Informist, Monday, May 2, 2022

By Pratiksha

NEW DELHI – The rupee pared gains and ended lower against the dollar today because of persistent dollar purchases by oil marketing companies, dealers said.

The Indian currency settled at 76.5150 a dollar, off the day's high of 76.3450 a dollar.

The rupee had opened about 7 paise lower at 76.4900 a dollar, against Friday's closing level of 76.4250. Shortly afterward, it moved up to 76.4050 as some banks sold dollars for investment by overseas investors in the initial public offering of Life Insurance Corp of India, dealers said.

The public issue of LIC will open on Wednesday and close on May 9. The issue size is 210-220 bln rupees.

The rupee then traded in a narrow range of 76.40-76.48 a dollar for more than two hours, after which it rose further as some foreign banks persistently sold dollars for overseas investments into LIC's IPO.

"There was selling (of dollars) for LIC IPO as soon as the market opened," said a dealer with a state-owned bank. "I had expected the rupee to break the 76.35 (a dollar) resistance level, which it didn't because there were many negative factors."

The rupee then moved in a narrow range of 76.40-76.46 a dollar for more than an hour, weighed down by dollar purchases by banks on behalf of oil marketing companies, dealers said.

Crude oil prices have been on the rise since the war between Russia and Ukraine broke out, so oil importers try to make the most of a fall in prices.

Crude oil prices fell today as concerns about weak economic growth in China, the world's top oil importer, outweighed fears of likely supply stress from a potential European Union ban on Russian crude.

Data released on Saturday showed that manufacturing activity in China, the world's second-largest economy, contracted for the second month to its lowest since February 2020 because of COVID-19 related lockdowns.

China's manufacturing Purchasing Managers' Index fell to 47.4 in April as COVID-19 lockdowns hit production.

At 1705 IST, the June contract of Brent crude was at $104.23 a barrel on the Intercontinental Exchange against the previous close of $107.14 a bbl. Prices had fallen to $103.58 a bbl earlier in the day.

The dollar index remained elevated near a 20-year-high, as investors prepared for a rate hike by the US Federal Reserve at its meeting this week. This also weighed on the Indian currency, dealers said.

Bank of England is also set to meet on Thursday, and is expected to raise rates by 25 basis points to 1%.

At 1700 IST, the dollar index, which measures the value of the greenback against six major currencies, was at 103.40 against 103.21 on Friday. It was at 103.62 on Thursday. The index gained 5% in April, its best monthly performance since January 2015.

Trade volume in the currency market was lower than usual as traders stayed on the sidelines and refrained from placing fresh bets ahead of the US Federal Open Market Committee's two-day meeting that concludes on Wednesday, dealers said. 

The Fed is expected to deliver an interest-rate increase of half a percentage point in the upcoming meeting, and 50-75 bps each in the next two meetings.

A fall in domestic share indices also dampened sentiment for the rupee. Both the Nifty 50 and Sensex ended 0.2% lower each.

FORWARDS

Premiums on dollar/rupee forward contracts were sharply down on the view that the interest rate differential between India and US may narrow fast.

The outcome of the US Federal Open market Committee's meeting is due on Wednesday. The Fed is expected to raise rates by half a percentage point, and 50-75 bps each in next two meetings.

The premium on the one-year, exact-period dollar/rupee contract was at 285.25 paise, against 291.20 paise on Friday. On an annualised basis, the premium was at 3.73%, against the previous close of 3.81%.

OUTLOOK

Financial markets will be closed Tuesday on account of Id-ul-Fitr.

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

Traders will also continue to monitor developments related to the ongoing Russia-Ukraine war.

Foreign and private banks are expected to sell dollars for investment by overseas funds into the public offer of LIC, dealers said.

Dealers have now pegged strong key technical resistance at 76.30 a dollar.

During the day, the rupee is seen in the range of 76.3000-76.8000 a dollar.

 India Rupee - Asia FX: Down as dollar index firm

MUMBAI – Asian currencies fell as the dollar index was firm in the early trade today due to rising bets of aggressive US interest rate hikes and concern about global economic growth.

Contraction in Chinese factory activity in April raised concern about global economic growth outlook.

China's official manufacturing Purchasing Managers' Index for April declined for second straight month, to 47.4, as COVID lockdowns hit industrial production.

At 1030 IST, the dollar index was at 103.45, against 103.21 on Friday.

Movement in most Asian currencies was limited due to low volumes as markets in Hong Kong, China, Singapore and Taiwan were closed today for a holiday.

However, a weaker-than-expected exports data pulled South Korean won 0.8% lower today.

South Korea's exports rose 12.6% on year in April on the back of brisk demand for chips and petroleum products, but imports grew 18.6%, and the trade deficit came to $2.66 bln, sharply up from a deficit of $140 mln the previous month. (Richard Fargose)

India Rupee: Falls as domestic shares down; inflows for LIC IPO aid

NEW DELHI – The rupee fell against the greenback today because domestic and Asian share indices were down as a contraction in the Chinese factory activity in April weighed on the global economic growth outlook, dealers said. 

China's official manufacturing Purchasing Managers' Index for April fell for the second straight month to 47.4 as COVID-19 lockdowns hit industrial production.

At 0939 IST, the Nifty 50 and the Sensex fell 0.7% and 0.8%, respectively.

The dollar index remained elevated today after easing from 20-year highs on Friday. This also weighed on the local unit, according to dealers. 

At 0939 IST, the dollar index, which measures the value of the greenback against six major currencies, was at 103.38, against 103.21 on Friday. It was at 103.62 on Thursday. 

Meanwhile, some banks stepped in to sell dollars, likely for overseas investments into the initial public offering of Life Insurance Corp of India, which limited further losses in the Indian unit, dealers said. 

The LIC IPO will open on May 4 and close on May 9. The issue size of the public offer is 210-220 bln rupees. 

"The rupee will see the upside 76.30 (a dollar) level due to the continuous LIC IPO related flows today, but investors may also practice caution ahead of the Fed policy outcome," a dealer with a state-owned bank said. "I think it (rupee) should remain in a narrow range of 76.30-76.55 (a dollar) today."

The rupee is seen at 76.3000-76.7000 a dollar for the rest of the day.  (Pratiksha)

India Rupee: Expected range for rupee - May 2

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 and Richard Fargose)                                        

End

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

Edited by Ashish Shirke

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