Informist, Friday, Sep 30, 2022
By Pratiksha
NEW DELHI – The rupee ended sharply higher against the greenback today after reports said the Reserve Bank of India is pushing state-owned oil marketing companies to reduce dollar buying in the spot market to contain a sharp fall in the Indian currency, dealers said.
On a day when the spotlight event of the day–the RBI monetary policy outcome–turned out to be a lacklustre affair for the currency market, the rupee ended a whopping 52 paise higher, due to a report which said that the central bank was encouraging state refiners to cut spot dollar buying.
Today, the rupee settled 0.6% higher at 81.3400 a dollar.
The rupee started the day 24 paise stronger at 81.6200 a dollar as India’s current account deficit widened to $23.9 bln for Apr-Jun, which was lower than market expectations, dealers said.
India’s current account deficit widened to the highest level since Oct-Dec 2012 on account of a rise in merchandise trade deficit and higher net outgo on investment income payments. The current account deficit for Apr-Jun was 2.8% of the GDP as against 1.5% a quarter ago.
However, the Indian unit was largely unchanged after the rate-setting panel raised interest rate by 50 basis points to 5.90%, as it was thought to be on expected lines, dealers said.
“The RBI decision was more or less discounted, so the kind of reaction we saw in the market was no surprise,” a dealer with a brokerage firm said. “The real movement started during the second half of the trade after the report came in, but before that it was all lacklustre movement.”
Governor Shaktikanta Das said the Monetary Policy Committee decided to remain focused on withdrawal of accommodation to ensure inflation remains within the target going forward, while supporting growth.
The committee scaled down its forecast for GDP growth in 2022-23 (Apr-Mar) by 20 bps to 7.0% from 7.2% project in August.
The domestic unit then traded in a narrow range of 81.50-81.65 a dollar, before ascending to the day’s high of 81.1525 a dollar as soon as the reports surfaced that the central bank is pushing state-owned oil marketing companies to reduce dollar buying in the spot market to contain a sharp fall in the Indian currency.
“I think the RBI will come up with more measures in a matter of time and this is just one step out of the probably four five steps in their mind,” said Ritesh Bhansali, vice-president, Mecklai Financial Services Ltd. “However, rupee has always been a game of sentiment governed by the global market. This may work like a short term booster for the rupee, but eventually it will test the 82 level.”
News agency Reuters reported today that the RBI has ensured $9 bln has been made available at overseas branches of some Indian banks for the country’s three state-owned oil marketing companies to tap, and the funds are available at market rates.
India’s crude oil purchases account for about 30% of the overall imports.
However, shortly after banks rushed to purchase the greenback on behalf of importers, who wanted to take advantage of relatively lower dollar/rupee levels, after which the rupee moved to 81.41 level.
The rupee also found support from a fall in the dollar index, dealers said.
The dollar index, which measures strength in the greenback against six major currencies, fell after the pound sterling reversed its losses as investors analysed the Bank of England’s intervention in the bond market.
On Thursday, the Bank of England bought 1.4 bln pound sterling of UK government bonds with maturities of over 20 years. This was the second day of the programme designed to stabilise the market.
At 1725 IST, the dollar index was at 112.59 compared with 112.25 on Thursday. It was at 112.60 on Wednesday.
A surge in domestic share indices also supported sentiment for the Indian unit, dealers said. Today, both the Nifty 50 and the Sensex ended 1.6% and 1.8% higher, respectively.
FORWARDS
The premiums on dollar/rupee forwards ended largely steady today as the Reserve Bank of India’s Monetary Policy Committee raised the policy repo rate by 50 bps to 5.90%, which was in line with market expectations, dealers said.
The premium on the one-year, exact-period dollar/rupee forward contract was at 227.83 paise as against 230.07 paise at close on Thursday. On an annualised basis, the premium was at 2.80% as against 2.81% at close of the previous session.
Premiums on forwards of a currency pair are reflective of the interest rate differential between two countries. Rise in RBI’s policy rates ensure that the spread will not narrow further in the coming days, dealers said.
An Informist poll showed that the rate-setting panel is seen raising the policy repo rate by 50 bps to bring down domestic inflation, and to protect the domestic currency from weakening further.
OUTLOOK
On Monday, the rupee will take cues from overnight movement in the dollar index and crude oil prices, dealers said.
