Informist, Thursday, Feb. 20, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended at its highest level in nearly three weeks against the dollar on Thursday as banks persistently sold the greenback for foreign fund inflows and likely on behalf of the Reserve Bank of India, dealers said. However, dollar purchases by banks on behalf of importers capped gains for the Indian currency, they said.  

"There were some selling (of dollars) by foreign banks in the morning and (RBI) intervention throughout the day," a dealer at a brokerage firm said. "There was no particular reason for them (RBI) to intervene but it mostly likely looks like they don't want the rupee to breach the big figure (87-per-dollar). They want the levels to be ideally between 86.60-86.80, which is what we have been seeing for almost two weeks now."

After appreciating 0.3% against the dollar, the rupee settled at 86.6600 a dollar on Thursday, against 86.9500 on Tuesday. The currency market was closed on Wednesday for Chhatrapati Shivaji Jayanti. Barring the Indonesian rupiah and Taiwan dollar, most other Asian currencies rose between 0.1-0.3% against the greenback, with the Indian rupee being the best performer amongst peers.
 

The rupee opened higher at 86.8450 against the dollar tracking gains in other Asian currencies, dealers said. It gained further shortly after opening as some foreign and private banks sold the greenback for foreign fund inflows into an Indian corporate, they said. "There was some block deal-related inflows into a corporate, which brought inflows I think," said a dealer at a state-owned bank. 

Dealers said that some state-owned banks also stepped in with dollar sales, likely on behalf of the RBI, which gave some cushion to the Indian unit throughout the day. "RBI intervention is passive but there is continuous supply to prevent it from inching toward 87 (a dollar)," said a dealer at a state-owned bank.

The central bank likely sold dollars around multiple dollar/rupee levels during the day, dealers said. However, some dealers were puzzled by the RBI's likely intervention around the current levels. "It doesn't make sense for them to intervene around these levels. It (rupee) is comfortable above 87 right now, what is the point of selling (dollars) here?" a dealer at a private bank said. 

The rupee was also aided by a fall in the dollar index. The dollar index declined tracking sharp gains in the Japanese yen on growing expectations of more interest rate hikes by the Bank of Japan. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 106.91, compared to 107.16 on Wednesday and 107.02 on Tuesday.

However, losses in the US unit were capped as the US Federal Open Market Committee meeting's January minutes on Wednesday indicated that the US Federal Reserve might opt for less frequent rate cuts amid worries over the impact of President Donald Trump's tariffs on inflation. "Provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate," the minutes read.

Noting the appreciation in the rupee, some traders sold the greenback to cut their long dollar bets, which also aided the Indian currency, dealers said. Some banks' stop losses were triggered on long dollar bets around the 86.70-a-dollar level, they said. 

Dealers said some banks also sold the greenback on behalf of exporters, on the expectation that the rupee may appreciate further in the near term, which aided the rupee and pushed it to the day's high of 86.5825. "There was a mild panic selling (of dollars) when it (rupee) inched toward 86.80 levels. We can expect panic selling in the coming days now that they (RBI) have a strong grip (on the rupee)," said a dealer at a brokerage firm.

However, the gains in the Indian unit were capped as banks purchased dollars on behalf of importers, who wanted to make the most of the relatively lower dollar/rupee levels, dealers said. The rupee has appreciated 0.9% against the dollar since last week. 

FORWARDS

The premium on the one-year dollar/rupee forward contract ended slightly higher on Thursday as banks purchased dollars for forward delivery, likely on behalf of some corporates, dealers said.

However, the rise in premiums was limited as dealers speculated that the Reserve Bank of India might have sold dollars for forward delivery. They speculated that the RBI continued to sell dollars for forward delivery, likely to offset the impact of its spot dollar sales on rupee liquidity. 

At 1530 IST, the one-year exact period dollar/rupee forward premium was 184.00 paise, against 183.10 paise on Tuesday. On an annualised basis, the premium was 2.12%, against 2.09% on Tuesday. 

OUTLOOK

On Friday, the rupee will likely take cues from the movement in the dollar index after the US initial jobless claims data due later in the day, dealers said. The rupee will also closely track movements in crude oil prices and the Chinese yuan, they said. 

