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India Rupee Review: At record closing low on high crude oil prices

Informist, Monday, Oct 16, 2023

 

By Ananya Chaudhuri

 

MUMBAI – The rupee ended at a record closing low against the dollar today, as crude oil prices hovered around a two-week high on fears that the war between Israel and Palestinian militant group Hamas will spread to the neighbouring countries and hit supply of crude oil from the region, dealers said.

 

However, persistent dollar sales by banks, likely on behalf of the Reserve Bank of India, aided the rupee, dealers said. 

 

The Indian currency settled at 83.2675 a dollar, against 83.2625 a dollar on Friday and the same level as on Sep 18. The rupee had opened largely steady against the greenback at 83.2450 as a fall in the dollar index offset the impact of a surge in crude oil prices, dealers said.

 

Dealers said banks likely sold the US unit in the offshore non-deliverable forwards market, likely on behalf of the RBI, which supported the Indian currency when the market opened.

 

The dollar index fell after Philadelphia Fed President Patrick Harker said on Friday that he believes the US central bank can stop raising interest rates. His comments came after Atlanta Fed President Raphael Bostic last week said that the current policy is sufficiently restrictive.

 

Market participants are now waiting for speeches by Fed officials, especially by Chair Jerome Powell, at a US Economic Club of New York event starting Tuesday, for further cues on the US central bank's rate hike trajectory. Powell is scheduled to speak at the event at 2130 IST on Thursday.

 

At 1656 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.50 as against 106.67 on Friday and 106.57 on Thursday. The index fell as much as 106.40 during the day.

 

Shortly after opening, the rupee touched the day's high of 83.2300 against the dollar. 

 

On Friday, Brent crude oil prices rose nearly 6%, the sharpest since April, as Israel prepared for ground assault on the Gaza Strip. Crude oil prices also surged after Iran's Foreign Affairs Minister Hossein Amir-Abdollahian said Israel's failure to end aggression towards Palestinians may force other parties in the region to act.

 

A rise in crude oil prices increases India's import bill and subsequently weighs on the rupee. At 1656 IST, the December contract of Brent crude oil on the Intercontinental Exchange was at $90.86 a barrel, against $90.89 a bbl on Friday. It was at $86.00 a bbl on Thursday. Today, prices rose as much as $91.20 a bbl.

 

Some foreign banks purchased the greenback on behalf of importers who expected the Indian currency to depreciate further, which also exerted pressure on the rupee, dealers said.

 

"Global cues are not in favour of the rupee. General positional buying (of dollars) were there. Mostly, people expect the rupee to depreciate. That was one factor working out," a dealer at state-owned bank said.

 

Dealers said exporters remained on the sidelines, expecting the Indian currency to breach 83.30 a dollar level in the near future.

 

Fall in local share indices also weighed on the Indian currency, dealers said. Today, the benchmark Sensex and Nifty 50 ended 0.2% and 0.1% lower, respectively.

 

However, banks rushed to sell the US currency at around 83.27 a dollar level, likely on behalf of the RBI, which prevented the Indian currency from falling below the psychologically crucial level of 83.29 against the dollar, dealers said.

 

"To some extent, that (RBI's intervention) was also there. That was why it (rupee) was not falling. Crude prices have gone up, and that also added to dollar demand. But they (RBI) have protected the 83.30 (a dollar) level," a dealer at a big state-owned bank said. 

 

Throughout the day, the Indian currency moved in a tight range of 5 paise against the dollar as banks' persistence dollar sales offset the impact of high crude oil prices, dealers said.

 

 AT 1530 ISTAT 0900 ISTHIGHLOW

PREVIOUS

(AT 1530 IST)

Spot rupee per $183.267583.245083.230083.280083.2625
1-year dlr/rupee fwd (paise)142.97146.65146.65142.26146.24

 

FORWARDS

Premium on one-year dollar/rupee forward contracts fell to an over six-week low as banks sold dollars for forward delivery ahead of the maturity of RBI's dollar/rupee swap of $5 bln on Oct 23, dealers said.


"There are worries of dollar crunch in the market as the sell/buy swap maturity is nearing," said a dealer with a private bank. "The movement can be seen in both the near and far tenures."

 

A rise in US Treasury yields also pressured the premiums, dealers said. US Treasury yields rose in European trade as investors assessed the US economic outlook amid uncertainty over the monetary policy path going ahead as well as the geopolitical concerns in West Asia.

 

Premiums on forwards of a currency pair are reflective of the interest rate differential between the two countries.

 

Premium on the one-year, exact-period dollar/rupee forward contract was at 142.26 paise, against 146.24 paise at close on Friday. On an annualised basis, the premium was at 1.71%, against its previous close of 1.75%.

 

OUTLOOK

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

 

Market participants will closely monitor Fed officials' speeches at the US Economic Club of New York event, for further cues on the central bank's rate trajectory.

