Informist, Wednesday, May 31, 2023
By Kabir Sharma
MUMBAI – The rupee ended steady against the greenback today as the impact of dollar sales by banks on behalf of exporters was offset by a strong dollar globally, dealers said.
“There was selling (of dollars) for month-end, and MSCI flows were also there. We saw it (USDINR) was tracking yuan also,” a dealer with a foreign bank said.
After moving in a narrow range of 10 paise throughout the day, the rupee ended at 82.7225 a dollar against Tuesday’s close of 82.7100 a dollar. The rupee depreciated 1.1% against the dollar in May.
Today, the Indian unit opened almost flat against the dollar as market participants were cautious of placing large bets ahead of the US Congress’ decision on the debt ceiling deal later today.
While US President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy remained hopeful about the smooth passage of the agreement in the US Congress, some Republicans have expressed their opposition to the deal. “After this deal, our country will still be careening towards bankruptcy,” Ron DeSantis, Republican presidential hopeful from Florida, told Fox News.
The dollar index rose further on safe-haven demand due to uncertainty around the US debt ceiling and touched an over two-month high of 104.63 during the European session.
European Central Bank Vice President Luis de Guindos said, “Inflation data today and yesterday (Tuesday) have been positive. Victory over inflation is not there yet. But the trajectory is correct.” His comments weighed on the euro and further supported the dollar index.
At 1640 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.50 as against 104.06 on Tuesday. It was at 104.27 on Monday.
Further, a slump in the Chinese yuan also weighed on the rupee, dealers said.
The offshore yuan fell to an around six-month low, against the dollar, after data showed China’s Manufacturing Purchasing Managers’ Index hit a five-month low of 48.8 in May from 49.2 in April. This was against the market expectations of 49.4. A reading above 50 shows expansion in activity, while one below that indicates contraction.
The Indian currency tends to mirror a similar movement as the Chinese yuan, in order to maintain export competitiveness.
However, some banks sold dollars on behalf of exporters for month-end payments, which supported the rupee, dealers said.
Dealers said banks also sold dollars for foreign funds due to rebalancing of Morgan Stanley Capital International index, which further supported the rupee, dealers said.
“MSCI rejig is scheduled on May 31 and India should receive net passive foreign flow in upwards of $500 mln,” Nuvama Alternative & Quantitative Research said in a report.
MSCI removed two Adani Group companies as part of a review of global standard indices. Adani Total Gas and Adani Transmission were removed from MSCI India Index as there aren’t enough shares of these companies considered freely tradable to meet the criteria.
MSCI also removed Indus Towers from its India index. On the other hand, it added Hindustan Aeronautics, Max Healthcare Institute, and Sona BLW Precision to the MSCI India Index.
Moreover, a slump in crude oil prices also supported the rupee, dealers sad.
After dropping more than 4% on Tuesday, oil prices slumped further today, as weak economic data from China led to fears over demand from the worlds’ largest oil importer.
Oil prices also fell amid conflicting supply forecasts from key producers ahead of a meeting of the Organization of the Petroleum Exporting Countries and allies on Sunday. Market participants were conflicted about the outcome of the meeting with opposing remarks from major members. Last week, Saudi Arabian Energy Minister Abdulaziz bin Salman warned short-sellers betting that oil prices will fall, to “watch out”, signalling that the organisation may cut output.
At 1640 IST, the July contract of Brent crude oil on the Intercontinental Exchange was at $71.77 a barrel as against $73.54 a bbl on Tuesday. It was $77.07 a bbl on Monday.
Meanwhile, comments from Russia’s Deputy Prime Minister Alexander Novak indicated that the world’s third-largest oil producer is possibly going to keep the output unchanged.
FORWARDS
The premium on the one-year dollar/rupee forward contract erased all earlier gains and settled lower because banks and exporters sold dollars for forward delivery, noting a rise in levels in early trade, dealers said.
“There was some receiving around 1.8%. Exporters are finding this level lucrative after the sharp fall in levels before,” a dealer with a private bank said. “For now, 1.65% is a good resistance.”
Earlier in the day, premiums on the one-year dollar/rupee forward contract jumped to a high of 1.8% tracking a fall in US Treasury yields, dealers said.
US Treasury yields fell amid uncertainty over the passage of the bipartisan US debt ceiling deal in Congress.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
The premium on the one-year dollar/rupee contract was 145.21 paise, against 147.73 paise on Tuesday. On an annualised basis, the premium was at 1.75%, against the previous close of 1.77%.
OUTLOOK
On Thursday, the rupee will take cues from overnight movement in the dollar index and crude oil prices, dealers said.
“USDINR will remain in a range of 82.50-83.00 as a number of data releases from Europe and the US would make it volatile. Manufacturing PMI from India, Europe, the UK and the US, Eurozone CPI, US challenger job cuts, non-farm employment, initial jobless claims, and crude oil inventories are some of the main data releases,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors LLP.
Market participants also await India’s GDP data, due later today.
The Reserve Bank of India may sell the greenback to prevent the rupee from falling beyond the psychologically crucial level of 83.00 a dollar, dealers said.
Dealers pegged the immediate key technical support for the rupee at 82.80 a dollar. During the day, the rupee is seen in a range of 82.50-83.00 a dollar.
India Rupee – World FX: Dlr rises post US consumer confidence data
NEW DELHI – The dollar rose further against its major peers across the globe after data showed less-than-expected fall in consumer confidence in the US.
Data from the Conference Board showed consumer confidence index dropped to 102.3 in May from 103.7 in April, against Reuters’ poll projection of 99. The figure is also above 101.3 reported earlier. However, consumer confidence is at the lowest level since November 2022.
