Informist, Friday, Aug 5, 2022

By Pratiksha

NEW DELHI - Even as the rupee ended sharply higher against the dollar today, the unit erased a considerable portion of its gains as oil marketing companies and importers continuously purchased dollars, dealers said. 

The Indian currency had risen after the Reserve Bank of India's Monetary Policy Committee hiked interest rate by 50 basis points to 5.40% today, dealers said. 

Having touched a high of 78.9300-a-dollar during the day, the rupee settled at 79.2300 a dollar, as against 79.4650 a dollar on Thursday.

"The RBI's policy outcome was largely on expected lines. The rupee saw some appreciation due to it but most of it was due to ease in crude oil prices," a dealer with a state-owned bank said. 

The Indian currency opened 30 paise higher at 79.1600 a dollar because of a sharp fall in the dollar on Thursday, dealers said. 

The US unit fell as investors turned cautious ahead of the widely-anticipated US jobs data amid growing concerns about a recession, dealers said. 

US employment gains in July are expected to drop to 258,000 from 372,000 in the previous month, a poll of economists by The Wall Street Journal shows. If so, it would mark the smallest increase since December 2021.

At 1735 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 105.88 compared with 105.69 on Thursday. It was at 106.51 on Wednesday.

The Indian currency also rose as prices of crude oil fell to the lowest level since early February, as concerns over a slowing global economy worried investors.

At 1735 IST, the October contract of Brent crude oil on the Intercontinental Exchange was at $93.82 a barrel against the previous close of $96.12 a bbl. Prices were at $96.78 a bbl on Wednesday. 

The Indian unit also received a boost after the rate-setting panel hiked interest rate by 50 basis points, dealers said. Interest rate hikes improve the prospects for the domestic currency as domestic bonds attract more foreign investor interest. 

The committee decided to remain focused on withdrawal of accommodation to ensure inflation remains within the target range going forward, while supporting growth.

RBI Governor Shaktikanta Das said in his monetary policy statement that the central bank will remain watchful and focused on ensuring stability of the rupee.

Das also said RBI's interventions helped rupee move in a relatively orderly fashion and it depreciated by 4.7% against the dollar during the current financial year. The Indian unit fared better than several reserve currencies as well as many of emerging market economies and Asian peers, he added.

"RBI delivered a hawkish guidance, hinting that more hikes are needed to bring inflation within its targeted band. We expect repo rate to head towards 6% before it peaks. This should allow real rates to support Rupee via carry trade," Anindya Banerjee, vice-president, currency derivatives and interest rate derivatives at Kotak Securities Ltd said.

"However, global uncertainty will prevent any significant appreciation in the currency. Therefore, we are looking at a range of 78.80 and 79.60 on spot over the next week."

However, the rupee was dragged to the day's low of 79.2925 a dollar as state-owned banks persistently purchased dollars on behalf of importers, dealers said.

Dealers said banks also purchased dollars on behalf of oil marketing companies, which further weighed on the domestic unit. 

"There was significant demand (for dollars) from importers today. Looks like the panic that we saw in the past few sessions was still there." a dealer with a brokerage firm said. 

However, some exporters also came in to sell the greenback, which supported the Indian unit, dealers said. 

After moving in a range of 79.15-79.25 a dollar during the final hour of the trade, the rupee closed at 79.2300 a dollar.

FORWARDS

Premiums on dollar/rupee forwards ended higher today after the Reserve Bank of India's Monetary Policy Committee raised the policy repo rate by 50 basis points to 5.40%.

Premium on the one-year dollar/rupee contract was 245.79 paise, against 242.66 paise on Thursday. On an annualised basis, the premium was unchanged against the previous close of 3.05%.

Premiums on forwards of a currency pair are reflective of the interest rate differential between two countries. A rise in RBI policy rates ensure that the spread will widen.

In a poll by Informist, all 30 respondents had said they expected the rate-setting panel to raise the repo rate, but there was less clarity on the quantum, though majority expected the hike to be in the range of 35-50 basis points.

OUTLOOK

On Monday, the rupee will take cues from overnight movement in the dollar index after the release of the US jobs data later today, dealers said. 

Market participants are eyeing the monthly US jobs report for further cues on the US Federal Reserve's stance on monetary policy tightening. 

