Informist, Monday, Dec 4, 2023

By Sourabh Kumar

MUMBAI – Despite a weak dollar index and a surge in domestic equities, the rupee ended lower against the dollar today as banks bought the greenback on behalf of oil marketing companies, dealers said.

"Mostly there is buying (of dollars) only from oilers (oil importers). There are no sellers (of dollars). Market is very shallow," a dealer with a state-owned bank said.

After moving in a range of 11 paise during the day, the rupee settled at 83.3650 a dollar today. The rupee had settled at 83.2875 a dollar on Friday.

Oil marketing companies bought dollars, noting a fall in crude oil prices, as such levels seemed lucrative to them. Crude oil prices were down as the Organization of the Petroleum Exporting Countries and its allies furthered their total crude oil output cuts less than market expectations.

At 1533 IST, the February contract for Brent crude oil was at $78.28 a bbl, compared to $78.88 a bbl on Friday. It was at $82.83 on Thursday.

In the morning, the Indian unit opened steady at 83.2600 a dollar, as banks' dollar purchases for importers offset the impact of a weak dollar index, said dealers.

Importers' constant dollar demand kept the Indian currency from capitalising on weakness in the dollar index last month as well.

The dollar index was broadly weak as investors assessed the comments of US Federal Reserve Chair Jerome Powell on Friday, and ahead of a key employment report for November, due at the end of the week, which may influence the outlook for US interest rates.

"We are getting what we wanted to get," Powell said during an event at Spelman College in Atlanta. "Having come so far so quickly, the (Federal Open Market Committee) is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced." 

Post Powell's remarks, a weak purchasing managers' index for November showed that US manufacturing remained subdued with factory employment declining further, as hiring slowed and layoffs increased.

Additionally, the Institute for Supply Management said that its manufacturing purchasing managers' index was unchanged at 46.7 in November, below the estimate of 47.6 in a poll of economists by Reuters. It was the 13th consecutive month when the PMI stayed below 50, indicating a contraction.

Fed fund futures traders are expecting an almost 52% chance of a rate cut by the Fed by March compared with 21% just over a week ago, according to the CME's FedWatch tool.

At 1649 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.33, against 103.19 on Friday. It was at 103.47 on Thursday.

Shortly after opening, banks rushed to purchase the greenback on behalf of oil marketing companies and other importers, which weighed on the Indian unit, dealers said. 

"It seems that the rupee is unable to participate in the rally because of strong import demand," said a dealer with a brokerage firm.

Further, with the election results of three out of four states coming in favour of the Bharatiya Janata Party on Sunday, the domestic equity indices were upbeat today. However, the same did not reflect in the currency market, said dealers.

Market participants had kept an eye on Sunday's election results as it could provide cues to 2024's Lok Sabha elections, which would be crucial for the market's expectation of future policy measures. 

The Nifty 50 closed 2.1% higher at 20686.80 points, after hitting a lifetime high of 20702.65 points during the session. The 30-stock Sensex closed 2.1% higher at 68865.12 points, after hitting a lifetime high of 68918.22 points today. 

Dealers said that with the inclusion of Indian government bonds in JP Morgan's emerging-market index, the Indian market will witness foreign fund inflows soon.

"We are expecting $4 bln of inflows by December 10 for JP Morgan index inclusion, but we haven't seen it so far," said a dealer with a state-owned bank.

In September, JPMorgan announced the inclusion of Indian government bonds in its emerging-market index from June 2024.

FORWARDS

Premiums on one-year dollar/rupee forwards rose today, tracking a fall in US Treasury yields, dealers said. 

On Friday, US Treasury yields fell following US Federal Reserve Chair Jerome Powell's comments that tight monetary policy has been successful in slowing the US economy down and the risks of over- and under-tightening are now fairly balanced, thereby hinting that the Fed may refrain from hiking rates. 

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

The premium on the one-year, exact-period dollar/rupee forward contract was at 131.52 paise, against 128.48 paise on Friday. On an annualised basis, the premium was 1.57%, up from the previous close of 1.54%.

OUTLOOK

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

They expect the RBI to continue selling dollars to prevent runaway depreciation in the rupee.

Investors now await the US November services purchasers managers index due Tuesday, and the US employment report for November due on Friday.

Dealers have pegged key technical support for the local currency at 83.50 a dollar. During the day, the rupee is seen in the range of 83.10-83.40 a dollar.

India Rupee - World FX: Australian dollar down ahead of rate decision

MUMBAI – The Australian dollar weakened 0.5% against the dollar as market participants remained cautious ahead of the Reserve Bank of Australia's final policy meeting of the year on Tuesday and the release of Australia's Jul-Sep quarter GDP figures, due on Wednesday.   

The Reserve Bank of Australia is expected to keep its cash rate on hold at a 12-year high of 4.35%, according to 28 of 30 analysts polled by Reuters. The other two went with a hike of 25 basis points. Further, Moody's economics group forecast a slowdown in Australia's Jul-Sep GDP growth to 0.2% on-quarter owing to a decline in family spending and a fall in business investment.

The pound sterling slipped 0.3% against the greenback ahead of the UK’s retail sales data for November, due on Tuesday.

The euro fell 0.1% against the US currency as German exports unexpectedly fell in October, edging 0.2% lower on month as demand in the European Union slumped, data from the Federal Statistics Office showed today. Germany is the largest economy in the eurozone. 

Meanwhile, the Japanese yen rose 0.1% against the greenback ahead of Japanese CPI data for November, due on Tuesday. 

The Canadian dollar and the Swiss franc strengthened, 0.5% and 0.3%, respectively, against the dollar. 