The consumer confidence index reflects citizens’ perspective about a country’s financial situation. If consumers are optimistic, they are likely to spend more in near future, subsequently boosting the economy. In case they are pessimistic, they will cut down their spending.
Moreover, the greenback gained support from the uncertainty surrounding the passage of the US debt ceiling agreement in Congress as some Republicans expressed their opposition to the deal.
The 99-page bill is scheduled to be heard by the US House Rules Committee before voting takes place at midnight today in the Republican-controlled House and the Democratic-led Senate.
At 1457 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.62 as against 104.1 on Tuesday. It was at 104.27 on Monday.
The Australian dollar fell 0.6% against the US unit, tracking a sharp decline on offshore Chinese yuan. China accounts for a third of Australia’s international trade.
The offshore yuan fell to around six-month low, against the dollar after data showed China’s Manufacturing Purchasing Managers’ Index hit a five-month low of 48.8 in May from 49.2 in April. This was against the market expectations of 49.4. A reading above 50 shows expansion in activity, while one below that indicates contraction.
The euro and pound sterling were 0.7% and 0.5% lower against the US currency respectively. (Ananya Chaudhuri)
India Rupee: In thin band; strong dlr offsets exporters’ dlr sales
India Rupee: In thin band; strong greenback offsets exporters’ dollar sales
MUMBAI – The rupee remained in a narrow range against the dollar as the impact of dollar sales by exporters was offset by a strong greenback globally, dealers said.
“There are exporters (selling dollars) since it’s the month-end. Some inflows are also there from MSCI rebalancing,” said a dealer with a big state-owned bank.
Dealers said exporters were selling dollars to make month-end payments.
Some banks sold dollars on behalf of foreign funds due to rebalancing of Morgan Stanley Capital International index, which also supported the rupee, dealers said.
“MSCI rejig is scheduled on May 31, 2023 and India should receive net passive foreign flow in upwards of $500 million,” Nuvama Alternative & Quantitative Research said in a report.
MSCI removed two Adani Group companies as part of a review of global standard indices. Adani Total Gas and Adani Transmission were removed from MSCI India Index as there aren’t enough shares of these companies considered freely tradable to meet the criteria.
MSCI also removed Indus Towers from its India index. On the other hand, MSCI added Hindustan Aeronautics, Max Healthcare Institute, and Sona BLW Precision to the MSCI India Index.
However, rise of the dollar to a two-week high against other major currencies put pressure on the rupee, dealers said.
The rupee was also weighed down by fall of offshore Chinese yuan to its lowest level in six months against the dollar, after data showed that China’s factory activity contracted more than expected in May as demand weakened.
China’s official manufacturing purchasing managers’ index fell to 48.8 in May from 49.2 in April, while the non-manufacturing gauge fell to 54.5 from 56.4.
Market participants are now waiting for India’s GDP data, due later today, and the US jobs data that is due on Friday.
Dealers peg immediate technical support for the rupee at 82.80 a dollar. During the day, the unit is seen moving in band of 82.50-83.00 a dollar. (Kabir Sharma)
India Rupee: Steady as 4% fall in crude prices offset by firm dollar
MUMBAI – The rupee was steady against the dollar as the impact of a fall in crude oil prices was offset by a strong dollar globally, dealers said.
“There is some optimism on the debt ceiling deal but we are still playing safe,” a dealer with a state-owned bank said.
The greenback rose against major currencies on the back of safe-haven demand due to uncertainty around passage of the US debt ceiling deal in the Congress.
While US President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy remained hopeful about the smooth passage of the deal in Congress, some Republicans have expressed their opposition to the deal. “After this deal, our country will still be careening towards bankruptcy,” Ron DeSantis, Republican presidential hopeful from Florida, told Fox News.
At 0954 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.33 as against 104.06 on Tuesday. It was at 104.27 on Monday.
Oil prices fell over 4% on Tuesday due to uncertainty over passage of the debt ceiling agreement. Conflicting supply forecasts from key producers ahead of a meeting of the Organization of the Petroleum Exporting Countries and allies on Jun 4, also weighed on the commodity, dealers said.
Some dealers said banks’ dollar sales likely on behalf of foreign fund inflows due to rebalancing of Morgan Stanley Capital International index may support the rupee.
Dealers pegged immediate technical support for the rupee at 82.80 a dollar. During the day, the unit is seen at 82.50-83.00 a dollar. (Kabir Sharma)
India Rupee – Asia FX: Most dn as dlr firm before US debt deal vote
MUMBAI – Most Asian currencies were down against the dollar as the greenback remained strong against major currencies on safe-haven demand due to uncertainty around passage of the US debt ceiling deal in the Congress.
While US President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy remained hopeful about the smooth passage of the deal in Congress, some Republicans have expressed their opposition to the deal. “After this deal, our country will still be careening towards bankruptcy,” Ron DeSantis, Republican presidential hopeful from Florida, told Fox News.
The US House Rules Committee is scheduled to hear the 99-page bill before voting takes place on the same later today in the Republican-controlled House and the Democratic-led Senate.
The Indonesian rupiah, the Malaysian ringgit and the Thai baht were down 0.2%, 0.3%, and 0.2%, respectively.
Bucking the trend, the Philipines peso was up 0.2% against the dollar. (Kabir Sharma)
India Rupee: Expected range for rupee – May 31
MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecasted by leading banks and brokerages in an Informist poll:
(Kabir Sharma)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Kabir Sharma
Edited by Tanima Banerjee
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