent crude oil prices.
Dealers have now pegged strong key technical support at 78.00 a dollar.
During the day, the rupee is seen in the range of 77.00-78.00 a dollar.
India Rupee: Premiums fall as exporters sell fwd dlrs at high levels
MUMBAI – Premiums on dollar/rupee forward contracts fell because exporters sold the greenback for forward delivery across tenures to lock in contracts at high levels, dealers said.
The premium on the one-year, exact-period dollar/rupee contract was at 322.09 paise, against 324.93 paise on Friday. On an annualised basis, the premium was at 4.16%, against the previous close of 4.22%.
For exporters, even spot rupee levels were attractive to book forward contracts as the rupee fell to a record low of 77.5250 a dollar, dealers said.
Premiums had risen sharply last week as the interest rate differential between India and US adjusted after the rate hikes made by central banks of both countries. Premiums on swaps/forward contracts of any currency pair mirror the differential in interest rate between the two countries.
After the massive rise, premiums are at attractive levels for traders to book profits and for exporters to book contracts. (Srijonee Bhattacharjee)
India Rupee: Fall limited by PSU banks’ dollar sales likely for RBI
MUMBAI – Dollar sales by a few state-owned banks, likely for the Reserve Bank of India, around 77.50 a dollar limited further fall in the rupee, dealers said.
After falling to a record low of 77.5250 a dollar, the rupee pared some of its losses also due to dollar sales by exporters, dealers said.
According to dealers, the central bank’s intervention in the currency futures market was heavier than that in the spot market.
The rupee, along with most its Asian peers, has been falling continuously since Friday due to the broad strength in the dollar index.
At 1405 IST, the dollar index was at a two-decade high of 104.03 as against 103.66 on Friday. (Srijonee Bhattacharjee)
India Rupee – Asia FX: Down as dollar index at a 20-year high
NEW DELHI – Asian currencies fell against the greenback because the dollar index remained at a two-decade high today.
The index gained due to a sharp rise in the US Treasury yields and investors opted for the haven currency because of lockdowns in China, the Russia-Ukraine conflict, and concern about higher interest rates.
The dollar index, which measures the strength in the US currency against a basket of six major currencies, touched 104.11 earlier today, the highest since December 2002.
At 1153 IST, the dollar index was at 104.03, against 103.66 on Friday. It was at 103.75 on Thursday.
A fall in equity indices in the region also weighed on Asian currencies.
The Thai baht fell the most and was down 0.8% against the greenback today. The Indonesian rupiah ad Taiwan dollar fell 0.7% and 0.4% respectively, against the US unit. (Pratiksha)
India Rupee: Hits record low as dollar index at 20-year high
India Rupee: Hits record low as dollar index at 20-year high
NEW DELHI – The rupee fell to an all-time low against the dollar today because the dollar index remained elevated at a two-decade high, dealers said.
The index gained due to a sharp rise in the US Treasury yields and investors’ tilt towards the safe haven currency because of lockdowns in China, the Russia-Ukraine conflict, and concern about higher rates, they added.
The dollar index, which measures the strength in the US currency against a basket of six major currencies, hit a fresh 20-year high on Friday as traders assessed the global central banks’ policy actions and were also worried about rising recession risks.
At 0915 IST, the dollar index was at 104.01, against 103.66 on Friday. It was at 103.75 on Thursday.
Today, the Indian rupee opened at an all-time low of 77.1250 a dollar.
Dealers are of the view that banks may step in to sell dollars on behalf of the Reserve Bank of India, which is expected to protect the rupee from depreciating below the psychologically crucial level of 77.35-77.40 a dollar.
Dealers have now pegged key technical support for the rupee at 77.40 a dollar.
For the rest of the day, the Indian unit is seen at 76.7000-77.4000 a dollar. (Pratiksha)
India Rupee: Expected range for rupee – May 9
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 Avishek Dutta
Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to [email protected]
© Informist Media Pvt. Ltd. 2022. All rights reserved.
Source: Cogencis