"I think the rupee will consolidate in a range of 78.50-79.50 (a dollar) since it has seen enough volatility this week," a dealer with a brokerage firm said. 

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

During the day, the rupee is seen at 78.70-79.50 a dollar.

India Rupee: Premiums jump as RBI hikes repo rate by 50 bps

MUMBAI – Premiums on dollar/rupee forwards jumped up today after the Reserve Bank of India's Monetary Policy Committee raised the policy repo rate by 50 basis points to 5.40%.

Premium on the one-year dollar/rupee contract was 247.95 paise, against 242.66 paise on Thursday. On an annualised basis, the premium was at 3.13%, against the previous close of 3.05%.

"Going forward, we may see premiums getting paid as MPC expects inflation to stay elevated and economic activity is resilient, hence, more rate hikes will be there," said a dealer with a state-owned bank.

Premiums on forwards of a currency pair are reflective of the interest rate differential between two countries. Rise in RBI policy rates ensure that the spread will widen further.

In a poll by Informist, all 30 respondents had said they expected the rate-setting panel to raise the repo rate, but there was less clarity on the quantum, though majority expected the hike to be in the range of 35-50 basis points. (Richard Fargose)

India Rupee: Remains sharply up as RBI hikes repo rate by 50 bps

NEW DELHI – The rupee remained sharply up against the greenback after the Reserve Bank of India hiked interest rate by 50 basis points to 5.40%, dealers said. 

The committee decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

"The decision was mostly on expected lines. The market should remain flow-based now," a dealer with a state-owned bank said. "The focus is now on US jobs data."

Investors are waiting for US jobs data for further clues on the pace of interest rate hikes by the US Federal Reserve.

For the rest of the day, the Indian unit is seen at 78.8000-79.3000 a dollar.  (Pratiksha)

India Rupee: Surges on overnight fall in dlr, crude; RBI policy eyed

NEW DELHI – The rupee rose sharply against the greenback today because of a sharp fall in the US dollar on Thursday, dealers said. 

The US unit fell as investors turned cautious ahead of the widely-anticipated US jobs data amid growing concerns about a recession, dealers said. 

US employment gains in July are expected to drop to 258,000 from 372,000 in the previous month, a poll of economists by The Wall Street Journal estimates. If so, it would mark the smallest increase since December 2021.

At 0929 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 105.86 compared with 105.69 on Thursday. It was at 106.51 on Wednesday.

Moreover, prices of crude oil fell to the lowest level since early February, as concerns over a slowing global economy worried investors. This further provided support to the Indian unit, dealers said. 

At 0929 IST, the October contract of Brent crude oil on the Intercontinental Exchange was at $94.26 a barrel against the previous close of $96.12 a bbl. Prices were at $96.78 a bbl on Wednesday. 

"I think the rate hike will be mostly on expected lines. However, the market will focus on the Reserve Bank of India's commentary on future rate hikes," a dealer with a state-owned bank said. 

Traders are exercising caution ahead of the RBI's monetary policy statement, scheduled at 1000 IST. The rate-setting panel is expected to increase the repo rate by 35-50 bps, according to an Informist poll. 

For the rest of the day, the Indian unit is seen at 78.8000-79.5000 a dollar.  (Pratiksha)

India Rupee - Asia FX: Most up tracking fall in dollar, crude prices

MUMBAI - Most Asian currencies traded higher today tracking a sharp fall in the US dollar on Thursday, as investors turned cautious ahead of the widely-anticipated US jobs data amid growing concerns about a recession.

A fall in prices of crude oil also lifted the Asian units. Prices of crude oil fell to the lowest level since early February, before Russia’s invasion of Ukraine, as concerns over a slowing global economy worried investors.

At 0844 IST, the October contract of Brent crude oil on the Intercontinental Exchange was at $94.34 a barrel against the previous close of $94.12 a bbl. Prices were at $96.78 a bbl on Wednesday.

The South Korean won surged 0.9%, the highest jump among Asian currencies, while the Philippine peso and the Thailand Baht rose 0.7%, each.  (Richard Fargose)

India Rupee: Expected range for rupee - Aug 5

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)

End

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

Edited by Aditya Sakorkar

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2022. All rights reserved.