Informist, Tuesday, Oct 12, 2021

By Arushi Jain

MUMBAI – The rupee fell against the dollar today because foreign banks persistently purchased the US unit on behalf of oil marketing companies due to a sharp rise in Brent crude oil price, dealers said.

However, dollar sales by some state-owned banks, likely on behalf of the Reserve Bank of India, limited the rupee's fall, the dealers added.

The Indian currency closed at its lowest level since Jul 1, 2020 at 75.5100 a dollar compared with 75.3550 at 1530 IST on Monday.

The Indian unit had opened lower at 75.4100 a dollar because Brent crude oil futures settled at their highest levels in years on Monday. The surge in oil prices follows a rebound in demand globally with the lifting of pandemic-induced restrictions.

The boost in demand has also contributed to power and gas shortages in major economies across Asia, Europe and the US.

In India, many states and power plants have flagged shortage of coal in the past week. The shortage is said to be due to high power demand and a prolonged monsoon season which disrupted the mining process.

As a result, sentiment for the rupee was affected given that India is the third-largest importer of crude oil and high crude oil prices worsen the country's current account deficit by increasing the import bill.

At 1642 IST, the December contract of Brent crude on the Intercontinental Exchange was at $83.94 per barrel, as against $83.65 a bbl at close on Monday. Prices were at $82.39 a bbl on Friday.

The price of Brent oil has surged by more than 60% so far this year.

"Oil importers are probably readying themselves for seeing oil at $90/bbl," said a dealer with a private bank.

Early in the trade, the rupee hit the day's high of 75.1575 a dollar because some foreign banks stepped in to sell dollars on behalf of foreign investors investing in two large Indian corporates, said dealers.

However, later in the session when dollar sales dried up, the rupee started to depreciate due to persistent dollar purchases by oil marketing companies, dealers said.

Dealers said some banks rushed to buy dollars after stop-losses got triggered near 75.50 a dollar levels, which pushed the rupee to the day's low of 75.6625 a dollar.

This was also the lowest intra-day level since Jun 25, 2020 for the Indian currency.

The weakness in the rupee was curtailed after some state-owned banks sold dollars on behalf of exporters at higher dollar/rupee levels of 75.60 a dollar, dealers added.

Some dealers were of the view that part of these dollar sales were on behalf of the central bank that may have stepped in to curtail the sharp volatility in currency trade.

"There may have been intervention from RBI at higher (dollar/rupee) levels, coupled with lumpy corporate flows which pushed prices lower. But rising oil prices and firming US bond yields kept bids alive," said Anindya Banerjee, deputy vice president, currency derivatives and interest rate derivatives at Kotak Securities Ltd.

Investors now look forward to data on US inflation and retail sales, due Wednesday, for further cues on global economic recovery.

Investors are also waiting for the minutes of the US Federal Open Market Committee's meeting, also due Wednesday, for cues on when the US central bank will start tapering its massive bond-buying programme.

Traders across Asia were cautious after the thirteenth round of military talks between India and China to cool tensions in eastern Ladakh ended in a stalemate on Sunday.

"Resumption of the buying bias in the dollar coupled with higher US yields across the curve encourages the US dollar index to refocus its price action on the upside," said a dealer with a foreign bank.

FORWARDS

The premium on dollar/rupee forwards contract ended marginally lower because state-owned banks sold dollars for forward delivery on behalf of exporters, and likely for the RBI, dealers said.

On an annualised basis, premium on the one-year, exact-period dollar/rupee contract was at 4.42%, against 4.43% on Monday. The premium was at 333.37 paise, compared with 333.95 paise on Monday.

OUTLOOK

On Wednesday, the rupee will take opening cues from overnight movement in Brent crude oil prices and the dollar index.

Foreign banks may continue to buy dollars on behalf of oil marketing companies noting the high Brent oil prices, said dealers.

However, dollar sales by banks for exporters at higher dollar/rupee levels and likely on behalf of the central bank may check any sharp fall in the Indian rupee, dealers said.

Dealers now see strong key technical support for the rupee at 75.90 a dollar.

The rupee is seen at 75.1000-75.7000 a dollar during the day.

India Rupee: Sharply down as banks buy dollars for oil importers

MUMBAI – The rupee fell sharply against the dollar in intra-day trade because foreign banks stepped in to purchase dollars on behalf of oil marketing companies due to a sharp rise in Brent crude oil prices, said dealers.

At 1314 IST, the December contract of Brent crude on the Intercontinental Exchange was at $83.67 per barrel, compared with $83.65 a bbl at close on Monday. Prices were at $82.39 a bbl on Friday.

Oil prices surged on the back of a rebound in global demand as COVID-induced curbs were lifted, which also contributed to power and gas shortages in major economies.

"Coal shortage remains a worrisome factor for the economy as stockpiles have reduced to unprecedented low levels (of less than a week) in most power plants across India," said a dealer with a brokerage.

"As India generates a majority of its electricity from coal, this shortfall can lead to derailment of the post-pandemic recovery path."

The Indian currency fell to its lowest intra-day level since Jun 29, 2020.

Foreign banks' dollar sales on behalf of foreign investments in two large Indian corporates seen in early trade dried up, which also weighed on the rupee, dealers added.

The Indian unit is expected to move in a range of 75.2500-75.7500 a dollar during the day.  (Arushi Jain)

India Rupee: Rises as some foreign banks sell dollars in early trade

MUMBAI – The rupee rose against the dollar today because foreign banks stepped in to sell dollars on behalf of foreign investors investing in two large Indian corporates, said dealers.

The rupee further found support as some banks also stepped in to sell dollars on behalf of exporters at higher dollar/rupee levels of 75.40 a dollar, said dealers.

A US-based bank was said to have sold dollars in a considerable quantum, dealers said.

Currency traders were largely on the sidelines ahead of the release of inflation and retail sales in the US, due on Wednesday, for further cues on economic recovery in the world's largest economy, said dealers.

Investors worldwide also awaited the release of minutes of the US Federal Open Market Committee's meeting, also due on Wednesday, for cues on when the US Federal Reserve will begin tapering its massive bond-buying programme.

Dollar was firm against a basket of major currencies today and at 1047 IST, the dollar index, which measures the US currency against six other major units, was at 94.31 compared with 94.32 on Monday. It was at 94.10 on Friday.

The rupee had opened lower at 75.4100 a dollar today.

The Indian unit is expected to move in a range of 75.10-75.60 a dollar during the day.  (Arushi Jain)

India Rupee: Expected range for rupee - Oct 12

MUMBAI - The following are the expected support and resistance levels for the rupee, as forecast by leading banks and brokerages in an Informist poll:

(Arushi Jain)

India Rupee - Asia FX: Most down on high crude prices, firm dollar

NEW DELHI – Most Asian currencies were down against the dollar in early trade today as crude oil prices remained near three-year-high levels amid a global energy crisis. 

Crude oil prices have remained elevated after the Organization of the Petroleum Exporting Countries and its allies last week decided to not increase oil output beyond the planned 400,000 barrels per day every month.

A firm dollar index and high yields of US Treasury bonds also weighed on Asian currencies. The dollar index was at 94.33 compared to 94.32 on Monday and 94.10 on Friday.

The South Korean won and the Taiwan dollar fell the most among their Asian peers.

Meanwhile, the Thai baht rose 0.7% after the decision to relax travel requirements for vaccinated visitors brightened the outlook for the tourist-reliant economy. Visitors from 10 low-risk countries will not be required to undergo isolation on arrival in Thailand from Nov 1.  (Shubham Rana and Pratiksha) 

End

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

Edited by Ashish Shirke

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