Informist, Wednesday, Jul 6, 2022

By Pratiksha and Srijonee Bhattacharjee

NEW DELHI – Even though foreign institutional investors continuously purchased the greenback, the rupee rose against the dollar today due to persistent dollars sales by the Reserve Bank of India and gains in domestic share indices, dealers said. 

Dealers said some state-owned banks sold dollars on behalf of the central bank, which may have wanted to prevent the rupee from breaching the record low level of 79.3800 a dollar, hit on Tuesday. 

Domestic share indices ended over 1% higher today as a sharp overnight fall in crude prices eased concerns over profitability of most frontline sectors.

After moving in a range of 13 paise throughout the day, the rupee ended at 79.3025 a dollar, as against 79.3700 a dollar at the previous close.

The rupee opened higher at 79.2600 a dollar because prices of crude oil fell about 9% on Tuesday, the biggest daily drop since March, dealers said. 

Oil prices fell on growing concerns of a global recession and COVID-induced lockdowns in China that could hit demand, dealers said.

Mass COVID-19 testing in China stoked fears of potential lockdowns that threaten to weigh on oil consumption, according to reports. 

At 1645 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $103.96 a barrel against the previous close of $102.77 a bbl. It was at $113.50 a bbl on Monday.

An hour into the trade, the rupee moved to the day's low of 79.3675 a dollar, as foreign banks purchased dollars on behalf of foreign institutional investors, dealers said. 

Moreover, banks purchased the US unit on behalf of importers who wanted to take advantage of the relatively lower dollar/rupee levels of 79.23-79.26 a dollar, which also weighed on the Indian unit, dealers said.

The rupee then traded in a narrow range of 79.29-79.35 a dollar for a duration of almost four hours as losses from dollar purchases by foreign portfolio investors were restricted due to dollar sales on behalf of the Reserve Bank of India, dealers said. 

So far this year, the FIIs have pulled out around $30.66 bln from the Indian equity markets.

Meanwhile, the dollar index remained near a two-decade high as fear of a global recession led investors to seek refuge in the safe haven unit, which weighed on the Indian unit, dealers said.   

The index, which measures the strength in the US currency against a basket of six major currencies, rose to 107.02 today, its highest level since December 2002. 

At 1645 IST, the dollar index, was at 106.94 compared with 106.54 on Tuesday. It was at 105.14 on Monday.

However, as the central bank stepped up its dollar sales during the final 30 minutes of the trade, the rupee ascended to the 79.24 a dollar level and went on to close at 79.3025 a dollar, dealers said. 

"The general buying (of dollars) on dips trend was there. The market sentiment has soured a lot after the trade deficit numbers," a dealer with a brokerage firm said. "On the supporting side, Nats (PSU banks) sold almost $600 mln for the central bank, and other than that fall in oil prices helped."

Data released on Monday showed India's merchandise trade deficit touched an all-time high of $25.63 bln in June, as high oil imports pushed up overall imports to a record high, thus adding to fears of further pressure on the rupee.

Dealers said traders remained cautious and refrained from placing large bets ahead of the release of the minutes of US Federal Open Market Committee's June meeting, due later today.

Market participants hope to gauge from the minutes the future pace of rate hikes by the US central bank.

FORWARDS

Premiums on the dollar/rupee forwards rose slightly because banks continued to buy dollars for forward delivery at relatively low premium levels, dealers said.   

The premium on the one-year, exact-period dollar/rupee forward contract was at 238.92 paise as against 232.93 paise at Tuesday's close. On an annualised basis, the premium was at 3.00% as against 2.93% at the previous close.

However, market participants remained cautious and refrained from placing large bets ahead of the release of the minutes of US Federal Open Market Committee's June meeting, due later today, which may provide further clues about the central bank's tightening stance.

OUTLOOK

On Thursday, the rupee will take cues from overnight movement in the dollar index after the release of the minutes of last month's US Federal Reserve meeting, dealers said. 

The local unit will also take cues from movement in Brent crude oil prices, said dealers.

