Informist, Friday, Jun 2, 2023
By Kabir Sharma
MUMBAI – The rupee ended higher against the dollar today as the greenback weakened globally and as banks sold the US unit on behalf of foreign portfolio investors, dealers said.
“It (USD-INR) was mostly tracking weak dollar, some inflows were also there of around $500 mln,” a dealer with a foreign bank said.
After moving in a narrow range of 11 paise throughout the day, the rupee ended at 82.3050 against the close of 82.4050 a dollar on Thursday.
The rupee had opened higher against the US currency because the dollar index fell to its lowest level in over a week after comments from Federal Reserve officials and US economic data eased fear of another rate hike in the world’s largest economy.
The dollar slumped after data released on Thursday showed US manufacturing activity contracted for seven straight months. Data from the Institute for Supply Management showed that manufacturing Purchasing Managers’ Index fell to 46.9 in May from 47.1 in April, against a Reuters poll of 47.0.
The dollar also came under pressure after the US Federal Reserve Governor and vice-chair nominee Philip Jefferson and Fed Philadelphia President Patrick Harker expressed their bias for skipping a rate hike in the policy review meeting next week. “Skipping a rate hike at a coming meeting would allow the (Federal Open Market) Committee to see more data before making decisions about the extent of additional policy firming,” Jefferson said.
Some banks sold the dollar for foreign portfolio investment into domestic equities, which also supported the rupee, dealers said.
Moreover, the US Senate voted to pass a bill that would suspend the debt ceiling for two years, boosting risk sentiment for emerging currencies and supporting the rupee, dealers said. The bill, which was passed with a majority of 63 to 36 votes, averted an unprecedented default by the world’s largest economy. The bill needed 60 votes to pass.
Some banks, however, bought the US unit for oil marketing companies, limiting the gains for the rupee, dealers said.
Oil importers were buying the commodity fearing a rise in prices after a meeting of the Organization of the Petroleum Exporting Countries and allies, including Russia, due on Sunday. Market participants fear the cartel may decide to cut production, boosting crude prices. However, they limited their purchases on caution ahead of the Fed rate hike decision that may dampen demand.
Volumes in the currency market were also subdued as participants are awaiting the US non-farm payroll report, due later today, for further cues on the Fed’s rate hike path, dealers said.
FORWARDS
The premium on the one-year dollar/rupee forward contract rose tracking a fall in US Treasury yields on Thursday, dealers said. US Treasury yields fell as data showed contraction in manufacturing activity and lower labour costs in the US, leading to expectations that the Federal Reserve will keep policy rates unchanged at its upcoming meeting.
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 146.73 paise, against 143.92 paise on Thursday. On an annualised basis, the premium was at 1.77%, against the previous close of 1.74%.
OUTLOOK
On Monday, the rupee will take cues from movement in the dollar index and crude oil prices over the weekend, dealers said.
“Indian rupee will be in the range of 82.10 to 82.60 on Monday as inflows dominate and oil companies are not heavy buyers at the moment. Rupee should drift slowly towards 82 levels as dollar index falls and market awaits for a possibly dovish FOMC (Federal Open Market Committee),” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors LLP.
Dealers pegged the immediate key technical resistance for the rupee at 82.20 a dollar. During the day, the rupee is seen in a range of 82.20-82.60 a dollar.
India Rupee – World FX: Australian dlr rises on wage growth; dlr down
NEW DELHI – The Australian dollar rose 0.9% against the dollar after an increase in minimum wage sparked fears of rise in inflation. A rise in inflation in the country could ultimately prompt the Reserve Bank of Australia to hike interest rates further from current cash rate of 3.85%.
Today, Fair Work Commission, an independent entity in Australia, decided 5.75% pay hike for workers on awards with pays linked to minimum wage movements. The commission also reclassified the national minimum wage, which extended the pay rise to 8.6% for lowest paid workers who constitute 0.7% of total Australia’s workforce.
The Reserve Bank of Australia’s next policy review meeting is on Jun 6.
Meanwhile, the dollar index weakened to near one-week low after data showed Thursday US manufacturing activity remained contracted for seven straight months. Data from the Institute for Supply Management showed that manufacturing Purchasing Managers’ Index fell to 46.9 in May from 47.1 in April, against a Reuters’ poll projection of 47.0. This is the longest contraction seen since the Great Recession.
The dollar lost further ground after the US Federal Reserve Governor and vice-chair nominee Philip Jefferson and Fed Philadelphia President Patrick Harker expressed their bias for skipping a rate hike in next policy review meeting next week.
