Informist, Tuesday, Jul 12, 2022

By Pratiksha and Srijonee Bhattacharjee

NEW DELHI – Even though the Reserve Bank of India supported the rupee through its sales of the greenback, the rupee ended at a record closing low against the dollar today due to continuous purchases of the US currency by foreign institutional investors and a broad-based strength in the dollar, dealers said. 

Today, the rupee closed 0.2% lower at a record closing low of 79.5975 a dollar

The Indian currency began the day 8 paise lower at 79.5100 a dollar because the US dollar index surged to a fresh near two-decade high, dealers said. 

The dollar index strengthened after the euro weakened due to concerns that an energy crisis would tip the region into a recession, amid aggressive policy tightening by central banks.

In Europe, Nord Stream I, the biggest single pipeline carrying Russian gas to Germany, began annual maintenance on Monday, with flows expected to stop for 10 days, but governments, markets and companies are worried the shutdown might be extended because of the ongoing war in Ukraine. This has raised concerns about the energy crisis in the eurozone, according to reports.

"There is speculation of euro-dollar parity, such is the strength of dollar, so the rupee like all other currencies is bound to suffer," a dealer with a state-owned bank said. "Even the measures announced by the RBI yesterday to boost the rupee are not that massive that they will change the situation. Rupee invoicing was already there before, it is just being formalised now."

The central bank on Monday announced additional steps for invoicing, payment, and settlement of exports and imports in rupee terms with its trading partner countries.

The latest measures to enable greater use of the rupee in foreign trade can be more useful for neighbouring countries, and with those countries facing sanctions from the west, according to analysts. Russia is seen as main trade partner, with whom a significant shift is expected towards rupee-denominated trades.

Moving back to global indicators, the dollar index gained on demand for the safe-haven currency due to growth worries with China implementing strict zero-COVID policies to contain fresh outbreaks.

The dollar index, which measures the strength in the US currency against a basket of six major currencies, rose to 108.56 today, its highest level since October 2002. 

At 1655 IST, the dollar index, was at 108.28 compared with 108.02 on Monday. It was at 106.90 on Friday.

An hour into the trade, the rupee moved to the 79.59 a dollar level, tracking strength in the dollar index. However, losses in the Indian currency were restricted as some banks sold dollars near the 79.59 a dollar level, likely on behalf of the RBI, dealers said. 

Despite the central banks' efforts to prevent the rupee from falling beyond the immediate support level of 79.60 a dollar, the local unit fell to a record low of 79.6575 a dollar as foreign banks persistently purchased dollars on behalf of foreign institutional investors, dealers said. 

Dealers said banks also purchased the greenback on behalf of oil marketing companies, which also weighed on the rupee. 

Oil prices fell today as fresh COVID-19 curbs in China, the world's biggest crude importer, and fears of a global economic slowdown weighed on the fuel demand outlook.

At 1655 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $102.58 a barrel against the previous close of $107.10 a bbl.

During the final thirty minutes of trade, the rupee pared almost 8 paise of losses as the central bank stepped up its dollar sales around the 79.63-79.64 a dollar level. 

However, as dollar purchases by oil importers continued, the domestic unit closed at a record closing low of 79.5975 a dollar, dealers said.

"The RBI continued with its strategy of letting the rupee fall slowly and steadily," a dealer with a private bank said. "Since today the rupee mostly tracked global cues, the RBI avoided intervening aggressively."

Domestic share indices stayed in the red throughout the day, which dampened sentiment for the Indian unit, dealers said. Today, the Nifty 50 and the Sensex ended 1.0% and 0.9% lower, respectively.

FORWARDS

Premiums on dollar/rupee forwards rose because banks bought the greenback for forward delivery noting an arbitrage between the onshore forwards and offshore non-deliverable forwards rates, dealers said.

The premium on the one-year dollar/rupee contract was at 243.10 paise, against 237.73 paise on Monday. On an annualised basis, the premium was at 3.05% as against 2.99% at the previous close.  

"There was paying pressure because of the NDF, we see such arbitrage in the NDF market whenever the rupee is under pressure," said a dealer with a state-owned bank.

The absence of heavy sales of forward dollars by exporters also propped up the premiums, dealers said.

OUTLOOK

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

Traders are likely to stay cautious ahead of the release of the US consumer price data due on Wednesday, dealers said. 

"We might now see the RBI intervening aggressively when the rupee comes very close to the 80 (a dollar) level," a dealer with a private 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 pegged immediate key technical support for the rupee at 79.80 a dollar.

During the day, the rupee is seen in the range of 79.20-79.80 a dollar.

