Informist, Wednesday, Jun 29, 2022
By Pratiksha and Srijonee Bhattacharjee
NEW DELHI – Despite persistent dollar purchases by foreign institutional investors and oil marketing companies, the rupee managed to keep itself from breaching the 79-a-dollar mark due to sales of the greenback, likely by the Reserve Bank of India, dealers said.
Today, the rupee closed 0.3% lower at a record closing low of 78.9650 a dollar. The Indian unit restricted itself to a range of 13 paise today.
The Indian currency started the day at a record opening low of 78.8500 a dollar as prices of crude oil settled higher on Tuesday, dealers said.
Crude prices remained elevated as it seemed unlikely that major producers–Saudi Arabia and the United Arab Emirates—could boost output significantly even as the Group of Seven nations agreed to explore ways to cap the price of Russian oil.
A rise in crude oil prices increases India’s import bill, which subsequently dampens sentiment for the rupee.
At 1630 IST, the August contract of Brent crude oil on the Intercontinental Exchange was at $118.57 a barrel against the previous close of $117.98 a bbl. It was at $115.09 a bbl on Monday.
Just an hour into the trade, the rupee fell to an all-time low of 78.9800 a dollar, as some overseas banks persistently purchased dollars on behalf of foreign institutional investors, dealers said.
Dealers said state-owned banks continuously bought the US unit on behalf of oil marketing companies, which also weighed on the Indian unit.
Meanwhile, as some banks stepped in to sell the greenback, likely on behalf of the RBI, the rupee retraced its path and moved to 78.8600 a dollar, dealers said.
However, as foreign institutional investors stepped up their dollar purchases, the rupee returned to the 78.9700 a dollar level, dealers said.
So far this year, foreign institutional investors have pulled out around $29.71 bln from Indian equity markets.
“There was a lot of (dollar) demand as usual, but since the supply (of dollars) was very limited these levels were bound to be seen,” a dealer with a state-owned bank said. “Exporters are also not selling at these levels since they are expecting the rupee to touch the 80-81 (a dollar) level soon.”
The rupee traded in a tight range of 78.93-78.97 a dollar during the final four hours of the trading session, as losses from dollar purchases by oil marketing companies and foreign institutional investors were restricted because of persistent sales of dollar on behalf of the RBI, dealers said.
According to dealers, the central bank wanted to prevent the rupee from falling beyond the psychologically crucial support of 79.00 a dollar.
“The RBI very strategically prevented the 79 (a dollar) mark today, but I don’t think that will stay for too long. In the next few days we will touch the 79 level since the market is just RBI-driven now, with no other supporting factors in picture,” a dealer with a big state-owned bank said.
Meanwhile, the dollar edged higher due to demand for the safe haven US asset, as stocks declined globally amid mounting risks of a recession ahead. This also weighed on the local unit, dealers said.
At 1630 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 104.50 compared with 104.51 on Tuesday. It was at 103.94 on Monday.
Moreover, domestic share indices stayed in the red for a majority of the trade, which dampened sentiment for the Indian unit, dealers said. Today, both the Nifty 50 and the Sensex ended 0.3% lower, each.
FORWARDS
Premiums on dollar/rupee forwards fell as banks and exporters continued to sell dollars for delivery later in order to cash in on the sharp fall in the rupee’s exchange rate, dealers said.
The premium on the one-year, exact-period dollar/rupee forward contract was at 228.90 paise, against 232.50 paise at close on Tuesday. On an annualised basis, the premium was at 2.88%, as against 2.95% at the previous close.
The premiums that participants receive on selling dollars for forward delivery also have the rupee’s over-the-counter exchange rate as a component. A rise in the dollar/rupee exchange rate makes the premium larger, making sales of forward dollars attractive when the rupee falls.
OUTLOOK
On Thursday, the rupee will likely take cues from overnight movement in the dollar index and Brent crude oil prices, said dealers.
“Overall, a short-term range for the (USDINR) pair would be 77.90 to 79.50 with an upside bias,” a brokerage firm said in a note.
Market participants are now waiting for the European Central Bank President Christine Lagarde, Federal Reserve Chairman Jerome Powell and Bank of England Governor Andrew Bailey’s speech later today for further cues.
Investors also await the release of the crude supply data from the US Energy Information Administration later today.
Dealers are of the view that the RBI will continue to intervene through dollar sales to protect the rupee from depreciating sharply against the dollar.
Dealers have pegged immediate key technical support for the rupee at 79.00 a dollar and long term support at 79.50 a dollar.
During the day, the rupee is seen in the range of 78.50-79.00 a dollar.
India Rupee – World FX: Sterling down; BoE Bailey’s speech eyed
MUMBAI – The pound sterling was near one-week low against the dollar today as worries over slowing economic growth and political risks lingered after Scotland proposed an Independence referendum.
Political risk has risen after Scottish First Minister Nicola Sturgeon on Tuesday proposed another Independence referendum for October 2023. UK Prime Minister Boris Johnson and his Conservative Party, which is in Opposition in Scotland, are strongly opposing a referendum.