“Rupee to remain on a depreciating path, considering the global tailwinds and risk off. RBI MPC is mostly a non-event for FX market and it won’t change the underlying fundamentals. Rupee is on course to 83 level,” a dealer with a state-owned bank said.
Dealers expect the RBI to continue to intervene through dollar sales to protect the rupee from depreciating sharply against the greenback.
Dealers see long term technical support for the Indian currency at 82.00 a dollar.
During the day, the rupee is seen moving within a range of 81.20-81.70 a dollar.
India Rupee: Surges on report RBI pushing oil cos to cut spot dlr buy
MUMBAI – The rupee surged against the greenback today after reports said the Reserve Bank of India has is pushing state-owned oil marketing companies to reduce dollar buying in the spot market to contain a sharp fall in the Indian currency, dealers said.
News agency Reuters reported that the RBI has ensured $9 bln has been made available at overseas branches of some Indian banks for the country’s three state-owned oil marketing companies to tap, and the funds are available at market rates.
“This was expected for long time, now dollar demand in spot market will drop sharply,” said a dealer with brokerage firm.
India’s crude oil purchases account for about 30% of the overall imports.
For the rest of the day, the Indian unit is seen moving in the range of 81.000-81.5000 a dollar. (Richard Fargose)
Informist, Friday, Sep 30, 2022
India Rupee: Remains sharply up after RBI hikes repo rate by 50 bps
NEW DELHI – The rupee remained sharply up against the greenback after the Reserve Bank of India hiked the policy repo rate by 50 basis points to 5.90%, in line with the market’s expectation, dealers said.
Governor Shaktikanta Das said the Monetary Policy Committee decided to remain focused on withdrawal of accommodation to ensure inflation remains within the target going forward, while supporting growth.
The committee has scaled down its forecast for GDP growth in 2022-23 (Apr-Mar) by 20 bps to 7.0% from 7.2% project in August.
“The policy decision was no surprise to the market. The pre-policy and post policy levels are almost the same,” a dealer with a private bank said. “From hereon, the 81.25 level is seen as the resistance level for rupee.”
Domestic equity indices rose sharply after the MPC’s decision, which provided support to the Indian unit, dealers said. At 1110 IST, the Nifty 50 and the Sensex were up 0.8% each.
For the rest of the day, the Indian unit is seen moving in the range of 81.3000-81.7000 a dollar. (Pratiksha)
India Rupee: Rises as India Apr-Jun CAD below view, dlr index down
NEW DELHI – The rupee rose sharply against the greenback today as India’s current account deficit widened to $23.9 bln for Apr-Jun, which was lower than market expectations, dealers said.
“Some modest greenshot came after India reported that its current account deficit widened to the highest in a decade in the June quarter to $23.9 bln–or 2.8% of the GDP–versus the estimated $30.8 bln, which certainly helped the rupee to open higher by at least a quarter per cent,” said Arnob Biswas, head, FX research at SMC Global Securities Ltd.
India’s current account deficit widened to the highest level since Oct-Dec 2012 on account of a rise in merchandise trade deficit and higher net outgo on investment income payments. The current account deficit for Apr-Jun was 2.8% of the GDP as against 1.5% a quarter ago.
Moreover, the dollar index, which measures strength in the greenback against six major currencies, fell after the pound sterling reversed its losses as investors analysed the Bank of England’s intervention in the bond market. This further supported the Indian unit, dealers said.
On Thursday, Bank of England bought 1.4 bln pound sterling of UK government bonds with maturities of more than 20 years. This was the second day of the programme designed to stabilise the market.
At 0930 IST, the dollar index was at 112.15 compared with 112.25 on Thursday. It was at 112.60 on Wednesday.
Meanwhile, traders remain cautious ahead of the Reserve Bank of India’s monetary policy statement, scheduled at 1000 IST today.
According to an Informist poll, the rate-setting panel is seen raising the policy repo rate by 50 basis points to bring down domestic inflation, as well as to protect the domestic currency from weakening further, dealers said.
“The short- to medium-term outlook for the rupee remains negative because the global dollar demand will continue to grow as we see more problems and limited firepower with the RBI,” a brokerage firm said in a note. “Any pullback near 80.80-81.20 amid the policy announcement, global developments or RBI intervention shall be short-lived and a temporary.”
For the rest of the day, the Indian unit is seen moving in the range of 81.3000-81.7000 a dollar. (Pratiksha)
India Rupee: Expected range for rupee – Sep 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 Vidhi Verma
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