India Rupee: Premiums rise as bks buy fwd dlrs noting NDF arbitrage

MUMBAI – The premiums on dollar/rupee forwards rose because banks bought the greenback for forward delivery noting an arbitrage between the onshore forwards and offshore non-deliverable forwards rates, dealers said.

The premium on the one-year dollar/rupee contract was at 243.10 paise, against 237.73 paise on Monday. On an annualised basis, the premium was at 3.05% as against 2.99% at the previous close.  

"There was paying pressure because of the NDF, we see such arbitrage in the NDF market whenever the rupee is under pressure," said a dealer with a state-owned bank. 

Dealers also pointed out that exporters did not sell dollars for forward delivery because they expect the rupee falling further from the current levels.

The dollar/rupee exchange rate is a component of the premium received by exporters for selling forward dollars. A rise in the dollar/rupee (a fall in the rupee) pushes the receivable premiums up thus encouraging exporters to book contracts at those levels.  

The absence of selling of forward dollars by exporters also propped up the premiums, dealers said.  (Srijonee Bhattacharjee) 

India Rupee: Remains sharply down on dlr buys by FIIs, firm dlr index 

NEW DELHI – The rupee remained sharply down against the greenback as foreign banks purchased dollars on behalf of foreign institutional investors, dealers said. 

Moreover, the dollar index rose to a fresh near two-decade high, which further weighed on the Indian unit, dealers said. 

The dollar index strengthened after the euro weakened on concerns that an energy crisis would tip the region into a recession, amid aggressive policy tightening by central banks.

The dollar index, which measures the strength in the US currency against a basket of six major currencies, rose to 108.54 today, its highest level since October 2002. 

At 1340 IST, the index, was at 108.51 compared with 108.02 on Monday. It was at 106.90 on Friday.

Meanwhile, dealers said losses in the Indian currency were restricted as some state-owned banks sold dollars, likely on behalf of the Reserve Bank of India. 

The Indian currency fell to a record low of 79.6575 a dollar today. 

For the rest of the day, the Indian unit is seen at 79.3000-79.8000 a dollar.  (Pratiksha)

India Rupee - Asia FX: Down as dollar surges globally on recession fears

MUMBAI - Asian currencies were sharply down today as the US dollar surged to a fresh near

two-decade high amid growing fears over recession in Europe and the US.

The dollar index, which measures the strength in the US currency against a basket of six major currencies, rose to 108.50 today--its highest level since October 2002.

Globally, investors have been increasingly concerned that aggressive rate hikes by the US central bank to curb inflation may push the economy into a recession.

In Europe, Nord Stream I, the biggest single pipeline carrying Russian gas to Germany, began annual maintenance on Monday, with flows expected to stop for 10 days. However, there is fear that the shutdown might be extended because of the war in Ukraine. This has raised concerns over energy crisis in the Eurozone that may tip the economy into a recession.

The worsening COVID-19 situation in China and Hong Kong also dented risk sentiment for Asian currencies.

The South Korean won was the worst hit currency today, down 0.9%, followed by the Philippines peso down 0.7%. Other Asian currencies also fell 0.2-0.3% against the US dollar. (Richard Fargose)

India Rupee: Hits record low as dollar index surges to near 20-year high

NEW DELHI – The rupee fell to a record low against the greenback today because the dollar index surged to a fresh near two-decade high, dealers said. 

The dollar index strengthened after the euro weakened due to concerns that an energy crisis would tip the region into a recession, amid aggressive policy tightening by central banks.

The index also gained on demand for the safe-haven greenback due to growth worries with China implementing strict zero-COVID policies to contain fresh outbreaks.

The dollar index, which measures the strength in the US currency against a basket of six major currencies, rose to 108.47 today, its highest level since October 2002. 

At 0940 IST, the index, was at 108.31 compared with 108.02 on Monday. It was at 106.90 on Friday.

Domestic and other Asian share indices fell today, which further weighed on the local unit, dealers said. At 0940 IST, the Nifty 50 and the Sensex were down 0.5% and 0.4%, respectively.

Meanwhile, dealers said losses in the Indian currency were restricted as some banks sold dollars near the 79.59-a-dollar level, likely on behalf of the Reserve Bank of India. 

The Indian currency fell to a record low of 79.5925 a dollar today. 

"I think the RBI will continue to follow the strategy of letting the rupee depreciate slowly and steadily," a dealer with a big state-owned bank said. "From here on, the 80 (a dollar) level is not far."

For the rest of the day, the Indian unit is seen at 79.3000-79.8000 a dollar.  (Pratiksha)

India Rupee: Expected range for rupee - Jul 12

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 Vidhi Verma

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