Informist, Thursday, Jan 12, 2023
By Kabir Sharma
MUMBAI – The rupee reversed its losses and closed largely steady against the dollar today due to sales of the greenback on behalf of exporters and broad-based weakness in the US unit, dealers said.
After touching a low of 81.7425 a dollar during the day, the Indian currency settled at 81.5500, as against 81.5750 on Wednesday.
The rupee opened slightly weaker at 81.6150 a dollar as crude oil prices rose nearly 3% overnight, dealers said. Crude oil prices were up due to an improved economic outlook and worries about the impact of sanctions on Russian crude output.
Crude oil prices were at their highest level in the new year despite the 19-mln-barrel jump in inventories in the US. The rise in stocks is the highest since Feb 2021.
At 1520 IST, the March contract of Brent crude oil on the Intercontinental Exchange was at $83.14 a bbl as against $82.67 a bbl Wednesday. The contract settled at $80.10 per bbl on Tuesday.
Gradually, the Indian unit fell to the day’s low of 81.7425 a dollar, as state-owned banks bought dollars on behalf of oil marketing companies, dealers said.
However, banks stepped in to sell dollars for exporters, which limited losses for the domestic currency, dealers said.
Exporters sold dollars with a sense of urgency because they expect the rupee to appreciate further after the release of the US CPI data for December, due later today, dealers said.
“Today a lot of selling (of dollars) happened, there was panic hedging by exporters, and they were selling at 81.70-81.75 (a dollar) level,” a dealer with a state owned bank said.
Moreover, the broadly weak US unit fell further against other major currencies during European trade, ahead of the release of the US CPI data for December, dealers said. This too provided support to the Indian unit, dealers said.
Annual headline inflation in the US is predicted to cool to 6.5% from the previous month’s reading of 7.1%, according to a Bloomberg analysis, raising expectations amongst market participants of slower pace of rate hikes by the US Federal Reserve. Investors now expect the Fed to increase the key interest rate by 25 basis points at its February meeting.
The greenback was also weighed down by gains in the euro, which rose after hawkish comments from European Central Bank officials. ECB Governing Council member Olli Rehn said that rates will have to rise significantly in the next couple of meetings to dampen inflation.
At 1526 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.07 as against 103.18 on Wednesday. It was at 103.23 on Tuesday. The index fell to 102.94 on Monday.
Meanwhile, volume in the currency market remained subdued today as traders refrained from placing large bets ahead of the release of US CPI print for December, dealers said.
“Market is stuck in a range since this morning and only CPI will move it now,” a dealer with a foreign bank said.
As exporters stepped up their dollar sales during the final thirty minutes of trade, the Indian currency erased all losses and jumped to the day’s high of 81.53 a dollar.
FORWARDS
Premiums on dollar/rupee one-year forward contracts rose today as a strong rupee prompted banks and importers to buy dollars for forward delivery, dealers said.
The premium on the one-year, exact-period dollar/rupee forward contract was at 178.51 paise as against 174.72 paise at Wednesday’s close. On an annualised basis, the premium was at 2.19% as against 2.12% at the previous close.
Premiums also rose tracking a fall in US Treasury yields on Wednesday, dealers said. The yield on the benchmark 10-year US Treasury fell as traders expected inflation to soften in December which would result in smaller rate hikes by the Fed moving ahead.
Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.
Traders avoided placing huge bets on caution ahead of the key US inflation data, later today.
OUTLOOK
On Friday, the rupee will take cues from overnight movement in the dollar index after the release of the US CPI data later today.
“US CPI will come positive, we are expecting the rupee to appreciate till 81.20 a dollar,” a dealer with a state-owned bank said.
Dealers said the Reserve Bank of India may intervene in the market through dollar purchases to prevent the currency from appreciating sharply.
Dealers have pegged immediate technical resistance for the rupee at 81.50 a dollar and long term resistance at 81.00.
The rupee is seen at 81.30-81.80 a dollar, dealers said.
India Rupee:Erases losses as bks sell dlr for exporters; US CPI eyed
NEW DELHI – The rupee erased some losses against the greenback as banks stepped in to sell dollars on behalf of exporters, dealers said.
