Informist, Wednesday, Feb 7, 2024
By Vaishali Tyagi
MUMBAI – The rupee ended higher against the dollar today due to dollar sales by foreign banks for foreign fund inflows, and a fall in the dollar index, dealers said. This was despite a few banks purchasing the greenback on behalf of oil marketing companies and importers, they said.
“Overall, there were some flows in the market today, but can’t say it hit the market that hard,” a dealer with a big state-owned bank said. “We saw some importers were also there in the market today, but they were very few as many importers are still eyeing more low levels (in dollar/rupee),” the dealer said.
Some dealers speculated that a few state-owned banks purchased dollars, likely on behalf of the Reserve Bank of India. The Indian currency traded in a range of 10 paise throughout the day and settled at 82.9675 a dollar. On Tuesday, it had closed at 83.0550 a dollar.
The rupee opened steady against the dollar today at 83.0300 a dollar, and traded at about the same level for an hour as the impact of a fall in the dollar index was offset by a rise in crude oil prices. The dollar index eased and came off the near-three-month high it had hit on Monday, tracking a fall in US Treasury yields, dealers said. Comments by US Federal Reserve Bank of Cleveland President Loretta Mester on Tuesday also led to a decline in the dollar index.
In a speech on Tuesday, Mester had said that if the US economy performed as expected, it could provide Fed officials with confidence to cut rates. The dollar index had earlier surged following robust economic indicators from the US, which bolstered investors’ expectations that the Fed might delay interest rate cuts.
The dollar also came under pressure against other currencies as policymakers of other central banks hinted at the need for a robust indication of inflation coming down before rate cuts could be considered. The European Central Bank will not rush to cut rates, policymaker Boris Vujcic told Reuters on Tuesday. Inflation, he said, needs to be decisively under control.
According to CME Group’s FedWatch tool, Fed fund futures traders are now pricing in only a 21.5% probability that the US central bank will cut rates at its next meeting in March, compared with 52.8% a week ago. At 1601 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.05 compared with 104.14 on Tuesday. It was at 104.46 on Monday. The index touched a near three-month high of 104.60 on Monday.
The rupee rose to a high of 82.9350 a dollar as foreign banks persistently sold dollars for foreign fund inflows, said dealers. Further, dealers said there were barely any exporters in the market today as current dollar/rupee levels were not particularly lucrative for them. “Today, exporters were running away from the market as the pair (dollar/rupee) was down,” a dealer at a state-owned bank said. “They will come back in the market when level is around 83.18 a dollar.”
The rupee also found support from dollar sales by banks ahead of the reference rate fixing, dealers said. Banks usually receive orders from clients to sell or buy dollars at the fix rate, through which they hedge in the interbank market. For most of the session, the rupee sustained above 83.00 a dollar.
However, some banks bought dollars on behalf of oil marketing companies as they wanted to take advantage of the relatively lower dollar/rupee levels, dealers said. This limited gains for the rupee, dealers said.
Oil prices rose after US crude inventories grew less than expected and a cut in the forecast for output growth in the US, the world’s biggest producer, eased concerns about potential oversupply. The US Energy Department said crude oil production would rise less than forecast. Output in the US would grow by 170,000 bbl per day this year, down from the previously expected 290,000 bpd, the energy department said in its short-term energy outlook on Tuesday. At 1619 IST, the April contract of Brent crude oil on the Intercontinental Exchange was at $79.03 a barrel, compared with $78.59 a bbl on Tuesday and $77.99 a bbl on Monday.
Some dealers speculated that the central bank might have bought dollars around 82.93-82.95 a dollar to curb volatility in the exchange rate.
“They (the RBI) are aggressively trying to absorb flows, and then protecting moves on the downside (of rupee) as well,” a dealer with a private bank said. “If this continues, we may see a big breakout in the rupee range, most likely on the appreciation side.”
FORWARDS
Premiums on one-year dollar/rupee forward contracts rose today, tracking an overnight fall in US Treasury yields, dealers said. Premiums rose consecutively for the second day after falling to a one-month low on Monday. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
The yield on the 10-year benchmark US Treasury note fell on Tuesday as investors looked for fresh cues on how soon the US Federal Reserve may begin to cut interest rates. Strong demand for new three-year notes auctioned by the Treasury department also aided buying sentiment.
Market participants see technical support for the one-year dollar/rupee forward premium at 1.90%. At 1328 IST, the premium on the one-year, exact-period dollar/rupee forward contract was at 150.66 paise, against 148.08 paise at close on Tuesday. On an annualised basis, the premium was at 1.80%, against its previous close of 1.77%.
