Informist, Friday, Jan 14, 2022

By Pratiksha and Arushi Jain

NEW DELHI – The rupee ended sharply lower against the dollar today because some state-owned banks stepped in to purchase the dollar on behalf of oil marketing companies, which noted elevated crude oil prices, said dealers. 

Prices of Brent crude oil recovered from their earlier lows and remained elevated beyond the $85-per-barrel mark due to supply constraints and a globally weak dollar, said dealers. A weaker dollar makes commodities more affordable for holders of other currencies.

At 1619 IST, the March contract of Brent crude on the Intercontinental Exchange was at $85.43 per bbl compared with the previous close of $84.47 per bbl. It was at $84.67 per bbl on Wednesday.

After moving in a narrow 16 paise range throughout the day, the rupee settled at 74.1500 a dollar against 73.8800 a dollar at 1530 IST on Thursday. The local unit had opened lower at 74.0500 a dollar.

Moreover, the sentiment for the local currency was dampened also due to a slump in domestic and Asian equity indices, which weakened because investors feared policy tightening by major central banks on the back of rising inflation globally, said dealers.

Both the Nifty 50 and the Sensex were in the red for most of the session and eventually ended flat today.

Today, the rupee saw the day's low at 74.2000 a dollar. 

On the flip side, losses in the Indian unit were limited as the dollar index remained weak globally and headed for its worst week in more than a year as investors have now fully priced in rate hikes this year by the US Federal Reserve, said dealers.

Data released on Wednesday showed an expected surge in US consumer prices in December, indicating that the Fed may not have to hike interest rates too aggressively.

The US consumer price index rose 0.5% in December after advancing 0.8% in November. In the 12 months through December, the CPI surged 7%, the biggest year-on-year increase since June 1982.

At 1619 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 94.78 against 94.79 on Thursday. It was at 94.92 on Wednesday.

The dollar index had fallen to as much as 94.63 earlier today.

Governor Lael Brainard, the latest senior Fed official to signal prompt Fed action, said during her confirmation hearing before the Senate Banking Committee, that “we do have a powerful tool, and we are going to use it to bring inflation down over time."

Meanwhile, trade volumes in the currency market were lower than usual as traders stayed on the sidelines due to lack of any significant cues in the market, according to dealers.

"Trade volumes were dull today as traders are apprehensive about the direction of the rupee from here, so nobody stepped in to place fresh bets," said a dealer with a state-owned bank. 

Investors now await the release of the US retail sales data, due later today, for further cues on economic recovery in the US and the pace of Fed's policy normalisation plan, said dealers.

FORWARDS

Premium on the dollar/rupee forwards contract settled lower due to dollar sales by banks on behalf of exporters, dealers said.

On an annualised basis, premium on the one-year, exact-period dollar/rupee contract was at 4.72%, compared with 4.74% on Thursday. The premium was at 349.92 paise compared with 350.51 paise on Thursday.

OUTLOOK

On Monday, the rupee may take opening cues from overnight movement in the dollar index after the release of US retail sales data, later today, said dealers.

Dealers said that the local unit may also take cues from prices of Brent crude oil.

Dealers have pegged strong key technical support for the rupee at 74.20 a dollar.

During the day, the rupee is seen at 73.8000-74.2500 a dollar.

India Rupee:Dn as domestic equities slump; weak dlr index limits fall

NEW DELHI – The rupee fell sharply against the dollar because domestic and Asian equity indices slumped today tracking an overnight weakness in US stocks, said dealers. 

Dealers said global equities fell due to investors' fears of policy tightening by major central banks on the back of rising inflation globally. 

At 1041 IST, the Nifty 50 and the Sensex were nearly 0.5% and 0.6% lower, respectively.

Meanwhile, losses in the local unit were limited as the dollar index remained weak because data released on Wednesday showed an expected surge in US consumer prices in December, indicating that the US Federal Reserve may not have to hike interest rates too aggressively, said dealers.

The US consumer price index rose 0.5% in December after advancing 0.8% in November. In the 12 months through December, the CPI surged 7%, the biggest year-on-year increase since June 1982.

At 1041 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 94.68 against 94.79 on Thursday. It was at 94.92 on Wednesday.

Investors now await the release of the US retail sales data, due later today, for further cues on economic recovery in the US and the pace of US Fed's policy normalisation plan.

"We are seeing the support level for rupee at 74.15/$1, but if it breaks, it (rupee) might depreciate down to 74.20/$1-74.25/$1 levels today," said a dealer with a state-owned bank.

The rupee is seen moving in a range of 73.8000-74.2000 a dollar during the day. (Pratiksha)

India Rupee: Expected range for rupee - Jan 14

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

(Pratiksha)

End

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

Edited by Maheswaran Parameswaran

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