Informist, Tuesday, May 20, 2025

By Gowri Lakshmi

MUMBAI – The rupee ended sharply down against the dollar Tuesday as foreign banks purchased dollars, possibly for foreign fund outflows, dealers said. Some banks also purchased the greenback for importers in early trade, which also weighed on the rupee. Volumes in the market remained relatively low because of a lack of significant activities, dealers said.

"The market is dull since two days, any inflows coming are being immediately absorbed and foreign banks have been selling for the outflows," a currency trader at a broking firm said. 

After hitting a high of 85.6525, the Indian unit ended at 85.6350 a dollar, sharply down from the previous close of 85.4000. The rupee moved in a range of over 26 paise during the day. The Indian currency fell 0.3% against the greenback and was one of the two worst-hit currencies amongst its Asian peers. 

Other Asian currencies moved on a mixed note, with the South Korean won being the worst performing currency and the Thai baht being the best.

The rupee began the day slightly lower as some banks purchased dollars for importers, dealers said. A rise in crude oil prices prompted importers to buy the greenback owing to uncertainties over the Iran-US nuclear deal that had given investors hope last week. Iran's supreme leader, Ayatollah Ali Khamenei, signalled doubts over whether the talks would lead to an agreement.

The July Brent Crude contract on the Intercontinental Exchange rose to a high of $66 per barrel Tuesday, up from $65.54 per barrel Monday and $65.41 per barrel Friday. 

However, for most part of the day a majority of importers remained on the sidelines waiting for further cues and movement of the rupee. Dealers said importers have entered a 'wait-and-watch' mode and will possibly buy dollars in large quantities only if the rupee appreciates above 85.30 a dollar.

"The rupee is now range-bound," the currency trader said. "The rise is capped at 85.65 a dollar (by the Reserve Bank of India), we wouldn't see much of a movement in that direction in the near term at least."

Moreover, a slight fall in the dollar index supported the rupee in early trade. The dollar index fell owing to rising concerns among investors about the health of the US economy after the recent slew of weaker-than-expected economic data and a ballooning fiscal debt. At 1530 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.28, down from 100.38 Monday and 100.98 Friday.

A fall in the offshore Chinese yuan also weighed on the rupee, dealers said. In early trade the offshore Chinese yuan fell 0.2% after the People's Bank of China lowered its benchmark one-year prime rate by 10 basis points to 3.0% and the five-year loan prime rate to 3.5%.

The rupee was pushed to the day's low of 85.6525 a dollar as foreign banks persistently purchased the greenback, possibly on behalf of foreign portfolio investors who withdrew funds from the Indian stock market, dealers said. Both the benchmark stock indices, the Nifty 50 and the BSE Sensex, ended 1.1% lower on the day. However, foreign investors have been net buyers in the domestic equity market in May. So far this month, they have net bought shares worth $3.1 billion in the Indian equity market.

FORWARDS

Dollar/rupee forward premiums ended lower Tuesday, with the one-year premium falling to a near-one-month low earlier in the day, tracking a rise in the benchmark US Treasury yield, dealers said. Some exporters also sold forward dollars, which pushed premiums lower, they said. Tuesday, the one-year exact-period dollar/rupee forward premium fell to 2.06% on an annualised basis, the lowest since Apr. 24.

Market participants expect forward premiums to fall in the coming weeks owing to higher chances of a rate cut in India and uncertainty over interest rate cuts in the US. Forwards of a currency pair are reflective of the interest rate differential between the two countries.

At 1530 IST, the one-year exact-period dollar/rupee forward premium settled at 177.16 paise, slightly lower from 179.67 paise Monday. Annualised, it was 2.06%, against Monday's 2.10%.

OUTLOOK

On Wednesday, the rupee will take cues from the movement of the dollar index and the movement of the offshore Chinese yuan, dealers said. Dealers expect the rupee to move within the range of 85.20-85.80 a dollar, with the Reserve Bank of India expected to intervene with dollar sales at 85.70 a dollar to prevent the rupee from falling sharply. 

Dealers expect overseas investors to continue to exit the domestic financial markets, which may weigh on the Indian unit. The rupee may also take cues from movement in crude oil prices. A further fall in crude oil prices may prompt oil-marketing companies to buy dollars, which may also weigh on the rupee. Dealers see strong technical support for the rupee at 85.70 a dollar.

India Rupee - World FX: Australian dollar down as central bank cuts rate

MUMBAI – The Australian dollar slipped 0.6% against the US dollar after the Reserve Bank of Australia lowered interest rates Tuesday to a two-year low owing to easing inflation. The Reserve Bank of Australia cut its benchmark lending rate by 25 basis points to 3.85%. Reserve Bank of Australia Governor Michele Bullock said the central bank will keep the door open for further monetary policy easing and the committee discussed whether it should cut by 50 bps. 