OUTLOOK
On Thursday, the rupee will open steady ahead of the Reserve Bank of India’s Monetary Policy Committee meeting outcome at 1000 IST, dealers said.
“There are no major takeaways for the forex market at tomorrow’s (Thursday’s) policy. Only if there is a change in stance, which I feel is unlikely, will we see any movement,” a dealer at a brokerage said. According to an Informist Poll, the rate-setting panel is expected to keep the repo rate unchanged at 6.50%.
The rupee will also take cues from movement in the dollar index and crude oil prices, dealers said. During the day, the rupee is seen in a range of 82.80-83.30 a dollar, with key technical resistance pegged at 82.90 a dollar.
[I] India Rupee – World FX: Sterling up as UK construction PMI improves
India Rupee – World FX: Sterling up as UK construction PMI improves
MUMBAI – The pound sterling strengthened 0.2% against the dollar after the construction sector improved in January in the UK, albeit remaining in the contractionary mode. The S&P Global UK construction purchasing managers index rose to 48.8 in January, against economists’ forecast of 47.3 in a Reuters’ poll. It is also up from 46.8 in December.
The euro rose 0.1% against the greenback even as Germany, the largest economy in the eurozone, released its industrial production numbers for December today, which showed a more than expected decline. Industrial production output fell 1.6% against an expectation of a fall of 0.3% by economists polled by The Wall Street Journal.
Despite weak data, investors seem to have taken more cues from European Central Bank’s Executive Board member Isabel Schnabel’s comments. “We must be patient and cautious as inflation can flare up again,” she said while cautioning against adjusting policy stance too soon, looking at sticky services inflation, resilient labour market, and recent events in the Red Sea sparking fears of supply chain disruptions.
The Canadian dollar rose 0.1% against the greenback as major prices of commodities, especially crude oil, rose. Canada is a major oil producer for the US.
The dollar index came off the near 3-month high it hit on Monday because of a fall in US Treasury yields. Cleveland Fed President Loretta Mester said in a speech on Tuesday that if the US economy performs as expected, it could provide Fed officials with confidence to cut rates. However, she cautioned against acting too hastily. At 1437 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.12 compared with 104.14 on Tuesday. It was at 104.46 on Monday. The index touched a near three-month high of 104.60 on Monday. (Sourabh Kumar)
India Rupee: Forward premiums rise on fall in US Treasury yields
MUMBAI – Premiums on one-year dollar/rupee forward contracts rose today, tracking an overnight fall in US Treasury yields, dealers said. Premiums rose consecutively for the second day after falling to a one-month low on Monday. Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
“Premiums are up as US yields have moved down. Some paying was also there. The noise about strong economic data from the US is over, after that there is not much movement we have seen,” a dealer at a state-owned bank said.
The yield on the 10-year benchmark US Treasury note fell on Tuesday as investors looked for fresh cues on how soon the US Federal Reserve may begin to cut interest rates. Strong demand for new three-year notes auctioned by the Treasury department also aided buying sentiment.
Earlier, yields had jumped after US Federal Reserve Chair Jerome Powell on Sunday pushed back expectations for a near-term rate cut, stating that a strong economy gives the US central bank time to evaluate the fall in inflation. According to CME Group’s FedWatch tool, Fed fund futures traders are now pricing in only a 21.5% possibility that the US central bank will cut rates at its next meeting in March, compared with 52.8% a week ago.
“The buy on dips (in level) sentiment is still there in the market,” a dealer with a state-owned bank. “Let’s see how long this rise (in premiums) sustains.”
Market participants see technical support for the one-year dollar/rupee forward premium at 1.90%. At 1328 IST, the premium on the one-year, exact-period dollar/rupee forward contract was at 150.16 paise, against 148.08 paise at close on Tuesday. On an annualised basis, the premium was at 1.80%, against its previous close of 1.77%. (Vaishali Tyagi)
India Rupee: Up on dollar sales by foreign banks for FX inflows
MUMBAI – The rupee was up against the dollar as foreign banks sold dollars for foreign fund inflows, said dealers. However, a few banks also bought dollars on behalf of oil marketing companies and importers, which limited the gains in the Indian unit, they said.
“Foreign banks are selling (dollars) today, and we saw few importers also as this is a good opportunity to buy (dollars) at these levels for them, but we saw exporters are running away from these levels,” a dealer with a state-owned bank said. Meanwhile, some dealers speculated that a few state-owned banks purchased dollars, likely on behalf of the Reserve Bank of India.
