Informist, Wednesday, Jul 27, 2022
By Pratiksha
NEW DELHI – The rupee fell against the greenback for the second consecutive trading session today due to continuous dollar purchases for foreign fund outflows and oil importers, dealers said. This was despite the Reserve Bank of India and exporters selling dollars persistently, dealers said.
The rupee closed 0.2% lower at 79.8975 a dollar.
Today, the Indian currency opened lower at 79.8250 a dollar as against 79.7800 a dollar on Tuesday because the US dollar index settled higher on Tuesday, dealers said. The index gained as concerns over the possibility of another cut in Russian gas supply weighed on the euro, dealers said.
Russian energy major Gazprom on Monday said it would reduce gas supplies through the Nord Stream 1 pipeline to Germany to just 20% of its capacity from Jul 27.
At 1651 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 106.79 compared with 107.19 on Tuesday. It was at 106.48 on Monday.
Soon, the rupee fell to 79.90 a dollar as banks bought dollars to cover their existing short bets in the futures market ahead of the expiry of the July contract today, dealers said.
Banks also bought dollars on behalf of oil marketing companies, which further weighed on the Indian unit, dealers added.
Prices of crude oil rose today as a report of lower inventories in the US and cuts in Russian gas flows to Europe offset concern about weak demand and a looming interest rate hike in the US.
At 1651 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $105.43 a bbl as against the previous close of $104.40 a bbl. On Monday, the contract was at $105.15 a bbl.
State-owned banks were said to have purchased dollars for foreign fund outflows from a large corporate, which further weighed on the Indian unit, dealers said. However, the unit couldn’t breach the immediate support level of 79.90 a dollar, some banks stepped in to sell the greenback on behalf of the Reserve Bank of India, dealers said.
“The buying for outflows was considerable. The rupee could’ve easily breached the 79.95 level,” a dealer with a state-owned bank said. “The RBI protected that level since more depreciation can be seen after tomorrow’s big event.”
A part of these sales were on behalf of exporters, dealers said.
They said the RBI’s continuous dollar sales led exporters to believe that the central bank might not allow the domestic currency to fall below the psychologically crucial level of 80.00 a dollar so soon.
The domestic currency traded in a narrow range of 79.86-79.90 a dollar for most of the trading session and went on to close at 79.8975 a dollar.
Dealers said volumes in the currency market were lower than usual as traders refrained from placing fresh bets ahead of the conclusion of the US Federal Open Market Committee’s monetary policy meeting later today.
The US Federal Open Market Committee is expected to increase policy rates by 75 basis points.
With the recent US economic data showing signs of a slowdown, investors are eyeing the FOMC statement and Federal Reserve Chairman Jerome Powell’s comments on the future course of rate hikes by the central bank.
According to the CME FedWatch Tool, more than three-quarters of respondents expect a 75-basis-point increase in policy rates at the outcome of the Federal Reserve’s July policy review, while the rest anticipate a 100-bps rate hike.
Gains in domestic equities today supported sentiment for the Indian unit, dealers said. The Nifty 50 and the Sensex ended 1.0% higher each.
FORWARDS
Premiums on dollar/rupee one-year forward contracts were steady today as traders avoided taking large bets ahead of the US Federal Open Market Committee’s monetary policy meeting outcome later today, dealers said.
The premium on the one-year dollar/rupee contract was at 251.00 paise as against 249.20 paise at Tuesday’s close. On an annualised basis, the premium was unchanged from the previous close of 3.12%.
The US Federal Open Market Committee is expected to increase rates by 75 basis points at the conclusion of its two-day policy meeting later today. The possibility of a hike of that quantum has already been factored in by the market.
According to the CME FedWatch Tool, more than three-quarters of respondents expect a 75-basis-point increase in policy rates at the outcome of the Federal Reserve’s July policy review, while the rest anticipate a 100-bps rate hike.
OUTLOOK
On Thursday, the rupee will take cues from overnight movement in the dollar index after the outcome of the US Federal Open Market Committee’s monetary policy meeting later today, dealers said.
“A 75-bps hike is very much discounted by the market, so there won’t be any major movement in the spot as well as forwards market if that is the decision,” a dealer with a private bank said.
The local unit will also take cues from movement in Brent crude oil prices, dealers said.
Investors also await crude supply data from the US Energy Information Administration later in the day.
Dealers expect the RBI to continue to intervene through dollar sales to protect the rupee from depreciating beyond the psychologically crucial 80-per-dollar mark.
Dealers see technical resistance for the rupee at 79.70 a dollar and technical support at 80.00 a dollar.
During the day, the rupee is seen at 79.65-79.95 a dollar.
India Rupee – World FX: Dollar down; US FOMC meet outcome eyed
NEW DELHI – The US dollar was down against most major currencies ahead of the outcome of the US Federal Reserve’s policy meeting, which is due later today.