Investors will also pay close attention to remarks from Bank of England governor Andrew Bailey for any hints about plans to hike interest rates at its August meeting. Bailey is due to speak at a forum of central bankers in Sintra, Portugal. (Richard Fargose)
India Rupee: Premiums dn; exporters sell fwd dlr as rupee at fresh low
MUMBAI – Premiums on dollar/rupee forwards fell as banks and exporters continued to sell dollars for delivery later in order to cash in on the sharp fall in the rupee’s exchange rate, dealers said.
The premium on the one-year, exact-period dollar/rupee forward contract was at 228.40 paise, against 232.50 paise at close on Tuesday. On an annualised basis, the premium was at 2.88%, as against 2.95% at the previous close.
The premiums that participants receive on selling dollars for forward delivery also have the rupee’s over-the-counter exchange rate as a component. A rise in the dollar/rupee exchange rate makes the premium larger, making sales of forward dollars attractive when the rupee falls.
The rupee slid to a fresh record low of 78.9775 a dollar today while the Reserve Bank of India sold dollars to break the speed of the fall. The central bank was also said to have sold dollars for delivery in the next two-three months as a part of a buy-sell swap to neutralise the impact of it dollar sales on liquidity as well as its dollar reserves.
The central bank’s intervention in near-month forwards weighed on premiums of these contracts and was also transmitted to premiums on contracts with longer maturity tenure. (Srijonee Bhattacharjee)
India Rupee: Remains sharply down on dollar buys for FIIs, oil cos
NEW DELHI – The rupee remained sharply down against the dollar as foreign banks persistently purchased the greenback on behalf of foreign institutional investors.
Dealers said state-owned banks, too, continuously bought the US unit on behalf of oil marketing companies, which also weighed on the Indian unit.
The prices of crude oil were above $117-per-barrel as major producers–Saudi Arabia and the United Arab Emirates–looked unlikely to be able to boost output significantly and the Group of Seven nations agreed to explore ways to cap the price of Russian oil.
At 1315 IST, the August contract of Brent crude oil on the Intercontinental Exchange was at $117.37 a barrel against the previous close of $117.98 a bbl.
However, losses in the Indian currency were restricted as some banks stepped in to sell the greenback, likely on behalf of the Reserve Bank of India, dealers said.
According to dealers, the central bank wanted to prevent the rupee from falling beyond the psychologically crucial support of 79.00 a dollar.
Earlier today, the Indian currency fell to a record low of 78.9775 a dollar.
Dealers have pegged immediate technical support for the rupee at 79.00 a dollar.
For the rest of the day, the Indian currency is seen moving within the range of 78.7000-79.2000 a dollar. (Pratiksha)
India Rupee – Asia FX: Down as dollar index, rise in crude prices weigh
NEW DELHI – Most Asian currencies fell against the US dollar today as a firm dollar index and higher crude oil prices weighed on investor sentiment.
The dollar index remained firm as the euro slipped on Tuesday after European Central Bank President Christine Lagarde offered no fresh insight into the central bank’s policy outlook.
At 1100 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 104.52 compared with 104.51 on Tuesday. It was at 103.94 on Monday.
Crude oil prices topped $117 a barrel as major producers–Saudi Arabia and the United Arab Emirates–looked unlikely to be able to boost output significantly and the Group of Seven nations agreed to explore ways to cap the price of Russian oil.
A fall in equities in the region also weighed on investor sentiment.
The South Korean won fell 0.8%, the most among its Asian peers, as the country’s consumer sentiment index fell to 96.4 for June, down 6.2 points from May’s print.
Bucking the trend, the Thai baht rose 0.4% against the dollar after Arkhom Termpittayapaisith, the country’s finance minister, said on Tuesday that the Thailand economy is expected to grow about 3.5% this year, driven by stronger tourism and exports. (Pratiksha)
India Rupee: Hits record low on dlr buys for FIIs, high crude prices
NEW DELHI – The rupee fell to an all-time low against the greenback today as some banks persistently purchased dollars on behalf of foreign institutional investors, dealers said.
The Indian currency began the day at a record opening low of 78.8500 a dollar and then fell further to a fresh all-time low of 78.9675 a dollar.
Also, prices of crude oil rose overnight as major producers–Saudi Arabia and the United Arab Emirates–looked unlikely to be able to boost output significantly and the Group of Seven nations agreed to explore ways to cap the price of Russian oil.
A rise in crude oil prices increases India’s import bill, which subsequently dampens sentiment for the rupee.
At 0945 IST, the August contract of Brent crude oil on the Intercontinental Exchange was at $117.07 a barrel against the previous close of $117.98 a bbl. It was at $115.09 a bbl on Monday.
Losses in domestic equity indices also weighed on the rupee, dealers said. At 0945 IST, the Nifty 50 and the Sensex were down 0.7% and 0.8%, respectively.
“After a sharp rally yesterday (Tuesday), USD-INR could face strong intervention from the central bank,” a dealer with a brokerage said. “Therefore, we may get some intra-day pullbacks, which can be a buying opportunity for importers.”
For the rest of the day, the Indian unit is seen moving in the range of 78.7000-79.2000 a dollar. (Pratiksha)
India Rupee: Expected range for rupee – Jun 29
NEW DELHI – 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 Tanima Banerjee
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