Informist, Friday, May 20, 2022

By Pratiksha and Srijonee Bhattacharjee

NEW DELHI/MUMBAI – The rupee rose against the dollar, snapping a five-day losing streak, tracking gains in domestic equity indices and broad-based weakness in the dollar index, dealers said. 

The rupee ended at 77.5475 a dollar, against a record closing low of 77.7250 a dollar on Thursday. The unit kept to a range of 11 paise throughout the day.

The Indian currency opened higher at 77.5000 a dollar, as the dollar index moved near a two-week low hit on Thursday due to a decline in US Treasury yields, giving up some gains accrued over the greenback's 14-week surge, dealers said.

The yield on the benchmark 10-year US Treasury note fell as investors continued to seek shelter in safe haven bonds after a steep sell-off in equities.

The dollar index, which measures the strength of the US currency against a basket of six major currencies, fell to 102.66 on Thursday, its lowest since May 5.

A week earlier the index had surged to 105.01, its highest level since January 2003, as a hawkish Fed and increasing concerns about the state of the global economy helped boost the US currency. The index is up 7.5% for the year.

At 1627 IST, the dollar index was at 102.83 compared with 102.72 on Thursday. It was at 103.81 on Wednesday.

Meanwhile, domestic equities surged today tracking other Asian markets, which rose after China cut its benchmark lending rate to support economic growth. This further provided support to the Indian unit, dealers said. 

China cut its five-year loan prime rate by 15 basis points, a sharper cut than had been expected, as authorities seek to prevent an economic slowdown.

Both the Nifty 50 and the Sensex ended 2.9% higher each.

While purchases of the greenback by some state-owned banks on behalf of oil marketing companies took the rupee to the day's low of 77.6050 a dollar, dealers said volumes of these purchases were less in quantum.

Trade volume in the currency market remained lacklustre as traders stayed on the sidelines and refrained from placing fresh bets due to absence of significant cues. 

"The range was pretty thin. We have seen more buying (of dollars) today if compared to the past few sessions. There has been buying (of dollars) since morning. The perception of the market is still buying on dips," said a dealer with a private bank. 

Foreign banks also sold the greenback on behalf of some exporters today, which provided support to the Indian currency. However, dealers said these transactions were less in quantum.

"Exporters are selling (dollars) but these levels are not attractive anymore, so the volume is less. There's confusion if the RBI is targetting a level or just containing volatility. Importers are already on the sidelines," a dealer with a state-owned bank said. 

The rupee moved in a narrow range of 77.50-77.57 a dollar for most part of the trading session.

FORWARDS

Premiums on dollar/rupee forwards rose because traders and importers bought the greenback for forward delivery, after noting a significant fall in premium levels in the last two weeks, dealers said.

The premium on the one-year, exact-period dollar/rupee contract was at 302.79 paise, as against 294.34 paise on Thursday. On an annualised basis, the premium was 3.90% as against the previous close of 3.79%.

The premium on the one-year contract has fallen from 328.27 paise on May 5.  

While the rise in premiums in the last two sessions was limited by buy/sell swaps executed by banks on behalf of the Reserve Bank of India, today there was no such event preventing the premiums from rising, dealers said. Thus, the rise was sharp relative to the last two sessions.

The central bank was said to have been conducting these swaps following the maturity of some outstanding long forward dollar bets this month, dealers said.

Last week, a banking source said that the RBI would take a large delivery of forwards this month, which would boost reserves, adding that the central bank's forwards book was nearly $62 bln, which was not reflected on its balance sheet.

OUTLOOK

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

"The RBI has been protecting the 77.75-77.80 (a dollar) level, so traders will focus on that. If this level is breached we might see a movement towards the 78 (a dollar) level," a dealer with a state-owned bank said.   

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

Dealers have now pegged strong key technical support for the rupee at 77.80 a dollar.

During the day, the rupee is seen in the range of 77.30-77.80 a dollar.

India Rupee: Premiums rise as bks, traders buy fwd dlrs at low levels

MUMBAI – Premiums on dollar/rupee forwards rose because traders and importers bought the greenback for forward delivery, after noting a significant fall in premium levels in the last two weeks, dealers said.

The premium on the one-year, exact-period dollar/rupee contract was at 302.75 paise, as against 294.34 paise on Thursday. On an annualised basis, the premium was 3.80% as against the previous close of 3.77%.

The premium on the one-year contract has fallen from 328.27 paise on May 5.  

While the rise in premiums in the last two sessions was limited by buy/sell swaps executed by banks on behalf of the Reserve Bank of India, today there was no such event preventing the premiums from gaining, dealers said. Thus, the rise was sharp relative to the last two sessions.

The central bank was said to have been conducting these swaps following the maturity of some outstanding long forward dollar bets this month, dealers said.

Last week, a banking source said that the RBI would take a large delivery of forwards this month, which would boost reserves, adding that the central bank's forwards book was nearly $62 bln, which was not reflected on its balance sheet.  (Srijonee Bhattacharjee)

India Rupee: Rises sharply as dollar index falls, domestic shrs surge

NEW DELHI – The rupee rose sharply against the greenback today as the dollar index hovered near two-week low hit on Thursday due to a decline in US Treasury yields and fatigue after the currency's continuous 14-week surge, dealers said.

Despite an ongoing slide in global stocks amid concern over economic growth from aggressive monetary tightening by the US Federal Reserve, and China's strict lockdowns to curb spread of COVID-19, the dollar's appeal as a safe haven was eclipsed by a fall in US yields as investors flocked to the safety of Treasury bonds, dealers said. 

At 0930 IST, the dollar index was at 103.07 compared with 102.72 on Thursday. It was at 103.81 on Wednesday.

Domestic equities surged today tracking other Asian markets which rose after China cut its benchmark lending rate to support economic growth. This further provided support to the Indian unit, dealers said. 

China cut its five-year loan prime rate by 15 basis points, a sharper cut than had been expected, as authorities seek to cushion an economic slowdown.

At 0930 IST, both the Nifty 50 and the Sensex were up 1.9% each.

"After the overnight fall in dollar index, these rupee levels should be attractive for importers," a dealer with a state-owned bank said. "The buying (of dollars) on dip sentiment should continue with a focus on the 77.70-77.75 (a dollar) level."

Dealers have now pegged key technical support for the rupee at 77.70 a dollar.

For the rest of the day, the Indian unit is seen at 77.3000-77.7000 a dollar.  (Pratiksha) 

India Rupee: Expected range for rupee - May 20

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 Avishek Dutta

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