Informist, Thursday, Jul 14, 2022

By Pratiksha and Srijonee Bhattacharjee

NEW DELHI – The rupee ended at a record closing low against the greenback for the fourth consecutive session today as the dollar gained further ground globally on expectation of faster policy tightening by the US Federal Reserve, dealers said. 

The rupee was also weighed by continuous purchases of the US currency by oil marketing companies and foreign institutional investors who pulled out of Indian assets, dealers said. 

Today, the rupee closed 0.3% lower at a record closing low of 79.8750 a dollar. Earlier today, it fell to an all-time low of 79.9150 a dollar.

The Indian currency began the day 9 paise lower at 79.7150 a dollar because the greenback rose against a basket of major currencies due to higher-than-expected US June CPI data, dealers said.

Data from the US Labor Department on Wednesday showed that inflation in the US jumped 9.1% in June, higher than the anticipated 8.8%, marking the largest increase in nearly 41 years. 

This led to fears that the US Federal Reserve may go for a supersized rate hike of 100 basis points in its upcoming July meeting to tame mounting inflation. 

The dollar index, which measures strength in the US currency against a basket of six major currencies, rose to 108.65 today, its highest level since October 2002. 

At 1645 IST, the dollar index was at 108.63 compared with 107.96 on Wednesday. It was at 108.07 on Tuesday.

Three hours into trade, the rupee was dragged to 79.9025 a dollar as foreign banks persistently purchased dollars on behalf of foreign institutional investors, dealers said. 

Moreover, banks continuously purchased dollars on behalf of oil marketing companies, which also weighed on the rupee. 

Prices of crude oil fell more than 2% today as increasing fears of a global economic slowdown weighed on the outlook on demand for the fuel.

At 1645 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $97.49 a bbl as against the previous close of $99.57 a bbl. 

"Buying (of dollars) by oil importers was seen as soon as the market opened," a dealer with a private bank said. 

Dealers said the central banks tried protecting the rupee from falling beyond 79.90 a dollar for a very long time, but as the dollar purchases continued, the domestic unit fell to an all-time low of 79.9150 a dollar. 

As soon as the rupee fell to 79.90-79.91 a dollar levels, the central bank stepped up its dollar sales, as a result of which the rupee pared almost 10 paise of losses, dealers said.

Dealers said the central bank wanted to prevent the rupee from falling beyond the psychologically-crucial support level of 80.00 a dollar. 

"There was aggressive selling by the RBI around the 79.90 (a dollar) level," a dealer with a state-owned bank said. "I think to save the rupee from touching the big number (80 a dollar), we'll see a change of strategy in their intervention. But I don't think the 80 (a dollar) level can be avoided."

However, after oil importers continued their dollar purchases, the rupee ended at a record closing low of 79.8750 a dollar. 

FORWARDS

Premium on dollar/rupee forwards fell as exporters sold dollars for forward delivery in order to book contracts while the dollar/rupee exchange rate soared today, dealers said.

The dollar/rupee exchange rate is a component of the premia received by exporters for selling forward dollars. A rise in the dollar/rupee pushes the receivable premia up, thus encouraging exporters to book contracts at those levels.

The premium on one-year dollar/rupee contract was 234.40 paise, against 244.05 paise on Wednesday. On an annualised basis, the premium was at 2.93% against the previous close of 3.05%.

Banks also sold the greenback for forward delivery as the US CPI inflation for June indicated that the Fed may increase rates aggressively at the upcoming policy meeting on Jul 27-28. An aggressive hike in rates in the US will narrow the differential with Indian rates and this should lead to a fall in currency forward premiums.

OUTLOOK

On Friday, the rupee will take cues from overnight movement in the dollar index and Brent crude oil prices, dealers said.

"If the big figure 80 levels are broken, move towards 81 will be sharp and soon," a brokerage firm said in a note. 

Dealers are of the view that the RBI will continue to intervene through dollar sales to protect the rupee from depreciating sharply against the dollar.

Dealers have pegged immediate key technical support for the rupee at 80.00 a dollar.

During the day, the rupee is seen in the range of 79.70-80.20 a dollar.

 India Rupee: Premia fall as exporters sell fwd dlrs on rupee's fall

MUMBAI – Premium on dollar/rupee forwards fell as exporters sold dollars for forward delivery in order to book contracts while the dollar/rupee exchange rate soared today, dealers said.

The dollar/rupee exchange rate is a component of the premia received by exporters for selling forward dollars. A rise in the dollar/rupee pushes the receivable premia up, thus encouraging exporters to book contracts at those levels.

The premium on one-year dollar/rupee contract was 234.70 paise, against 244.05 paise on Wednesday. On an annualised basis, the premium was at 2.94% against the previous close of 3.05%.

The rupee fell to a record low of 79.9150 a dollar in the spot market earlier in the day due to rise of the dollar index and as foreign investors pulled out of domestic assets, dealers said.

