Informist, Thursday, Oct 27, 2022
By Richard Fargose
MUMBAI – The rupee ended off highs today because of persistent dollar purchases by banks likely on behalf of oil marketing companies and other importers, dealers said.
Today, the rupee settled at 82.4900 a dollar as against 82.7250 on Tuesday. Indian money markets were shut Wednesday on account of Balipratipada.
The rupee opened 58 paise higher at 82.14 a dollar today, tracking weakness in the greenback on increased hope that the Federal Reserve may slow down its pace of aggressive interest rate hikes.
The dollar index, which measures the US currency against six major peers, fell to a one-month low of 109.53 earlier today as market expectations mounted that the Federal Reserve will tone down its aggressive stance on interest rate hikes after data hinted that the US economy is slowing down in the face of high inflation and rising interest rates.
The US Conference Board reported that consumer confidence index missed expectations. New home sales dropped 10.9% on year in September. Mortgage applications, too, dropped 42% and are at their lowest level since 1997.
“Most of the US data that has come in over the last two days have missed expectations and are pointing towards a slowdown in the US economy,” IFA Global said in a note. “This could cause the US Fed to tone down its hawkish rhetoric and enter a wait-and-watch mode to see how the economy responds to the rate hikes done so far.”
However, a rise in crude oil prices weighed on sentiment for the rupee as oil is a major import item for India.
Crude oil prices remained firm today after surging nearly 3% in the previous session, driven by record US crude exports and a weaker dollar.
At 1550 IST, the December contract of Brent crude oil on the Intercontinental Exchange was at $95.80 a barrel as against $95.69 a bbl on Wednesday. On Tuesday, the contract settled at $93.52 a barrel.
The rupee erased gains as importers stepped up dollar purchases today, dealers said.
Market participants said oil companies and importers used today’s fall in the greenback to buy dollars at an attractive rate.
“The dollar is expected to see bids on dips till Fed indicates a change in stance,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP.
The market participants see the Federal Open Market Committee’s Nov 1-2 meeting as the next trigger for the currency market.
While the Fed is widely expected to raise rates by 75 basis points at its meeting next week, traders are eyeing guidance in terms of the future rate hike path. Market participants are split between a 50-bps and 75-bps hike in December.
Towards the end of session, a slight recovery in the dollar index further weighed on the rupee.
At 1550 IST, the dollar index was at 110.07 as against 109.70 on Wednesday. On Tuesday, it was at 110.95.
FORWARDS
Premiums on dollar/rupee forwards rose as importers and banks bought dollars for forward delivery at relatively low levels after a sharp fall in premiums last week, dealers said.
On Friday, premiums on one-year dollar/rupee forward contracts slipped to a fresh 11-year low as some state-owned banks sold dollars for forward delivery on behalf of the Reserve Bank of India to neutralise the impact of dollar sales on liquidity in the spot market.
The premium on the one-year, exact-period dollar/rupee forward contract was at 194.00 paise as against 189.43 paise at Tuesday’s close. On an annualised basis, the premium was at 2.35% as against 2.28% at the previous close.
Moreover, a sharp fall in US Treasury yields also pushed forward premiums lower.
Yield on the benchmark 10-year US Treasury note slid 21 bps in the last two sessions on renewed hopes that the Federal Reserve may slow down the pace of interest rate hikes.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
OUTLOOK
On Friday, the rupee will take cues from overnight movement in the dollar index and crude oil prices, dealers said.
Traders are expected to remain cautious ahead the US Federal Open Market Committee’s meeting next week.
“For tomorrow, rupee is expected to be in a range of 82.00 to 82.60 with exporters and importers both getting a chance to hedge their receivables and payables,” Bhansali said.
On Friday, the rupee is seen at 82.15-82.70 a dollar.
India Rupee: Dollar buying by oil cos erases some gains
MUMBAI – The rupee lost some of its gains and was hovering in the 82.30 to 82.40 range due to dollar purchases by oil importers. A sharp fall in US Treasury yields and easing of the dollar index continue to support the rupee.
At 1344 IST, the dollar index, which measures the US currency against six major peers, was at 109.7 as against 110.95 on Tuesday.
“There is buying from oil companies and some corporates which has erased early gains amidst the general view that the rupee will touch 83 again soon,” a dealer with a private bank said.
The market sees the rupee moving in a narrow range until the Federal Open Market Committee meeting scheduled on Nov 1-2. The FOMC meeting is likely to be the next trigger for the market, dealers said.
The Fed is widely expected to raise rates by 75 basis points at its meeting in November and traders are eyeing future guidance in terms of the rate hike path.
Market participants expect the rupee to trade in the 82.10 to 82.45 range for the rest of the day. (Kabir Sharma)
India Rupee: Premiums up as banks, importers buy fwd dlrs at low levels
MUMBAI – Premiums on dollar/rupee forwards rose as importers and banks bought dollars for forward delivery at relatively low levels after a sharp fall in premiums last week, dealers said.
On Friday, premiums on one-year dollar/rupee forward contracts slipped to a fresh 11-year low as some state-owned banks sold dollars for forward delivery on behalf of the Reserve Bank of India to neutralise the impact of dollar sales on liquidity in the spot market.
The premium on the one-year, exact-period dollar/rupee forward contract was at 195.50 paise as against 189.43 paise at Tuesday’s close. On an annualised basis, the premium was at 2.38% as against 2.28% at the previous close.
Moreover, a sharp fall in US treasury yields also pushed forward premiums lower.
Yield on the benchmark 10-year US Treasury note slid 21 bps in the last two sessions on renewed hopes that the Federal Reserve may slow down the pace of interest rate hikes.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries. (Richard Fargose)
India Rupee – Asia FX: Most up on weak dollar globally; yuan down
MUMBAI – Most Asian currencies were up tracking the fall in the dollar index as weak US economic data boosted hopes of slower pace of rate hikes by the US Federal Reserve.
The dollar index fell nearly 1% overnight due to weaker-than-expected economic data, including the US Conference Board’s consumer confidence index for October dropping to 102.5, below the market view of 105.9.
South Korean won gained the most among Asian currencies, up 0.3%.
China’s yuan remained weak today, down 0.6%, but the pace of declines slowed after major state-owned banks sold the greenback on Wednesday to stabilise the currency market. (Kabir Sharma)
India Rupee: Surges as dollar slips; importers’ demand to weigh
MUMBAI – The rupee opened sharply higher today, tracking weakness in the US dollar on hope that the Federal Reserve may slow down its pace of aggressive interest rate hikes, dealers said.
The dollar index, which measures the US currency against six major peers, fell to a one-month low earlier today as market expectations mounted that the Federal Reserve will tone down its aggressive stance on interest rate hikes after data hinted that the US economy is slowing down in the face of high inflation and rising interest rates.
The dollar index eased to 109.79 today as against 109.70 on Wednesday. On Tuesday, it was at 110.95.
“So far, it is all about the dollar retreat,” said a dealer with state-owned bank. “But, this is a good opportunity for importers to buy dollars.”
The rupee gave up some gains as some traders and importers bought dollars in early trade noting its attractive rate, dealers said.
“The recent recovery in the rupee could attract importers to rush and cover short-term payables and achieve their risk management policy, and at the same time exporters could wait for the resumption of the depreciating move,” said Amit Pabari, managing director of CR Forex Advisors.
Dealers have pegged immediate technical resistance for the rupee at 82.15 a dollar, and next at 82.00 a dollar.
For the rest of the day, the Indian unit is seen at 82.1500-82.4000 a dollar. (Richard Fargose)
India Rupee: Expected range for rupee – Oct 27
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 Tanima Banerjee
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