The dollar index was weak as investors assessed the comments made on Friday by US Federal Reserve Chair Jerome Powell, and ahead of a key US employment report for November, due at the end of the week, which may influence the outlook for US interest rates.

At 1417 IST, the dollar index was at 103.38. The index, which measures the strength of the greenback against a basket of six major currencies, settled at 103.19 on Friday. It was at 103.47 on Thursday.  (Vaishali Tyagi)

India Rupee: Steady as oil cos' dollar buys offset weak dollar index

MUMBAI – The rupee was steady against the dollar as banks' dollar buys for oil marketing companies offset the impact of a broadly weak dollar index, dealers said.

"Oilers must be there, but not much. They are in bits and pieces. There was also a global flow towards the US treasury," said a dealer with a state-owned bank.

The oil marketing companies bought dollars, noting a fall in crude oil prices, as such levels seemed lucrative to them. 

On Thursday, OPEC and its allies agreed to further their total crude oil output cuts to 2.2 mln barrels per day in the first quarter of next year, with the total including a rollover of Saudi Arabia and Russia's already 1.3 mln bpd of current voluntary cuts.

At 1257 IST, the February contract of Brent crude oil was at $78.16 a bbl, compared to $78.88 a bbl on Friday. It was at $82.83 on Thursday.

The dollar index was broadly weak as investors assessed the comments of US Federal Reserve Chair Jerome Powell on Friday, and ahead of key US employment report for November, due at the end of the week, which may influence the outlook for US interest rates.

At 1257 IST, the dollar index was at 103.35. The index, which measures the strength of the greenback against a basket of six major currencies, settled at 103.19 on Friday. It was at 103.47 on Thursday. 

Back at home, with the election results of three out of four states coming in favour of the Bharatiya Janata Party on Sunday, the domestic equity indices were upbeat today. However, the same did not reflect in the currency market, said dealers. At 1254 IST, the Nifty and the Sensex were 1.5% higher each.

"After such good election results, we were expecting foreign fund inflows to come, but they did not seem to have come yet," said the dealer with a state-owned bank. 

Dealers see immediate key technical support for the rupee at 83.50 a dollar. The rupee is seen at 83.10-83.40 against the dollar during the day. (Sourabh Kumar)

India Rupee: Steady as bks' dlr buys for importers offset weak dlr

MUMBAI – The rupee was largely steady against the dollar today as banks bought dollars for importers, which offset the impact of a weak dollar index and ease in crude oil prices, dealers said.

"Strong demand is coming from importers as the rupee opened around 83.2600 level and there is a lot of volume today as of now," a dealer at a state-owned bank said.

The dollar index was broadly weak as investors assessed the comments of US Federal Reserve Chair Jerome Powell on Friday, and ahead of key employment report for November, due at the end of the week, which may influence the outlook for US interest rates.

"We are getting what we wanted to get," Powell said during an event at Spelman College in Atlanta. "Having come so far so quickly, the (Federal Open Market Committee) is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced." 

Powell's comments were backed by a weak reading of the purchasing managers' index for November, which showed that US manufacturing remained subdued with factory employment declining further, as hiring slowed and layoffs increased. 

Additionally, the Institute for Supply Management said that its manufacturing purchasing managers' index was unchanged at 46.7 last month, below the 47.6 estimate of economists polled by Reuters. It was the 13th straight month the PMI stayed below 50, indicating a contraction.

At 0952 IST, the dollar index was at 103.29. The index, which measures the strength of the greenback against a basket of six major currencies, settled at 103.19 on Friday. It was at 103.46 on Thursday.

Meanwhile, Crude oil prices fell as uncertainty over the Organization of the Petroleum Exporting Countries' voluntary output cuts and global fuel demand growth clouded the outlook.

On Thursday, OPEC and its allies agreed to remove around 2.2 mln barrel per day of oil from the global market in the first quarter of the next year, with the total including a rollover of Saudi Arabia and Russia's 1.3 mln bpd of current voluntary cuts.

At 0952 IST, the February contract of Brent crude oil was at $78.37 a bbl, compared with $78.88 a bbl on Friday. It was at $79.98 on Thursday. 

Market participants await the Reserve Bank of India's monetary policy decision and anticipate that the central bank will maintain the current benchmark interest at the central bank's monetary policy meeting on Dec 6-8. 

Dealers see immediate key technical support for the rupee at 83.50 a dollar. The rupee is seen at 83.10-83.40 against the dollar during the day. (Vaishali Tyagi)

India Rupee - Asia FX:Most units up as dlr weakens post Powell speech

NEW DELHI – Most Asian currencies rose against the dollar today as the dollar index was weak following the US Federal Reserve Chair Jerome Powell's comments that tight monetary policy has been successful in slowing the US economy down and the risks of over- and under-tightening are now fairly balanced.

This reinforced expectation among market participants that the Fed may not hike rates going ahead. 

Powell said it was clear that US monetary policy was slowing the economy as expected, with a benchmark overnight interest rate "well into restrictive territory. Powell noted, however, that the Fed is prepared to tighten policy further if deemed appropriate.

Fed fund futures traders are now pricing in a 60% chance of a rate cut by the US Fed by March compared with 21% just over a week ago, according to the CME's FedWatch tool.

At 0945 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 103.27, against 103.19 on Friday. It was at 103.46 on Thursday.

The Taiwan dollar rose 0.4% against the dollar, the most amongst its Asian peers. Both the Malaysian ringgit and Indonesian rupiah rose 0.3% against the US unit. Bucking the trend, the Thai baht fell 0.2% against the greenback. 

Market participants now await the November payrolls report, due on Friday, for more cues on the US interest rate path. (Pratiksha)

India Rupee: Expected range for rupee - Dec 4

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

(Vaishali Tyagi)

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

Edited by Maheswaran Parameswaran

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