Dealers said exporters sold the greenback on expectation that the rupee will appreciate further in the near term. “Exporters have started panic hedging since the figure (82.00 a dollar) broke,” a dealer from a big state-owned bank said. The rupee strengthened and rose above 82.00 a dollar level on Tuesday.
Earlier in the day, the domestic unit fell to a low of 81.7425 a dollar as state-owned banks purchased dollars on behalf of oil marketing companies, dealers said.
Crude oil prices rose nearly 3% on Wednesday on improvement in global growth outlook and concern about the impact of sanctions on Russian oil.
At 1415 IST, the March contract of Brent crude oil on the Intercontinental Exchange was at $82.60 a barrel as against $82.67 on Wednesday. The contract settled at $80.10 on Tuesday.
Meanwhile, volume in the currency market remained lower than usual as traders avoided placing large bets before the release of the US inflation data for December later today. The US CPI is expected to ease to 6.5% in December from 7.1% in November, according to a Reuters’ poll.
A fall in domestic equity indices also dampened sentiment for the Indian unit, dealers said. At 1416 IST, Sensex and Nifty 50 were both 0.4% down.
Dealers have pegged immediate technical resistance for the rupee at 81.50 a dollar. The unit is seen moving in a band of 81.40-81.80 per dollar, dealers said. (Ananya Chaudhuri)
India Rupee – Asia FX: Most up ahead of US CPI data; local shrs aid
NEW DELHI – Most Asian currencies rose against the dollar today due to optimism among investors that inflation in the US may soften in December. The US CPI, due for release later today, is expected to ease to 6.5% in December from 7.1% in November, according to a Reuters’ poll.
The Asian units gained support from the rise in most of the Asian share indices. The Jakarta Composite and KOSPI indices were up 1% and 0.4%, respectively.
The Indonesian rupiah surged 1% against the US unit after the Chief Economic Minister Airlangga Hartarto said Wednesday the government was exploring new regulation to require exporters to keep their earnings in the domestic account for a certain period.
The offshore Chinese yuan was 0.1% higher against the greenback as the optimism after China reopened borders last weekend to Hong Kong continued to boost risk sentiment in the market.
The Malaysian ringgit and Thai baht were up 0.2% and 0.1% against the greenback, respectively. The South Korean won remained flat against the US dollar.
However, the Philippine peso was 0.6% lower against the greenback as Philippine Finance Secretary Benjamin Diokno told media the central bank may further consider smaller rate hikes or a change in stance as inflation is expectation comes down. (Ananya Chaudhuri)
India Rupee: Slightly down as crude up 3% Wed; US CPI data awaited
MUMBAI – The rupee was slightly down against the US dollar today as crude oil prices rose nearly 3% on Wednesday, dealers said. Prices of crude oil rose due to an improved global economic outlook, and concerns about the impact of sanctions on Russian crude output.
At 0949 IST, the March contract of Brent crude oil on the Intercontinental Exchange was at $82.80 a barrel as against $82.67 on Wednesday. The contract settled at $80.10 on Tuesday.
Broad-based weakness in the US dollar ahead of the inflation data for December which is due later today, supported the Indian unit, dealers said.
Annual headline inflation in the US is predicted to cool to 6.5% from the previous month’s reading of 7.1%, according to a Bloomberg analysis, raising expectations amongst market participants of a slower pace of rate hikes by the US Federal Reserve. Investors now expect the Fed to increase the key interest rate by 25 basis points at its February meeting.
At 0949 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 103.07 as against 103.18 on Wednesday. It was at 103.23 on Tuesday. The index fell to 102.94 on Monday.
“Exporters are likely to sell (dollars) on upticks (in dollar/rupee),” a dealer state-owned bank said. “There is fear among exporters of further appreciation of rupee after US CPI data.”
Dealers have pegged immediate technical resistance for the rupee at 81.50 a dollar. The unit is seen moving in a band of 81.40-81.80 per dollar, dealers said. (Aiswarya Santhosh)
India Rupee: Expected range for rupee – Jan 12
MUMBAI – Following are the expected support and resistance levels for the rupee today, as forecasted by leading banks and brokerages in an Informist poll:
(Aiswarya Santosh)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Aditya Sakorkar
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