Traders expect the central bank to continue its intervention in the domestic spot market through dollar sales and prevent the rupee from inching towards 87 a dollar. "In the near term, 87 (a dollar) is unlikely. Will have to see where they (RBI) let the rupee close tomorrow... we may get a clearer picture on rupee's trajectory then," said a dealer at a brokerage firm. 

Dealers expect banks to continue purchasing dollars on behalf of importers in case the rupee appreciates further. During the day, the rupee is seen in a range of 86.50-87.00 a dollar, with immediate technical resistance pegged at 86.50 a dollar.

India Rupee - World FX: Yen at over 10-wk high on rising BoJ rate hike bets

MUMBAI – The Japanese yen rose 0.8% against the dollar, touching its highest level in over 10 weeks, on Thursday on growing expectations that the Bank of Japan will go for another rate hike in the near term. Bank of Japan board member Hajime Takata hinted at further interest rate hikes by the central bank. "Inflation is approaching the BoJ's 2% target with positive corporate behaviour already observed," Takata said in a speech. "It's important to continue shifting gear gradually on monetary policy, even after January's rate hike." 

Recent economic data has also supported the case for the central bank to raise interest rates, with the GDP outperforming forecasts. A Reuters poll sees the Bank of Japan hiking interest rates only once more this year, most likely during the third quarter to 0.75%. 

Following gains in the Japanese yen, the dollar index fell marginally on Thursday. On Wednesday, minutes of the US Federal Reserve's January meeting indicated that the US Fed may opt for less frequent rate cuts amid worries over the impact of President Donald Trump's tariffs on inflation. "Provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate," the minutes read.

At 1520 IST, the index, which measures the strength of the dollar against a basket of six major currencies, was at 106.99, compared to 107.16 on Wednesday and 107.02 on Tuesday. Traders are now waiting for the US initial jobless claims data due later in the day. Both the pound sterling and the Swiss franc were up 0.2% against the dollar. 

The euro was up 0.1% against the greenback and the Australian dollar was up 0.4%. However, gains in the Australian currency were capped after data on Thursday showed that Australia's unemployment rose to 4.1% in January. However, employment in the country jumped 44,300 last month, above the market forecast of a 20,000 rise. Tracking gains in the Australian unit, the New Zealand dollar was up 0.4%. 

The Canadian dollar was up 0.1% against the greenback. On Wednesday, data showed that Canada's annual inflation rate rose 1.9% in January, with CPI edging up 0.1% on a monthly basis. The preferred gauges of inflation for the Bank of Canada --the CPI median and the CPI trim-- were both up 2.7% on month. Market participants now await Canada's Producer Price Index data due later in the day.  (Gowri Lakshmi)

India Rupee:At over 1-wk high as bks sell dlrs for FX inflows; RBI sales aid

MUMBAI – The rupee rose to its highest level in over one week against the dollar on Thursday as banks sold dollars for foreign fund inflows and likely on behalf of the Reserve Bank of India, dealers said. The rupee rose to a high of 86.5825 a dollar during the day, its highest intraday level since Feb. 12. "They (RBI) want rupee to be around 86.60-86.80 levels. This seems to be the comfort level they (RBI) are aiming for," a dealer at a brokerage firm said. 

Further, foreign and private banks sold dollars for foreign fund inflows, which also boosted the Indian unit, dealers said. "There is strong selling (of dollars) from foreign banks, which is why the sharp jump (in rupee)," said a dealer at a state-owned bank. "This has also led to some longs (bets in favour of dollar) cutting."

Noting the appreciation in the rupee, some traders sold the greenback to cut their existing long dollar bets, which also aided the Indian currency, dealers said. Some banks' stop losses were triggered on long dollar bets around the 86.70 a dollar level, they said. 

The rupee also got a boost as the Chinese yuan rose 0.1% against the greenback. The People's Bank of China left its benchmark lending rates unchanged at the monthly fixing, in line with expectations, providing further currency stability.

Noting the sustained rise in the rupee, some banks also sold the greenback on behalf of exporters on expectation that the rupee may appreciate further in the near term, they said. "Exporters are selling (dollars) now that the importer buys have cooled down. Given the levels, they are only bracing the rupee to appreciate here on in near term," a dealer at a foreign bank said.

However, gains in the Indian unit were limited as banks purchased the greenback on behalf of importers, who wanted to make the most of the relatively lower dollar/rupee levels, dealers said. "Buying (of dollars) is definitely there but the panic has stopped for importers. Now they are in a wait and watch mode, we can see them active again if it (rupee) rises above 86.60," said a dealer at another brokerage firm.