The central bank is expected to raise interest rates by another 75 basis points to tame soaring inflation. Investors are keeping a close eye on the Federal Reserve’s forward guidance as the US economy grapples with high inflation and fears of a possible recession.
At 1508 IST, the dollar index, which measures strength in the US currency against a basket of six major currencies, was at 106.95 compared with 107.19 on Tuesday.
The euro recovered slightly today after a sharp fall on Tuesday. This was because uncertainty over Europe’s energy security loomed large in the face of another prospective cut in Russian gas supply.
On Monday, Russian energy major Gazprom said that it would reduce gas supplies through the Nord Stream 1 pipeline to Germany to just 20% of its capacity from today. (Richard Fargose)
India Rupee: Premiums steady on caution before US FOMC meet outcome
NEW DELHI – Premiums on dollar/rupee one-year forward contracts were steady today as traders avoided taking large bets ahead of the US Federal Open Market Committee’s monetary policy meeting outcome due later today, dealers said.
The premium on the one-year dollar/rupee contract was at 251.50 paise as against 249.20 paise at Tuesday’s close. On an annualised basis, the premium was at 3.13% as against the previous close of 3.12%.
The US Federal Open Market Committee is expected to increase rates by 75 basis points at the conclusion of its two-day policy meeting later today. The possibility of a hike of that quantum has already been factored in by the market.
According to the CME FedWatch Tool, more than three-quarters of respondents expect a 75-basis-point increase in policy rates at the outcome of the Federal Reserve’s July policy review, while the remaining 24.9% anticipate a 100-bps rate hike.
“The market is waiting for the outcome of the big event tonight. A 75-bps hike is factored in. If in any case a 100-bps hike happens, 10-15 bps receiving pressure will be there,” a dealer with a state-owned bank said. ” Also, if there is a dovish statement along with the 75-bps hike, paying will be seen tomorrow.”
(Pratiksha)
India Rupee: Remains dn as bks buy dlrs ahead of F&O contract expiry
NEW DELHI – The rupee remained down against the greenback as banks bought dollars to cover their existing short bets in the futures market ahead of expiry of the July contract today, dealers said.
Moreover, banks bought dollars on behalf of oil marketing companies, which further weighed on the Indian unit, dealers added.
However, losses in the domestic unit were restricted as some banks stepped in to sell the greenback on behalf of exporters, dealers said.
Dealers have pegged immediate technical support for the rupee at 80.00 a dollar.
For rest of the day, the Indian unit is seen moving in the range of 79.6500-79.9500 a dollar. (Pratiksha)
India Rupee – Asia FX: Down as dlr remains firm, FOMC outcome eyed
MUMBAI – Most Asian currencies were down today as the dollar index rose overnight after three straight sessions of decline as concerns over the possibility of another Russian gas supply cut weighed on the euro.
Russian energy major Gazprom on Monday said it would reduce gas supplies through the Nord Stream 1 pipeline to Germany to just 20% of its capacity from today.
The dollar gained also due to risk-off sentiment globally following a profit warning from retail giant WalMart, which said it would slash prices to reduce inventory.
Some caution ahead of the US Federal Reserve’s monetary policy outcome due later today, also kept investors away from risky emerging market assets.
Investors are keeping a close eye on the Federal Reserve’s forward guidance as the US economy grapples with high inflation and a potential recession.
The South Korean won and the Philippine peso were down the most among Asian units, falling 0.5% and 0.6%, respectively. (Richard Fargose)
India Rupee: Falls as dollar index strengthens, domestic shares down
NEW DELHI – The rupee fell against the greenback today as the US dollar index settled higher on Tuesday, dealers said.
The index gained as concerns over the possibility of another cut in Russian gas supply weighed on the euro, dealers said.
Russian energy major Gazprom on Monday said it would reduce gas supplies through the Nord Stream 1 pipeline to Germany to just 20% of its capacity from Jul 27.
At 0940 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 107.03 compared with 107.19 on Tuesday. It was at 106.48 on Monday.
A fall in domestic share indices also weighed on the Indian unit, dealers said. At 0940 IST, the Nifty 50 and the Sensex traded 0.2% and 0.1% lower, respectively.
“There should be less volatility in the market today as even if a 75-bps hike by the Fed is largely discounted, caution remains,” a dealer with a state-owned bank said.
Market participants now await the outcome of the two-day meeting of the US Federal Open Market Committee, due later today. The US Federal Reserve is expected to increase rates by at least 75 basis points at the outcome of its policy review.
For the rest of the day, the Indian unit is seen moving in the range of 79.6500-79.9500 a dollar. (Pratiksha)
India Rupee: Expected range for rupee – Jul 27
MUMBAI – Following are the expected support and resistance levels for the rupee, as forecasted by leading banks and brokerages in an Informist poll:
(Richard Fargose)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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