"We see multiple headwinds, including weakening India BoP (balance of payment) dynamics, aggressive Fed hikes and rising US recession risks, which should drive INR (rupee) weakness in coming months, with USD/INR at 82 (a dollar) by Q3 2022 (Jul-Aug) and 81 (a dollar) by Q4 2022 (Oct-Dec)," financial services company Nomura said in a note on Tuesday. 

Dealers are of the view that the RBI will continue to intervene through dollar sales to prevent the rupee from depreciating sharply against the dollar.

Dealers have pegged immediate key technical support for the rupee at 79.50 a dollar.

During the day, the rupee is seen in the range of 79.00-79.60 a dollar.

 India Rupee - World FX: Euro near 20-year low on fear of recession

MUMBAI – The euro was down 0.5% and near a two-decade low against the dollar today because of rising concerns about the impact of surging energy prices on the eurozone economy.

The risk of Europe sliding into a recession rose after a 17% jump in natural gas prices in both Europe and UK looked set to push inflation even higher.

The pound sterling was near a two-year low against the dollar as UK Prime Minister Boris Johnson is facing a political crisis with Health Secretary Sajid Javid and Chancellor of the Exchequer Rishi Sunak having resigned in protest of his leadership.

The dollar index remains near a 20-year high as recession fears support demand for the safe-haven US currency.

At 1535 IST, the index was at 106.71 compared with 106.54 on Tuesday. (Richard Fargose)

India Rupee: Premiums up as banks buy forward dollars at low premium level

India Rupee: Premiums up as banks buy fwd dlrs at low premium level

MUMBAI – Premiums on the dollar/rupee forwards rose slightly because banks continued to buy dollars for forward delivery at relatively low premium levels, dealers said.   

The premium on the one-year, exact-period dollar/rupee forward contract was at 237.00 paise as against 232.93 paise at Tuesday's close. On an annualised basis, the premium was at 2.97% as against 2.93% at the previous close.

However, market participants remained cautious and refrained from placing large bets ahead of the release of the minutes of US Federal Open Market Committee's June meeting, due later today, which may provide further clues about the central bank's tightening stance.  (Srijonee Bhattacharjee)

India Rupee: Off highs as FIIs, importers buy dlrs; RBI dlr sales aid

NEW DELHI – The rupee came off the earlier highs against the greenback as foreign banks purchased dollars on behalf of foreign institutional investors, dealers said. 

Moreover, banks purchased the US unit on behalf of importers who wanted to take advantage of the relatively lower dollar/rupee levels, which also weighed on the Indian unit, dealers said.

However, the rupee couldn't move beyond the day's low of 79.3675 a dollar, as some state-owned banks stepped in to sell the greenback likely on behalf of the Reserve Bank of India, dealers said. 

"I think the RBI is actively trying to prevent the rupee from breaching the record low level," a dealer with a state-owned bank said. 

The Indian currency fell to a record low of 79.3800 a dollar on Tuesday. 

Dealers have pegged the immediate technical support for the rupee at 79.50 a dollar.

For the rest of the day, the Indian unit is seen at 79.0000-79.5000 a dollar.  (Pratiksha)

India Rupee: Rises as crude prices slump, domestic equities gain

NEW DELHI – The rupee rose against the greenback today because prices of crude oil fell about 9% on Tuesday, posting its biggest daily fall since March, dealers said. 

Oil prices fell due to growing concern about a global recession and COVID-led lockdowns in China hurting demand, dealers said.

Prices rose slightly today, and at 0940 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $104.10 a barrel against the previous close of $102.77 a bbl. It was at $113.50 a bbl on Monday.

Gains in domestic equity indices also supported sentiment for the Indian unit, dealers said. At 0940 IST, the Nifty 50 and the Sensex were up 0.4% and 0.5%, respectively.

"The bias still remains on a depreciating side as Fed’s tightening and recession fear is leading to a risk-off demand for the USD," a brokerage firm said in a note.

Market participants now await the release of the minutes of last month's US Federal Reserve meeting later today, dealers said. 

Dealers have pegged the immediate technical support for the rupee at 79.50 a dollar.

For the rest of the day, the Indian unit is seen at 78.9000-79.5000 a dollar.  (Pratiksha)

India Rupee: Expected range for rupee - Jul 6

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 Arshad Hussain

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