Informist, Tuesday, Jul 19, 2022

By Pratiksha and Srijonee Bhattacharjee

NEW DELHI – Even though support from the Reserve Bank of India rescued the rupee from below 80 a dollar levels, purchases of the US unit by importers continued to pose resistance to a significant recovery in the Indian unit, dealers said. 

"I think the importers believe that the weakness in the dollar is temporary. Also, they don't see any supporting factor for the rupee in the near term," a dealer with brokerage firm said. "Maybe this is why they have been buying (dollars) a lot lately."

Earlier in the day, the Indian unit fell to a fresh record low of 80.0575 but found support in sales of the greenback by the Reserve Bank of India, dealers said.

Importers bought dollars continuously as they expect the Indian unit to fall further in the coming days, dealers said.

The rupee also found support from broad-based weakness in the dollar index, which fell to a one-week low during European trade, dealers said. 

The dollar has been losing ground as traders are rolling back bets on an aggressive interest rate hike by the US Federal Reserve at its meeting later this month, However, even during this period, importers are continuously buying dollars, which has limited the rupee's recovery.

This also reflected in importer's behaviour in the forwards market. While importers have begun hedging their currency risk for 2-3 months, exporters have been on the sidelines as they would like to book forward contracts at lower levels for the rupee. Importers are generally found to resist hedging their foreign currency risk as they try to avert the cost of premiums.

At 1653 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 106.49 compared with 107.37 on Monday. It was at 108.06 on Friday.

Today, the Indian currency ended at 79.9400 a dollar as against 79.9700 a dollar on Monday. 

The rupee started the day below the psychologically-crucial level of 80-a-dollar as prices of crude oil surged above $105 per barrel, dealers said. 

Prices rose as supply remained tight with US President Joe Biden's Saudi Arabia trip failing to yield any pledge from the top producers in the Organization of the Petroleum Exporting Countries to boost oil supply.

At 1653 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $104.50 a bbl as against the previous close of $106.27 a bbl. 

However, as some state-owned banks stepped in to sell dollars, likely on behalf of the Reserve Bank of India, the Indian currency pared losses and rose to 79.89 a dollar, dealers said.

"The RBI's move was pretty aggressive today. It continuously tried keeping the rupee above the 80 (a dollar) level and was successful too," a dealer with a state-owned bank said.

The rupee was weighed by persistent dollar purchases by importers who wanted to take advantage of the relatively lower dollar/rupee levels, dealers said.  

Moreover, state-owned banks purchased the US unit on behalf of oil marketing companies, which also weighed on the Indian unit, dealers said. 

During the final two hours of trade, the rupee was in a narrow range of 79.90-79.92 a dollar, and went on to close at 79.9400 a dollar. 

FORWARDS

The premiums on dollar/rupee forwards rose slightly because oil companies and other importers bought dollars for forward delivery in the next two to three months on the worry that the rupee may fall further in the coming days. 

The premium on one-year dollar/rupee contract was 255.00 paise, against 247.00 paise on Monday. On an annualised basis, the premium was at 3.19% against the previous close of 3.09%.

Dealers said that the fall in the rupee below 80 a dollar also led importers to buy dollars in the spot as well forwards markets with a sense of urgency.

"There is buying in the spot and paying in the forwards market by importers," a dealer with a private bank said. "They know that on a daily basis the rupee is moving by 25-30 paise nowadays, better than that pay a premium of 25 paise and book forwards for the month. Maximum they are booking for three months. In the last two three weeks there has been a move of 1 rupee."   

This led to a rise in premia on near-month contracts that was transmitted to the premium on the one-month dollar/rupee forward contract.

OUTLOOK

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

"By December, the dollar will kind of top out, all the aggressive actions will be behind us and the Fed will perhaps turn more data dependent and soften its aggression," said Abheek Barua, chief economist, HDFC Bank. "I suspect there will be very strong intervention at 80 since it is some kind of psychological mark. I think by Nov-Dec we should be back to a range of 78.50-80.00 levels." 

Dealers expect that the RBI will continue to intervene through dollar sales to protect the rupee from depreciating beyond the psychologically-crucial 80-per-dollar mark.

Near-term support for the Indian currency is seen around 80.50 a dollar and the long term support at 81.00 a dollar.

During the day, the rupee is seen at 79.70-80.20 a dollar.

India Rupee: Premia rise as importers hedge dollar deliverables

MUMBAI – The premiums on dollar/rupee forwards rose slightly because oil companies and other importers bought dollars for forward delivery in the next two-three months on worry that the rupee may fall further in the coming days. 

The premium on one-year dollar/rupee contract was 251.50 paise, against 247.00 paise on Monday. On an annualised basis, the premium was at 3.14% against the previous close of 3.09%.

Dealers said that the fall in the rupee below 80 a dollar also led importers to buy dollars in the spot as well forwards markets with a sense of urgency.

"There is buying in the spot and paying in the forwards market by importers," a dealer with a private bank said. "They know that on a daily basis the rupee is moving by 25-30 paise nowadays, better than that pay a premium of 25 paise and book forwards for the month. Maximum they are booking for three months. In the last two three weeks there has been a move of 1 rupee."   

This led to a rise in premia on near-month contracts that was transmitted to the premium on the one-month dollar/rupee forward contract.  (Srijonee Bhattacharjee)

India Rupee: Remains up as dollar index falls to one-week low

NEW DELHI – The rupee remained higher against the greenback as the US dollar index fell to a one-week low in European trade, dealers said.

The index fell as traders moderated their bets on an aggressive interest rate hike by the US Federal Reserve at its meeting later this month.

At 1330 IST, the dollar index, which measures the strength in the US currency against a basket of six major currencies, was at 106.80 compared with 107.37 on Monday. It was at 108.06 on Friday.

Meanwhile, state-owned banks purchased dollars on behalf of oil marketing companies, which weighed on the Indian unit, dealers said. 

For the rest of the day, the rupee is seen moving in the range of 79.7500-80.1000 a dollar.  (Pratiksha)

India Rupee:Breaches 80/$1 mark as crude rises; RBI dlr sales support

NEW DELHI – The rupee breached the psychologically-significant 80-per-dollar mark and fell to an all-time low against the greenback today as the prices of crude oil surged above $105 per barrel, dealers said. 

Crude prices rose on Monday as the dollar index fell below the 108.00 mark and supply remained tight with US President Joe Biden's Saudi Arabia trip failing to yield any pledge from the top Organization of the Petroleum Exporting Countries producers to boost oil supply.

A rise in crude oil prices increases India's import bill, which subsequently dampens sentiment for the rupee.

At 0936 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $105.84 a bbl as against the previous close of $106.27 a bbl. 

A fall in domestic and Asian share indices also weighed on the Indian unit, dealers said. At 0936 IST, the Nifty 50 and Sensex were down 0.2% each.

However, as some state-owned banks stepped in to sell dollars, likely on behalf of the Reserve Bank of India, the Indian currency pared its losses and rose to 79.89 a dollar, dealers said.

"I think RBI will try sustaining above 80 (a dollar) level today, even if it is marginally," a dealer with a state-owned bank said. "However, we are expecting good buying (of dollars) by importers."

For the rest of the day, the Indian unit is seen moving in the range of 79.7500-80.2000 a dollar.  (Pratiksha)

India Rupee: Expected range for rupee - Jul 19

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 Aditya Sakorkar

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