For the rest of the day, the rupee is seen moving in a range of 86.50-87.00 against the dollar. Dealers see technical resistance for the Indian unit at 86.50 a dollar. (Gowri Lakshmi)

India Rupee: Technical Levels for rupee - Feb 20

MUMBAI – At 1135 IST, the rupee was at 86.7425 per dollar. At 0900 IST, the rupee was at 86.8450 a dollar against its previous close of 86.9500. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Pratiksha)

India Rupee - Asia FX: Most up; South Korean won up 0.3% on upbeat econ data

MUMBAI – Most Asian currencies traded higher against the US dollar on Thursday as the dollar index retreated in early trade. The South Korean won was up 0.3% against the dollar after data on Thursday showed that the country's producer price inflation in January was at a five-month high. Producer price inflation was at 1.7% on year last month, the highest level since July.

The South Korean won also received a boost after the country's consumer sentiment improved to a four-year high in February due to hope of political stability and government support for industries, a central bank poll showed Thursday. The composite consumer sentiment index stood at 95.2 in February, the largest gain since June 2021.

Minutes of the US Federal Reserve's January meeting, published on Wednesday, indicated that the US Fed might opt for less frequent rate cuts amid worries over the impact of US President Donald Trump's tariffs on inflation. "Provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate," the minutes read. 

On Tuesday, Trump announced his intention to impose 25% tariff on imports of automobiles, semiconductors, and pharmaceuticals. He said the automobile tariffs could come into effect as early as Apr. 2.

At 0944 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 107.03, compared to 107.16 on Wednesday and 107.02 on Tuesday. The Malaysian ringgit was up 0.2% against the greenback, while the Philippines' peso was up 0.1%.

The Chinese yuan was up 0.1% against the greenback. The People's Bank of China left its benchmark lending rates unchanged at the monthly fixing, in line with expectations, in an attempt to prioritise financial and currency stability. 
 

The Thai baht was up 0.2% against the US unit after data on Thursday showed that industrial confidence edged up in Janauary to its highest level in 10 months, driven by exports, tourism and governemnt stimulus measures. The Thai industries sentiment index climbed to 91.6 in January from 90.1 in December. 

The Taiwan dollar traded on a flat note against the US dollar. The Indonesian rupaih was down 0.1% against the greenback. On Wednesday, Bank Indonesia kept its interest rates steady at 5.75% in order to stabilise the Indonesian currency. However, the bank said it would opt for further easing to spur economic growth, depending on various global and domestic factors. This continued to weigh on the Indonesian currency  (Gowri Lakshmi)

India Rupee: Rises sharply on banks' dollar sales for foreign fund inflows

MUMBAI – The rupee rose sharply against the dollar early Thursday as some foreign banks sold the greenback, likely on behalf of foreign portfolio investors looking to invest in Indian markets, dealers said. "Buying pressure is just normal but today, there is continuous supply of dollars in the market, thats why it (rupee) is up," a dealer at a state-owned bank said. 

The rupee also got a boost from a rise in other Asian peers. The offshore Chinese yuan rose 0.1% in early trade Thursday. The rupee also got some support as the dollar index retreated slightly on Thursday. The Japanese yen was up 0.7% against the US dollar, which weighed on the dollar index. The yen has a weightage of 13.6% in the dollar index. The Japanese currency strengthened due to hope of further rate hikes by the country's central bank. 

At 0928 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 106.99, compared to 107.16 on Wednesday and 107.02 on Tuesday. 

Some importers purchased the greenback, which limited the rise in the Indian currency, dealers said. They demanded dollars, anticipating that the rupee may fall in the day. "I think the rupee is up just for now, and towards the mid day, we may see some pressure building up due to fixing buying, and once these inflows come down," a dealer with a state-owned bank said.

During the day, the rupee is seen moving in a range of 86.70-87.00 against the dollar. Dealers see strong technical resistance for the Indian unit at 86.70 a dollar.  (Gowri Lakshmi)

India Rupee: Expected range for rupee - Feb 20

MUMBAI – Following are the expected support and resistance levels for the rupee on Thursday, as forecast by leading banks and brokerages in an Informist poll:

(Sourabh Kumar)

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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