At 1502 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.40 as against 103.56 on Thursday. It was at 104.23 on Wednesday.
The euro was 0.1% up against the US unit after European Central Bank President Christine Lagarde said that inflation remains too high, and therefore, monetary tightening is necessary. (Ananya Chaudhuri)
India Rupee:Up as dlr dn post weak US data; oil cos’ dlr buys cap rise
MUMBAI – The rupee remained up against the dollar as the greenback slumped to an over one-week low on expectations of a pause in rate hikes by the US Federal Reserve in its June meeting, dealers said.
“There are some oilers because of the OPEC (Organization of Petroleum Exporting Countries) meeting, otherwise it’s all positive for the rupee,” a dealer with a foreign bank said.
The rupee surged against the greenback in early trade as dollar fell after data showed US manufacturing activity contracted for the seventh straight month as new orders continued to fall amid higher interest rates. The manufacturing Purchasing Managers’ Index fell to 46.9 in May from 47.1 in April.
The PMI reading stayed below the 50 threshold for the seventh straight month, indicating contraction in manufacturing. This is the longest contraction seen since the Great Recession.
On Wednesday, Federal Reserve Governor and Vice Chair nominee Philip Jefferson had said, “Skipping a rate hike at a coming meeting would allow the (Federal Open Market) Committee to see more data before making decisions about the extent of additional policy firming.” His comments further weighed on the greenback, dealers said.
However, some banks bought the greenback on behalf of oil marketing companies, which limited gains for the rupee, dealers said.
Oil prices rose ahead of a meeting of the Organization of the Petroleum Exporting Countries and allies, including Russia, on Sunday. Market participants fear the cartel may decide to cut production, boosting crude oil prices.
Dealers have pegged the next technical resistance for the rupee at 82.20 a dollar. During the day, it is seen at 82.20-82.60 a dollar. (Kabir Sharma)
India Rupee: Sharply up as dlr falls on weak US data, Fed comments
MUMBAI – The rupee rose sharply against the dollar as the greenback slumped globally after weak data from the US and comments by US Federal Reserve officials hinted at a pause at the June meeting, dealers said.
“The market is playing on the Fed skipping a rate hike now,” a dealer with a foreign bank said.
On Thursday, data from the US showed manufacturing activity contracted for the seventh straight month as new orders continued to fall amid higher interest rates. The manufacturing Purchasing Managers’ Index fell to 46.9 in May from 47.1 in April. The PMI reading stayed below the 50 threshold for the seventh straight month, indicating contraction in manufacturing. This is the longest contraction seen since the Great Recession.
Comments by US Federal Reserve officials also weighed on the dollar, dealers said. On Wednesday, Federal Reserve Governor and Vice Chair nominee Philip Jefferson had said, “Skipping a rate hike at a coming meeting would allow the (Federal Open Market) Committee to see more data before making decisions about the extent of additional policy firming.”
However, some banks bought the greenback for oil marketing companies, which limited gains for the rupee, dealers said.
Dealers have pegged next technical resistance for the rupee at 82.20 a dollar. During the day, it is seen at 82.20-82.60 a dollar. (Kabir Sharma)
India Rupee – Asia FX: Most up as Fed officials hint at rate pause
MUMBAI – Most Asian currencies were up against the dollar as the greenback fell to its lowest level in over a week on expectations that the US Federal Reserve may not hike interest rates at its Jun 13-14 meeting.
US Federal Reserve officials said they may “skip” a rate hike at the next meeting to give them time to evaluate the effects of the tightening cycle so far against still-strong inflation statistics.
“It’s time to at least hit the stop button for one meeting and see how it goes,” Philadelphia Federal Reserve President Patrick Harker said on Thursday on a National Association for Business Economics webinar.
The comments were supported by fresh economic data from the US. Manufacturing contracted for the seventh straight month as new orders continued to fall amid higher interest rates. Data from the Institute for Supply Management showed on Thursday that manufacturing Purchasing Managers’ Index fell to 46.9 in May from 47.1 in April.
The South Korean won led the gains and was up over 1% against the dollar. The Philippines peso was up 0.7% against the dollar.
The Taiwan dollar, Malaysian ringgit and Thai baht were all up between 0.3-0.6% against the dollar. (Kabir Sharma)
India Rupee: Expected range for rupee – Jun 2
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
Edited by Vandana Hingorani
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