 

Dealers have pegged key technical support for the rupee at 83.30 a dollar, a breach of which could push the rupee to 83.50 a dollar. During the day, the rupee is seen in the range of 83.00-83.50 a dollar.


India Rupee – World FX:Dlr index dn before US Fed chair's speech Thu

 

 AT 1506 ISTHIGHLOWPREVIOUS
GBP/USD 1.21571.21791.21421.2123
EUR/USD 1.05381.05441.05091.0511
NZD/USD 0.59180.59290.59000.5884
AUD/USD 0.63240.63320.63000.6230
USD/JPY 149.4740149.6280149.3740149.5550
USD/CAD 1.36451.36621.36341.3666
EUR/JPY 157.5130157.6160156.9896157.2000
CHF/USD 1.10781.10971.10591.0923
EUR/CHF 0.95120.95250.94870.9497

 

MUMBAI – The dollar fell against its major peer currencies today, as investors await US Federal Reserve Chair Jerome Powell's speech for further cues on the US central bank's rate hike trajectory. 

 

Powell is scheduled to speak at a US Economic Club of New York event at 2130 IST on Thursday. Market participants will also monitor comments by other Fed officials at the event, which starts on Tuesday. 

 

The dollar index fell after Philadelphia Fed President Patrick Harker said on Friday that he believed the US central bank could stop raising interest rates. His comments came after Atlanta Fed President Raphael Bostic had said last week that the current policy was sufficiently restrictive.

 

At 1506 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.43 as against 106.67 on Friday and 106.57 on Thursday.

 

The euro rose 0.3% against the dollar as investors focus on a meeting of eurozone finance ministers today. 

 

The Australian dollar gained 0.4% against the dollar ahead of minutes of the Reserve Bank of Australia's policy review meeting, scheduled to be released on Tuesday. 

 

The Canadian dollar rose 0.1% against the US dollar, tracking sharp gains in crude oil prices. Crude oil prices are at around a two-week high due to concerns that the war between Israel and Gaza could spread to other countries and hit oil supply from the region. 

 

Canada is the top exporter of crude oil to the US. 

 

At 1506 IST, the December contract of Brent crude oil on the Intercontinental Exchange was at $90.58 a bbl, as against $90.89 a bbl on Friday. It was at $86.00 a bbl on Thursday. Earlier today, prices had risen to as much as $91.20 a bbl.

 

The pound sterling rose 0.1% against the US currency while investors monitored comments by Bank of England Chief Economist Huw Pill at an event today. (Ananya Chaudhuri)


India Rupee: In narrow range; banks sell dollars likely for RBI

 

 AT 1358 ISTAT 0900 ISTHIGHLOWPREVIOUS(AT 1530 IST)
Spot rupee per $183.260083.245083.230083.277583.2625

 

MUMBAI – The rupee moved in a narrow range of 5 paise against the dollar. Banks stepped in to sell the greenback in the domestic spot currency market, likely on behalf of the Reserve Bank of India, which offset the impact of high crude oil prices, dealers said. 

 

Dealers speculated that the central bank sold the greenback around 83.27 a dollar to shield the rupee from depreciating below the record low level of 83.29 against the US unit.

 

The dollar index extended losses in European session ahead of a speech by the US Federal Reserve Chair Jerome Powell later this week for more cues on the US central bank's rate hike trajectory, which supported the Indian currency. At 1359 IST, the dollar index, which measures the strength in the greenback against a basket of six major currencies, was at 106.55 as against 106.67 on Friday. It was at 106.57 on Thursday.

 

Dealers said that due to a sharp rise in crude oil prices, the Indian currency was hovering around its record low level of 83.29 a dollar which it hit October last year. 

 

Brent Crude oil rose nearly 6% on Friday–its sharpest surge since April–as Israel started ground raids on the Gaza Strip. Crude oil prices also surged on recent comments by Iranian minister on the Israel war. Hossein Amirabdollahian, Iran's minister of foreign affairs, said Israel's failure to end aggression towards Palestinians may lead to other parties in the region acting on the conflict.

 

A rise in crude oil prices increases India's import bills and subsequently weighs on the Indian currency. At 1359 IST, the December contract of Brent crude oil on the Intercontinental Exchange was at $90.21 a bbl, as against $90.89 a bbl on Friday. It was at $86.00 a bbl on Thursday. Prices rose as much as $91.20 a bbl.

 

Dealers said exporters remained on the sidelines, expecting the Indian currency to fall further in the near future, which also put pressure on the local currency. "Exporters are expecting dollar appreciation, and it (rupee) to fall beyond 83.30 (a dollar). Therefore, they are waiting to breach this level," dealer said. "The market, today, is very range bound…and we are expecting it (narrow range) may continue."