Further, the dollar index eased and came off the near three-month high it hit on Monday, tracking a fall in the US Treasury yields, which also gave support to the Indian unit, dealers said. The US Treasury yield fell on Tuesday as investors looked for fresh cues on how soon the US Federal Reserve may begin to cut interest rates. Strong demand for the new three-year notes auctioned by the Treasury department aided buying sentiment, further weighing on yields.
At 1312 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 104.04 compared with 104.14 on Tuesday. It was at 104.46 on Monday. The index touched a near three-month high of 104.60 on Monday.
The rupee also found support from dollar sales by banks ahead of the reference rate fixing, dealer said. Banks usually receive orders from clients to sell or buy dollars at the fix rate, through which they hedge in the interbank market.
A slight fall in domestic indices weighed on the Indian unit, dealers said. At 1312 IST, the Sensex and Nifty 50 were 0.2% and 0.1% down, respectively.
For the rest of the day, the rupee is seen in the range of 82.90-83.20 against the dollar, dealers said. They pegged key technical resistance for the Indian currency at 82.90 a dollar. (Vaishali Tyagi)
India Rupee – Asia FX:Most up as dlr index eases from near 3-mo high
MUMBAI – Most Asian currencies rose against the dollar today as the dollar index slipped, retreating from the near three-month peak it hit on Monday, after a fall in US bond yields and comments from the US Federal Reserve Bank of Cleveland President Loretta Mester on Tuesday.
Mester said in a speech on Tuesday that if the US economy performs as expected, it could provide Fed officials with confidence to cut rates. The dollar index had earlier surged following robust economic indicators from the US, which bolstered investors’ expectations that the Fed might delay interest rate cuts.
At 1045 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.13 compared with 104.14 on Tuesday. It was at 104.46 on Monday. The index touched a near three-month high of 104.60 on Monday.
The Philippines peso was up 0.3% against the greenback despite inflation in the country easing to 2.8% in January from 3.9% recorded in December, putting price growth well within the government’s 2-4% target range. Both the Indonesian rupiah and the Thai baht rose 0.2% against the dollar.
The South Korean won was up 0.1% against the US unit even as the Organization for Economic Cooperation and Development lowered its economic growth forecast for South Korea. The Organization set 2.2% as its forecast for Korea’s economic growth in 2024, down from the 2.3% forecast in November last year.
Bucking the trend, Taiwan dollar fell 0.1% against the dollar, while the Malaysian Ringgit remained flat against the US currency.(Vaishali Tyagi)
India Rupee: Slightly up as dlr index comes off its near-3-month high
India Rupee: Slightly up as dlr index comes off its near-3-month high
MUMBAI – The rupee was trading slightly higher against the greenback as the dollar index eased and came off the near-three-month high it hit on Monday, tracking a fall in the US Treasury yield, dealers said. Comments from the US Federal Reserve Bank of Cleveland President Loretta Mester on Tuesday also led to a decline in the dollar index.
“The dollar and US yields both are down, so the rupee gained a little,” a dealer with a state-owned bank said. “However, I expect the dollar to rise, and the rupee to go to 83.07-83.08 a dollar levels again.”
The US Treasury yield fell on Tuesday as investors looked for fresh cues on how soon the Fed may begin to cut interest rates. A strong demand for new three-year notes auctioned by the Treasury department aided buying sentiment, further weighing on yields.
Meanwhile, Cleveland Fed President Loretta Mester said in a speech on Tuesday that if the US economy performs as expected, it could provide Fed officials with confidence to cut rates.
At 0950 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 104.13 compared with 104.14 on Tuesday. It was at 104.46 on Monday. The index touched a near-three-month high of 104.60 on Monday.
The dollar also came under pressure against currencies as policymakers of other central banks hinted at the need for a robust indication of inflation coming down before rate cuts could be considered. The European Central Bank will not rush to cut rates, policymaker Boris Vujcic told Reuters on Tuesday. He said that inflation needs to be decisively under control.
However, a rise in crude oil prices limited gains for the rupee, dealer said. Oil futures rose slightly after the US Energy Department said crude oil production would grow less than forecast. US output would grow by 170,000 barrels per day this year, down from the previously expected rise of 290,000 bpd, the energy department said in its short-term energy outlook on Tuesday. At 0951 IST, the April contract of Brent Crude oil on the Intercontinental Exchange was at $78.76 a barrel, compared with $78.59 a bbl on Tuesday and $77.99 a bbl on Monday.
For the rest of the day, the rupee is seen in the range of 82.90-83.20 against the dollar, dealers said. They pegged key technical resistance for the Indian currency at 82.90 a dollar. (Sourabh Kumar)
India Rupee: Expected range for rupee – Feb 7
MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecast by leading banks and brokerages in an Informist poll:
(Vaishali Tyagi)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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