Informist, Thursday, Jun 30, 2022
By Pratiksha and Srijonee Bhattacharjee
NEW DELHI – The rupee gave up early gains against the dollar and ended flat today due to dollar purchases by foreign institutional investors and strength in the dollar index, dealers said.
After moving in a narrow range of 8 paise for most part of the day, the rupee ended at a record closing low of 78.9675 as against 78.9650 a dollar at previous close.
The rupee opened higher at 78.8700 a dollar because the prices of crude oil settled nearly 2% lower on Wednesday.
Oil prices fell as a rise in US fuel inventories and concerns about slower economic growth around the world offset ongoing concerns about tight crude supplies.
Crude supply data from the US Energy Information Administration on Wednesday showed a draw of 2.76 mln barrels for the week ended Jun 24, while US gasoline and distillate stockpiles climbed.
At 1600 IST, the August contract of Brent crude oil on the Intercontinental Exchange was at $116.14 a barrel against the previous close of $116.26 a bbl. It was at $117.98 a bbl on Tuesday.
Shortly after market opened, the rupee moved to 78.9550 a dollar because some foreign banks purchased dollars on behalf of foreign institutional investors, dealers said.
Meanwhile, the dollar strengthened after hawkish comments from Federal Reserve Chair Jerome Powell at the European Central Bank Forum in Sintra, Portugal on Wednesday. The Fed chair said persistent inflation poses bigger risk to the US economy than interest rate hikes slowing the economy.
At 1600 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 105.10 compared with 105.11 on Wednesday. It was at 104.51 on Tuesday.
Trade volumes in the currency market were lower than usual as traders stayed on the sidelines and refrained from placing fresh bets due to absence of significant cues, dealers said.
“The trade was dull. The usual demand (of dollars) for outflows was there but since it’s also the month-end, traders avoided taking long positions,” a dealer with a big state-owned bank said. “The market is trying to understand the RBI’s intervention strategy from here on, so there was caution.”
The rupee traded in a tight range of 78.92-78.95 a dollar for a majority of the trading session but fell to a fresh record low of 78.9825 a dollar just 10 minutes before the closing, as foreign institutional investors stepped up their dollar purchases.
However, the rupee erased almost 4 paise of its losses as some banks stepped in to sell dollars, likely on behalf of the Reserve Bank of India.
The central bank wanted to prevent the rupee from falling beyond the psychologically crucial support of 79.00 a dollar, dealers said.
FORWARDS
Premiums on dollar/rupee forwards rose after falling for three straight sessions, as banks did not expect the Reserve Bank of India to sell forward dollars given the stability of the rupee today, dealers said.
The premium on the one-year, exact-period dollar/rupee forward contract was at 231.55 paise as against 228.90 paise at Wednesday’s close. On an annualised basis, the premium was at 2.93% as against 2.88% in the previous close.
OUTLOOK
On Friday, the rupee will likely take cues from overnight movement in the dollar index and Brent crude oil prices, said dealers.
“Upside risk remain intact on the rupee until sentiments turn positive and fundamentals improve and if RBI remains absent, there is no saver for rupee,” a brokerage firm said in a note.
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 78.80-79.20 a dollar.
India Rupee: Premiums rise as RBI not seen selling forward dollars
MUMBAI – Premiums on dollar/rupee forwards rose after falling for three straight sessions, as banks did not expect the Reserve Bank of India to sell forward dollars given the stability of the rupee today, dealers said.
The premium on the one-year, exact-period dollar/rupee forward contract was at 233.09 paise as against 228.90 paise at Wednesday’s close. On an annualised basis, the premium was at 2.95% as against 2.88% in the previous close.
One of the major reasons premiums fell in the last few days was the central bank’s sales of dollars for delivery between a month to about three months. This was part of the RBI’s intervention strategy where the central bank sold dollars in the spot market and subsequently executed buy-sell swaps in the forwards market in order to neutralise the impact of their intervention on liquidity and their reserves.
With the rupee having stabilised in an eight paise range and not falling to another record low, market participants saw no reason for the RBI to intervene in the spot and the forwards markets. This is why banks bought dollars for forward delivery to take advantage of the relatively low premiums, dealers said. (Srijonee Bhattacharjee)
India Rupee: Remains in tight range in absence of significant cues
NEW DELHI – The rupee remained in a narrow range against the dollar today as traders stayed on the sidelines and avoided placing fresh bets due to lack of significant cues.
The Indian currency has moved within a range of 8 paise so far today.
Earlier today, the rupee touched the day’s low of 78.9550 a dollar as some banks purchased the greenback on behalf of foreign institutional investors, dealers said.
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 at 78.8000-79.1000 a dollar. (Pratiksha)
India Rupee – Asia FX: Most down on fall in equities; yuan gains
NEW DELHI – Most Asian currencies fell against the greenback today tracking losses in local equities and a firm US dollar.
Most Asian shares fell today after Federal Reserve Chair Jerome Powell on Wednesday said while there is a risk that interest rate increases could slow the economy too much, the bigger risk was persistent inflation.
The US currency strengthened following Powell’s hawkish comments at the European Central Bank Forum in Sintra, Portugal.
At 1145 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 105.02 compared with 105.11 on Wednesday.
The Chinese yuan rose 0.1% against the dollar after data showed a rebound in manufacturing activities in the world’s second-largest economy in June.
The official manufacturing Purchasing Managers’ Index rose to 50.2 in June from 49.6 in May. A reading above 50 indicates expansion in the manufacturing activity, while below 50 indicates contraction.
The Philippines peso rose 0.4% against the dollar after the Philippines central bank’s incoming governor Felipe Medalla said the central bank won’t shy away from larger interest-rate increases to prevent a steep peso fall from further fanning inflation. (Pratiksha)
India Rupee: Rises as crude oil prices fall, domestic shares gain
NEW DELHI – The rupee rose slightly against the dollar today as prices of crude oil settled nearly 2% lower on Wednesday, dealers said.
Crude oil prices fell as a rise in US fuel inventories and worries of slower global economic growth offset the ongoing concerns over tight crude supplies, dealers said.
A fall in crude oil prices decreases India’s import bill, which subsequently supports the sentiment for the rupee.
At 0945 IST, the August contract of Brent crude oil on the Intercontinental Exchange was at $116.34 a barrel as against the previous close of $116.26 a bbl. It was at $117.98 a bbl on Tuesday.
Moreover, a rise in domestic share indices also supported the sentiment for the Indian unit, dealers said. At 0945 IST, the Nifty 50 and the Sensex were up 0.5% and 0.6%, respectively.
“The 79 (a dollar) mark might be protected even today since the market has seen enough volatility for this week,” a dealer with a state-owned bank said.
Dealers have pegged the immediate technical support for the rupee at 79.00 a dollar.
For the rest of the day, the Indian unit is seen moving in the range of 78.7000-79.1000 a dollar. (Pratiksha)
India Rupee: Expected range for rupee – Jun 30
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)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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