"Does it mean we're headed into a long series of interest rate cuts? I don't know at this point and that's why I think the cautious 25-basis-point cut with a recognition that if we need to move quickly, we can. We have got space," Bullock said. Tracking the fall of the Australian unit, the New Zealand dollar was down 0.2% against the greenback.

The Swiss franc and the Japanese yen gained 0.3% each against the greenback owing to a fall in the dollar index. The dollar index extended its fall from Monday as investors weighed the impact of the tariff uncertainties and the ballooning US fiscal debt. At 1514 IST, the dollar index, which measures the dollar's strength against a basket of six major currencies, was at 100.21, down from 100.38 Monday and 100.98 Friday. 

The euro rose 0.2% against the greenback. However, the gains were limited after data from Germany, the bloc's largest economy, showed a sharp decline in producer prices. Producer prices in Germany fell by 0.9% on year in April, following a 0.2% fall in March. 

The Canadian dollar was up 0.1% against the greenback ahead of inflation data for April, due later in the day. The pound sterling rose 0.1% against the US currency. Bank of England Chief Economist Huw Pill said Tuesday that the quarterly pace of the monetary policy easing cycle has been too fast due to current inflation expectations. "I would characterise my May vote as favouring a 'skip' within a continuing withdrawal of monetary policy restriction, rather than a halt to the process of withdrawal," Pill said. The Bank of England lowered its interest rates by 25 bps to 4.25% on May 8, with Pill favouring a 'hold' on rates.  (Gowri Lakshmi)

India Rupee: Premium near 1-mo low as US yld rises, exporters sell fwd dlrs

MUMBAI – Dollar/rupee forward premiums fell Tuesday, with the one-year premium falling to a near one-month low, tracking a rise in benchmark US Treasury yield, dealers said. Some exporters also sold forward dollars, which pushed premiums lower, dealers said.

"Some receiving by exporters is seen, and the fundamental reason of a rise in US Treasury yield is there," a dealer with a state-owned bank said. "Currently, people are not much active in forwards, except some exporters."

The benchmark 10-year US Treasury yield ended slightly higher Monday as investors remained concerned about the country's fiscal outlook, particularly after Moody's downgraded the US sovereign credit rating on Friday. The 10-year US Treasury yield ended at 4.46% Monday, up from 4.43% Friday. Market participants are looking forward to more details on US-China trade talks to assess the outlook of the US economy, dealers said.

On Tuesday, the one-year exact period dollar/rupee forward premium fell to 2.07% on an annualised basis, the lowest since Apr. 24. It was down from 2.10% Monday and 2.12% Friday. On an absolute basis, the forward premium was 177.85 paise at 1334 IST, down from 179.68 paise Monday and 181.33 paise Friday. Market participants expect forward premiums to fall in coming weeks due to higher chances of a rate cut in India and still an uncertainty over interest rate cuts in the US. Forwards of a currency pair are reflective of the interest rate differential between the two countries.

Overall volumes in the forward market were relatively lower Tuesday, dealers said. "Volumes are less nowadays, and I think while the movement is of downside in forwards, if the rupee rises above 85.40 a dollar, then we can see an accelerated fall (in one-year dollar/rupee forward premium) below 2.0%," a dealer with a foreign bank said.  (Sourabh Kumar)

India Rupee: Tad down on foreign banks' dollar buys likely for FX outflows

MUMBAI – The rupee fell against the dollar as foreign banks bought dollars, likely for foreign fund outflows from domestic equity market, dealers said. However, a slight fall in dollar index limited the fall in the Indian currency, dealers said.

"Since morning it has been just foreign banks buying..." a dealer at a state-owned bank said. However, overseas investors have been net buyers in the domestic equity market in May. So far this month, overseas investors have bought shares worth $3.1 billion in the Indian equity market. At 1254 IST, the benchmark stock indices, the Nifty 50 and the BSE Sensex were down 0.6% each.

Dealers said most importers remained on the sidelines and may only buy the greenback in large quantums if the rupee rises above 85.30. Exporters, on other hand, are waiting for the rupee to fall below 85.70 a dollar, before selling dollars in large quantums. Volumes in the currency market remained dull Tuesday, dealers said. The rupee has moved just over 16 paise so far in the day. "Volumes are very less because most people have booked already; importers at lower (dollar/rupee) levels and exporters at higher levels," a dealer with another state-owned bank said. 

