Informist, Tuesday, Jul 5, 2022

By Pratiksha

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

Today, the rupee closed 0.5% lower at a record closing low of 79.3700 a dollar

The dollar index, which measures the strength of the US currency against a basket of six major currencies, strengthened due to a sharp fall in the euro. The euro fell after market participants trimmed bets on policy tightening by the European Central Bank as another surge in natural gas prices re-ignited worries about the health of Eurozone economy and data showed Eurozone business growth slowed sharply in June.

The dollar index rose to 106.24 today, its highest level since December 2002. 

At 1650 IST, the dollar index was at 106.16 compared with 105.14 on Monday. It was at 105.12 on Friday.

The Indian currency started the day at a record opening low of 79.00 a dollar as prices of crude rose due to lower output from Organization of Petroleum Exporting Countries and unrest in Libya. Sanctions against Russia have already kept crude prices high since March.

High crude oil prices increase India's import bill and subsequently weigh on the rupee, given that India is the third-largest oil importer in the world.

At 1650 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $111.67 a bbl against the previous close of $113.50. 

An hour into the trading session, the rupee fell further to 79.0850 a dollar as overseas banks purchased the greenback on behalf of foreign portfolio investors, dealers said.

"There was pent-up demand after Monday's US holiday, so some buying was for that," a dealer with a private bank said.

The rupee then moved in a narrow range of 79.03-79.08 a dollar for more than three hours. Some dealers speculated that the Reserve Bank of India sold dollars around these levels to prevent the rupee from breaching the 79.10 a dollar level. 

However, as the dollar index strengthened in European trade, the rupee was dragged to the 79.17 a dollar level.

As soon as the rupee touched the psychologically crucial support level of 79.20 a dollar, stop-losses of market participants were triggered, which exacerbated the rupee's losses, and it fell to a fresh record low of 79.3800 a dollar, dealers said. 

"I think the RBI took note of the fact that most of the other major currencies took a beating against the dollar today," a dealer with a state-owned bank said. "Maybe that's why it didn't go against the global cues and let the rupee fall accordingly."

FORWARDS

Premiums on dollar/rupee forwards fell as banks and exporters continued to sell dollars for delivery later in order to cash in on the sharp fall in the rupee's exchange rate, dealers said.

The premium on the one-year, exact-period dollar/rupee forward contract was at 232.93 paise, as against 239.85 paise at close on Monday. On an annualised basis, the premium was at 2.93%, as against 3.04% at the previous close. 

The premiums that participants receive on selling dollars for forward delivery also have the rupee's over-the-counter exchange rate as a component. A rise in the dollar/rupee exchange rate leads to larger premium, making sales of forward dollars attractive when the rupee falls.

OUTLOOK

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

Traders are likely to stay cautious on Wednesday, ahead of the release of the minutes of last month's US Federal Reserve meeting, dealers said. 

Investors also await the US crude supply data from the American Petroleum Institute, due later in the day.

"Taking cues from both domestic and global perspective, rupee may remain under pressure for some more time," said Kunal Sodhani, assistant vice president - Global Trading Centre, FX and Rates Treasury at Shinhan Bank. "For USDINR, a close below 78.50 is required to get the pair in a consolidation zone, in case if that happens 78.20 levels can be tested, while 80.50 may act as a resistance."

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 79.50 a dollar, a break of which can push the rupee to 80 a dollar.

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

India Rupee: Hits record low as dlr index surges; RBI dlr sales aid

NEW DELHI – The rupee fell to a record low against the greenback as the dollar index rose to a two-decade high in European trade ahead of the release of the minutes of last month's US Federal Reserve meeting on Wednesday, dealers said. 

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

The index, which measures the strength in the US currency against a basket of six major currencies, rose to 105.86 today, its highest level since December 2002. 

At 1415 IST, the dollar index was at 105.83 compared with 105.14 on Monday. It was at 105.12 on Friday.

Moreover, foreign banks purchased dollars on behalf of foreign portfolio investors, which further weighed on the rupee, dealers said. 

Dealers said losses in the Indian currency were restricted as some banks stepped in to sell the greenback on behalf of the Reserve Bank of India.

The Indian currency fell to an all-time low of 79.1625 a dollar today. 

Dealers have pegged the immediate technical support for the rupee at 79.20 a dollar.

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

India Rupee - Asia FX: Most dn on firm dollar ahead of FOMC minutes

MUMBAI – Most Asian currencies were down as the US dollar remained firm amid caution ahead of the release of the minutes of last month's US Federal Open Market Committee's meeting, set to be released after market hours on Wednesday.

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

According to CME Group's FedWatch Tool, markets are currently pricing in a 66.5% probability of a 75-basis-point hike by the Fed in July. The probability was 84% a week ago. 

Markets have scaled back some rate hike expectations. However, the dollar index remained near a 20-year high.

At 1050 IST, it was at 105.09 compared with 105.14 on Monday.

Most units were down 0.1-0.2%. The Thailand baht and Chinese yuan, however, gained 0.1% today. (Richard Fargose)

India Rupee: Dn on high crude prices; gains in local shrs limit loss

NEW DELHI – The rupee breached the 79-per-dollar mark against the dollar today as prices of crude oil rose in early trade due to growing concerns over supply, dealers said.  

High crude oil prices increase India's import bill and subsequently weigh on the rupee, given that India is the third-largest oil importer in the world.

Prices of crude rose earlier today due to lower output from Organization of Petroleum Exporting Countries and unrest in Libya. Sanctions against Russia have already kept crude prices high since March.

Prices eased slightly later and at 0945 IST, the September contract of Brent crude oil on the Intercontinental Exchange was at $113.47 a bbl against the previous close of $113.50. It was at $111.63 a bbl on Friday. 

Today, the Indian currency opened at a record opening low of 79.0000 a dollar.

Gains in domestic and Asian equity indices restricted losses in the Indian unit, dealers said. At 0945 IST, the Nifty 50 and the Sensex were up 0.8% and 0.7%, respectively.

"I think the rupee will limit itself to a narrow range of 78.90-79.10 (a dollar) today," a dealer with a state-owned bank. "The 79.20 support level will be closely watched."

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

Dealers have pegged the immediate technical support for the rupee at 79.20 a dollar.

For the rest of the day, the Indian unit is seen at 78.8000-79.2000 a dollar.  (Pratiksha)

India Rupee: Expected range for rupee - Jul 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 and Richard Fargose)

End

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

Edited by Vandana Hingorani

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