Informist, Friday, Oct 7, 2022
By Richard Fargose
MUMBAI – The rupee today breached yet another psychologically-crucial level of 82/$1 on chances of aggressive rate hikes by the US Federal Reserve that led to a rally in the dollar globally. This comes within 12 sessions of the Indian currency closing below the 80/$1 mark.
The Indian currency opened at an all-time low of 82.2000 a dollar today, and fell to as much as 82.3825 a dollar.
The rupee managed a close below the 80/$1 mark on several occasions in the past two months mainly due to active intervention in the market by the Reserve Bank of India. However, the Indian unit weakened sharply after a median of projections by the US Fed officials showed Fed rates peaking at 4.50-4.75% next year, with no cuts until 2024.
"As we mentioned in our previous reports, a breakout of a big figure (80.00) leads to a minimum depreciation of 2.0-2.5 rupees within a month of the breakout," said Amit Pabari, managing director at CR Forex.
"And this time it took just 12 sessions to cross 82.00 levels," Pabari said. "It has become a new norm for the rupee to create a new all-time low ever and anon."
The dollar rose sharply on Thursday as investors bet a robust US jobs data, scheduled for release later today, will keep the Federal Reserve on its aggressive tightening path to curb inflation.
Meanwhile, Minneapolis Fed President Neel Kashkari said the central bank has "more work to do" to bring down inflation, and is "quite a ways away" from being able to pause its aggressive interest rate hikes.
Echoing the view, Fed Governor Lisa Cook said US inflation remains "stubbornly and unacceptably high" and requires continued rate hikes to ensure it begins falling, while Chicago Fed Bank President Charles Evans said the Fed's policy rate is likely headed to 4.50-4.75% by the spring of 2023 as it tries to curb inflation.
At 1001 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 112.12 compared with 112.26 on Thursday. It was at 110.07 on Wednesday.
Market participants said elevated trade deficit and the recent jump in crude oil prices also dented the sentiment for the Indian currency.
Prices of crude oil settled higher on Thursday after the Organization of the Petroleum Exporting Countries and its allies agreed to tighten global supply with a deal to cut production targets by 2 mln barrels per day, the producers' largest reduction since 2020.
At 0820 IST, the November contract of Brent crude oil on the Intercontinental Exchange was at $94.47 a bbl as against $94.42 a bbl on Thursday. On Sep 26, prices had cooled to $83.65 a bbl mark.
A rise in the prices of crude oil increases India's import bill, which subsequently weighs on the currency.
The country's trade deficit in Apr-Sep rose sharply to $149.47 bln from $76.25 bln in the same period last year. Exports rose 15.5% on year to $229.05 bln in Apr-Sep, while imports increased by 37.9% to $378.53 bln.
In its current spell of depreciation, the rupee has breached major levels six times in 2022--the most since 2018--when it breached key levels on nine occasions--from 65/$1 to 74/$1--due to global risk aversion amid the US-China trade war.
So far in 2022, the Indian currency has depreciated 9.7% against the US dollar.
Dealers expect the RBI to intervene, though not aggressively, through dollar sales to protect the rupee from depreciating sharply against the greenback.
"We are not expecting substantial intervention from RBI to defend the rupee during opening hours, but in second half we may see some bit of cool-off on the long speculative positions ahead of US monthly payrolls after market hours," said Arnob Biswas, head of FX research at SMC Global Securities Ltd.
Market participants said that with the next technical support level of 82.50 a dollar, the outlook for rupee is still negative, and it may plunge further towards 83.00-83.50 in the coming days. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Vandana Hingorani
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist. 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.
Informist, Friday, Oct 7, 2022
By Richard Fargose
MUMBAI – The rupee today breached yet another psychologically-crucial level of 82/$1 on chances of aggressive rate hikes by the US Federal Reserve that led to a rally in the dollar globally. This comes within 12 sessions of the Indian currency closing below the 80/$1 mark.
The Indian currency opened at an all-time low of 82.2000 a dollar today, and fell to as much as 82.3825 a dollar.
The rupee managed a close below the 80/$1 mark on several occasions in the past two months mainly due to active intervention in the market by the Reserve Bank of India. However, the Indian unit weakened sharply after a median of projections by the US Fed officials showed Fed rates peaking at 4.50-4.75% next year, with no cuts until 2024.
"As we mentioned in our previous reports, a breakout of a big figure (80.00) leads to a minimum depreciation of 2.0-2.5 rupees within a month of the breakout," said Amit Pabari, managing director at CR Forex.
"And this time it took just 12 sessions to cross 82.00 levels," Pabari said. "It has become a new norm for the rupee to create a new all-time low ever and anon."
The dollar rose sharply on Thursday as investors bet a robust US jobs data, scheduled for release later today, will keep the Federal Reserve on its aggressive tightening path to curb inflation.
Meanwhile, Minneapolis Fed President Neel Kashkari said the central bank has "more work to do" to bring down inflation, and is "quite a ways away" from being able to pause its aggressive interest rate hikes.
Echoing the view, Fed Governor Lisa Cook said US inflation remains "stubbornly and unacceptably high" and requires continued rate hikes to ensure it begins falling, while Chicago Fed Bank President Charles Evans said the Fed's policy rate is likely headed to 4.50-4.75% by the spring of 2023 as it tries to curb inflation.
At 1001 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 112.12 compared with 112.26 on Thursday. It was at 110.07 on Wednesday.
Market participants said elevated trade deficit and the recent jump in crude oil prices also dented the sentiment for the Indian currency.
Prices of crude oil settled higher on Thursday after the Organization of the Petroleum Exporting Countries and its allies agreed to tighten global supply with a deal to cut production targets by 2 mln barrels per day, the producers' largest reduction since 2020.
At 0820 IST, the November contract of Brent crude oil on the Intercontinental Exchange was at $94.47 a bbl as against $94.42 a bbl on Thursday. On Sep 26, prices had cooled to $83.65 a bbl mark.
A rise in the prices of crude oil increases India's import bill, which subsequently weighs on the currency.
The country's trade deficit in Apr-Sep rose sharply to $149.47 bln from $76.25 bln in the same period last year. Exports rose 15.5% on year to $229.05 bln in Apr-Sep, while imports increased by 37.9% to $378.53 bln.
In its current spell of depreciation, the rupee has breached major levels six times in 2022--the most since 2018--when it breached key levels on nine occasions--from 65/$1 to 74/$1--due to global risk aversion amid the US-China trade war.
So far in 2022, the Indian currency has depreciated 9.7% against the US dollar.
Dealers expect the RBI to intervene, though not aggressively, through dollar sales to protect the rupee from depreciating sharply against the greenback.
"We are not expecting substantial intervention from RBI to defend the rupee during opening hours, but in second half we may see some bit of cool-off on the long speculative positions ahead of US monthly payrolls after market hours," said Arnob Biswas, head of FX research at SMC Global Securities Ltd.
Market participants said that with the next technical support level of 82.50 a dollar, the outlook for rupee is still negative, and it may plunge further towards 83.00-83.50 in the coming days. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Vandana Hingorani
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist. 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.