The dollar index inched down Tuesday, which limited the fall in the rupee, dealers said. Worries over US fiscal position, which led to downgrade in US sovereign rating by Moody's, weighed on the US currency. At 1222 IST, the dollar index, which measures the strength in the dollar against a basket of six major currencies, was at 100.21, down from 100.38 Monday and 100.98 Friday.

For the rest of the day, the rupee is seen moving between 85.30 and 85.60 against the dollar. Dealers see strong technical support for the rupee at 85.60 against the greenback.  (Gowri Lakshmi)

India Rupee: Technical levels for rupee - May 20

MUMBAI – At 1050 IST, the rupee was at 85.4225 per dollar. At 0900 IST, the rupee was at 85.4875 a dollar, against the previous close of 85.4000. Following are the key support and resistance levels for the rupee as provided by leading banks and brokerages:

(Sourabh Kumar and Gowri Lakshmi)

India Rupee - Asia FX: Mixed; China central bk cuts benchmark rate by 10 bps

MUMBAI – Asian currencies traded on a mixed note Tuesday as the dollar index held steady in early trade amid lack of significant cues. People's Bank of China Tuesday cut its benchmark one-year loan prime rate for the first time since October to mitigate the impact of the of US-China trade war. The easing of monetary policy is expected to boost consumption and loan growth in a sluggish economy. 

China's central bank lowered the one-year prime rate by 10 basis points to 3.0% while the five-year loan prime rate was brought down to 3.5%. The central bank also reduced the average reserve requirement ratio to 6.2% from 6.6%. 

The dollar index remained largely steady on Tuesday in early Asian trade as investors take note of the ongoing tariff uncertainties and a rising US fiscal debt. At 1005 IST, the dollar index, which measures the strength of the dollar against a basket of six major currencies, was at 100.35, little changed from 100.38 Monday, and down from 100.98 Friday.

The Taiwan dollar was down 0.1% against the dollar while the South Korean won fell 0.3%. The Philippines peso rose 0.1% against the greenback. The central bank of the Philippine said the peso's exchange rate may not be a part of the trade negotiations with the US, as it hinted at a preference for non-interest rate measures to manage capital inflows. 

The Malaysian ringgit traded flat against the dollar. The Indonesian rupiah was up 0.2% against the greenback ahead of Bank Indonesia's policy announcement Wednesday, where the central bank is widely expected to lower the interest rate by 25 bps to support economic growth. 

The Thai baht fell 0.2% against the greenback in early trade. Data on Monday showed Thailand's economy expanded by 3.1% on year in Jan-Mar, beating the analysts' forecast of 2.9% rise in a Bloomberg survey. Thailand's Finance Minister Pichai Chunhavajira on Monday said the country's economy would slow down sharply in the third and fourth quarter of the year as the tariff uncertainties by the US are expected to hit the export-heavy economy.  (Gowri Lakshmi)

India Rupee: Steady as dollar index little changed; volume low in early trade

MUMBAI – The rupee was steady early Tuesday as the dollar index was little changed from Monday, dealers said. A few minutes after opening, the rupee fell to a low of 85.55 a dollar, before recovering slightly. Since the overall volume was low, even a small quantum of dollar purchases led to a rise of the dollar/rupee, they said.

"There is very less volume right now, as we saw yesterday," a dealer with a state-owned bank said. "The rupee's movement in 85.30-85.60 is a comfortable range, and currently only flows seem to move it beyond this range."

Dealers expect importers or exporters to purchase or sell dollars respectively in substantial amounts only when the rupee either rises above 85.30 a dollar or falls beyond 85.60 a dollar. They said the rupee will remain supported till there are no outflows from domestic equities.

The dollar index remained steady Tuesday as market participants waited for more details regarding US-China trade deal and further data to assess the health of the US economy. The dollar index, which measures the strength of the greenback against a basket of six major currencies, was 100.34 at 0936 IST, little changed from 100.38 Monday, and down from 100.98 Friday.

Crude oil prices inched up Monday, which weighed on the rupee, dealers said. Oil prices were up Monday on signs of a breakdown in talks between US and Iran over its nuclear programme. At 0941 IST, the July Brent crude contract on the Intercontinental Exchange was $65.52 per barrel, compared to $65.54 per barrel Monday and $65.41 per barrel Friday.

During the day, the rupee is seen moving between 85.30 and 85.60 against the dollar. Dealers see strong technical support for the rupee at 85.60 against the greenback.  (Sourabh Kumar)

India Rupee: Expected range for rupee - May 20

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

(Gowri Lakshmi and Sourabh)

End

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

Edited by Rajeev Pai

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