"At 80 dollar/rupee, exporters will of course sell (forward dollars), they will be very happy to receive premia for one year," said a dealer with a private bank. "Plus, once the Fed (US Federal Reserve) hikes rates this month, the premium will fall further, so these levels are better to receive (premiums)."

Banks also sold the greenback for forward delivery as the US CPI inflation for June indicated that the Fed may increase rates aggressively at the upcoming policy meeting on Jul 27-28. An aggressive hike in rates in the US will narrow the differential with Indian rates and this should lead to a fall in currency forward premiums.

Inflation in the world's largest economy hit 9.1% in June--the highest in nearly 41 years, US Labor Department data released Wednesday showed. This stoked expectation that the Fed could go for a 100-basis-point rate hike later this month to curb the soaring inflation.

Back in the domestic forwards market, dealers said that while exporters sold dollars for forward delivery, they weren't selling forward dollars very aggressively in anticipation of further fall in the rupee in the coming days.  (Srijonee Bhattacharjee)

India Rupee: Falls more on dollar buys by FIIs, strong dollar index

NEW DELHI – The rupee fell further against the greenback as banks purchased dollars on behalf of foreign institutional investors, dealers said. 

The US dollar index rose to a fresh near-two-decade high during European trade today on expectations of faster policy tightening by the US Federal Reserve and safe-haven demand amid growing fears of a recession. This further weighed on the Indian unit, dealers said. 

The dollar index, which measures strength in the US currency against a basket of six major currencies, rose to 108.63 today, its highest level since October 2002. 

At 1338 IST, the dollar index was at 108.40 compared with 107.96 on Wednesday. It was at 108.07 on Tuesday.

However, dealers said the losses were restricted as some state-owned banks stepped in to sell the greenback on behalf of the Reserve Bank of India. 

Dealers said the central bank wanted to prevent the rupee from falling beyond the psychologically-crucial support level of 80.00 a dollar. 

Today, the Indian currency fell to a record low of 79.9025 a dollar.

Dealers have now pegged the technical support for the rupee at 80.00 a dollar.

For the rest of the day, the Indian unit is seen at 79.5000-80.0000 a dollar.  (Pratiksha)

India Rupee - Asia FX: Most dn on firm dollar post high US CPI data

MUMBAI – Most Asian currencies were down today as the dollar rose globally after higher-than-expected US June CPI data sparked concern that the US Federal Reserve could go for a 100-basis-point supersized rate hike later this month to curb soaring inflation.

Data from the US Labor Department on Wednesday showed that inflation in the world's largest economy reached 9.1% in June, the highest in nearly 41 years.

At 1102 IST, the dollar index was at 108.41 compared with 107.96 on Wednesday. It was at 108.07 on Tuesday.

Most Asian units were down 0.1-0.5% against the US dollar today. Bucking the trend, the Philippines peso gained 0.15% as the Bangko Sentral ng Pilipinas unexpectedly increased its benchmark overnight borrowing rate by 75 basis points to 3.25%. (Richard Fargose)

India Rupee: Hits record low as dollar surges after high US CPI print

NEW DELHI – The rupee fell to a record low against the greenback in early trade today as the US dollar index strengthened due to higher-than-expected US June CPI data, dealers said.

Data from the US Labor Department on Wednesday showed that inflation in the US jumped 9.1% in June, higher than the anticipated 8.8%, marking the largest increase in nearly 41 years. 

This led to fears that the US Federal Reserve may go for a supersized rate hike of 100 basis points in its upcoming July meeting in a bid to tame the mounting inflation. 

The dollar index, which measures strength in the US currency against a basket of six major currencies, rose to 108.58 on Wednesday, its highest level since October 2002. 

At 0930 IST, the dollar index was at 108.30 compared with 107.96 on Wednesday. It was at 108.07 on Tuesday.

Meanwhile, dealers said losses in the Indian currency were limited as some banks sold dollars, likely on behalf of the Reserve Bank of India. 

Dealers said the central bank wanted to prevent the rupee from falling beyond the immediate support level of 79.80 a dollar. 

"The 80 (a dollar) level might not be breached today, since the RBI may continue with its strategy of intervening and managing the volatility in the market," a dealer with a state-owned bank said. 

The Indian currency fell to a record low of 79.7700 a dollar today. 

Dealers have pegged the immediate technical support for the rupee at 79.80 a dollar.

For the rest of the day, the Indian unit is seen moving in the range of 79.5000-79.9000 a dollar.  (Pratiksha)

India Rupee: Expected range for rupee - Jul 14

NEW DELHI – Following are the expected support and resistance levels for the rupee, as forecasted by leading banks and brokerages in an Informist poll:

(Pratiksha and Richard Fargose)

End

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

Edited by Maheswaran Parameswaran

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