 

Dealers see immediate technical support for the rupee at 83.30 a dollar. During the day, the rupee is seen in the range of 83.00-83.30 a dollar. (Vaishali Tyagi and Sourabh Kumar)


India Rupee – Asia FX:Most units down as dlr up on safe haven demand

 

MUMBAI – Most Asian currencies were weak against the dollar today after the dollar index strengthened on safe haven demand, as investors were cautious amidst escalation of the Israel war.

 

The South Korean won slipped 0.3% against the greenback, the most among its Asian peers. South Korean central bank is expected to keep its benchmark rate unchanged at 3.5% for the sixth consecutive time this Thursday, with inflation continuing to ease amid lingering concerns over growth.

 

The Indonesian rupiah fell 0.2% against the US unit after data showed the country saw outflows of $1.1 bln from Indonesian government bonds last month, the most in nearly a year.

 

The Taiwan dollar fell 0.1% against the dollar, as a rise in crude oil prices weighed on the country’s currency. Crude oil imports constitute almost 44% of the country's total energy needs, with most of them coming from West Asia.

 

The Philippines peso fell 0.1% against the greenback. The government's offshore borrowings during January to September this year were up 29% on year at $10.99 bln, data released by Bangko Sentral ng Pilipinas, the central bank of the Philippines, showed.

 

The Malaysian ringgit fell 0.2% against the greenback, while the Thai baht remained largely flat.

 

Brent crude oil rose nearly 6% on Friday — its sharpest surge since April – as Israel started ground raids into the Gaza Strip. At 1104 IST, Brent crude was at $91 a bbl, holding Friday's gain to $90 a bbl from Thursday's level of $86.

 

Crude oil prices also surged on recent comments by Iranian minister on the ongoing Israel war. Hossein Amirabdollahian, Iran's minister of foreign affairs, said Israel's failure to end aggression towards Palestinians may lead to other parties in the region acting on the conflict.

 

At 1104 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.51, as against 106.67 on Friday. It was at 106.57 on Thursday.

 

Going forward, investors await a speech by US Federal Reserve Chair Jerome Powell later this week for guidance on the Fed’s rate outlook. (Sourabh Kumar and Vaishali Tyagi)


India Rupee:Largely steady; fall in dlr index offsets high oil prices

 

 AT 0926 ISTAT 0900 ISTHIGHLOWPREVIOUS(AT 1530 IST)
Spot rupee per $183.252583.245083.230083.260083.2625

 

MUMBAI – The rupee was largely steady against the dollar as a fall in the dollar index offset the impact of a surge in crude oil prices, dealers said.

 

Further, dealers speculated that bank might have sold the greenback in the offshore non-deliverable forwards market today, likely on behalf of the Reserve Bank of India, which supported the Indian currency.   

 

"The reserves have also come down, if you see, from the data by the RBI, so the cues are against, but these levels are of strong resistance. Likely the day it (rupee) crosses 83.28-83.29 (a dollar), level, the rupee will go down only," a dealer at a state owned bank said. 

 

India's foreign exchange reserves stand at $584.74 bln as of Oct 6, down $2.2 bln from the preceding week. 

 

The dollar index fell after Philadelphia Fed President Patrick Harker said on Friday that he believes the US central bank can stop raising interest rates. His comments came after Atlanta Fed President Raphael Bostic had said last week the current policy is sufficiently restrictive.

 

At 0927 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 106.55 as against 106.67 on Friday. It was at 106.57 on Thursday.

 

Meanwhile, prices of Brent crude oil surged almost 5% on Friday, marking their highest weekly gain since February, as investors factored in the possibility that the conflict in West Asia may escalate as Israel begins ground raids into Gaza Strip. This weighed on the local unit, dealers said.

 

A rise in crude oil prices increases India's import bill, which subsequently weighs on the Indian currency.

 

At 0927 IST, the December contract of Brent crude oil on the Intercontinental Exchange was at $91.04 a bbl, as against $90.89 a bbl on Friday. It was at $86.00 a bbl on Thursday.

 

Some banks purchased the greenback on behalf of importers who expected the Indian currency may depreciate from here on, which also exerted pressure on the rupee, dealers said. 

 

Dealers see immediate technical support for the rupee at 83.30 a dollar. During the day, the rupee is seen in the range of 83.00-83.30 a dollar. (Ananya Chaudhuri)


India Rupee: Expected range for rupee – Oct 16

 

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

 

ParticipantsSUPPORTRESISTANCE
State-owned bank83.3083.05
Private bank83.2683.10
Foreign bank83.3283.15
Foreign bank83.3583.20
Brokerage firm83.3583.15
Brokerage firm83.2683.20
Brokerage firm83.3083.20

 

 

 

 

 

 

 

 

 

 

(Ananya Chaudhuri)

 

End

 

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

 

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

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