The rupee is likely to edge lower against the US dollar as traders are likely to buy the latter after a clear mandate in the US presidential election eliminated political and fiscal uncertainty in that country.
On Monday, the Rupee fell to the lowest level in a month following broad based strength in the dollar against its major crosses. Dollar gained on the back of safe haven buying as the number of Covid cases started to increase in the US and the EU.
In the middle of a pandemic, the rupee has moved past the 73 mark to hit a six-month high against the dollar. And that's not it, analysts are expecting it to rise further. But what's behind this swift movement in the domestic currency? And why isn't RBI interfering to rein in the rupee this time around?Will gains in Indian rupee last?
Spot gold prices for 24 karat in Delhi were trading up by Rs 45 in line with recovery in global gold prices despite rupee appreciation
The rupee opened at Rs 73.79 against the dollar compared with the previous close of 73.89.
In the international market, gold was trading with gains at USD 1,815 per ounce, while silver was quoting flat at USD 23.42 per ounce.
At the interbank forex market, the domestic unit traded in a narrow range as rising COVID-19 cases offset positive sentiments surrounding the progress on the vaccine front.
The US dollar was on the defensive on Thursday as downbeat US economic data and optimism about coronavirus vaccines prompted investors to seek out riskier assets tied to global commodities and emerging markets, Reuters reported.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.10 percent to 92.13.
Rupee opened at 73.99 against the US dollar, compared with the previous close of 74.00. At 10:12 am, it was up 4 paise at 73.96
Silver also faced selling pressure as it tumbled by Rs 1,588 to Rs 59,301 per kg from Rs 60,889 per kg in the previous trade.
Globally, risk-sensitive currencies gained on Tuesday as investors breathed easier after US President Donald Trump accepted the start of a transition to a Joe Biden administration, that is expected to include former Federal Reserve Chair Janet Yellen as Treasury secretary, Reuters reported.
The Indian rupee opened at 74.11 against the US dollar compared with the previous close of 74.15.
Spot gold prices for 24 carat gold at Delhi were trading up by Rs 65 reflecting overnight gains made in international gold prices limiting upside on rupee appreciation,
Mazhar Mohammad of Chartviewindia.in said, in next trading session, if the index settles below 12,800 levels on closing basis, then it may kick in the much needed corrective downswing with initial targets of 12,600 levels.
The yellow metal had closed at Rs 50,610 per 10 gram in the previous trade.
"The US and countries across Europe are enforcing stricter measures to tackle the rising second wave of cases. This has stalled the global risk rally as of now. However, with progress on the vaccine front, there are no signs of panic as yet," said Abhishek Goenka, Founder and CEO, IFA Global.
In the previous session, rupee fell sharply against the greenback ahead of the important inflation and industrial production number that were released later in the day.
During the one-month period, the rupee lost a marginal 0.2 percent to the greenback marking itself as one of the worst performing Asian currencies.
In Asian trade, the dollar held broad gains as investors adjusted some of their bullish expectations about a Covid-19 vaccine, tempering a recent rally in risk assets but keeping enough confidence to support the greenback against other safe-havens, Reuters reported.
India’s currency rose from a two-month low last week ahead of U.S. election results to 74.3725 per dollar on Wednesday.
At the interbank foreign exchange market, the local currency opened on a weak note at 74.24 and swung between the day's high of 74.18 and low of 74.50 to the US dollar.
After strengthening in the past few sessions, the Indian unit came under pressure in the previous session on the back of short covering moves even as the domestic equities surged to record high levels.
Motilal Oswal analysts said on the domestic front, the focus will now be on the inflation and industrial production number that will be released later during the week and price rise could keep the rupee gains in check.
Brokerage Motilal Oswal Financial Services expects rupee to trade higher in Friday’s session and quote in the range of 73.80 and 74.40.
Rangarajan, also the former Prime Minister's Economic Advisory Council chairman, said this during 'SICCI-360' organised here by the Southern India Chamber of Commerce and Industry.
Higher exports by the world's biggest cotton producer in 2020/21 season, started on Oct. 1, could weigh on global prices and limit shipments from rivals such as the United States and Brazil to key Asian buyers such as China, Bangladesh and Vietnam.
CEO Sanjiv Chadha said higher retail loan growth together with lower cost of funds gave the bank confidence of sustaining its profits in the immediate future.
The Indian rupee opened at 74.05 against the dollar, down 17 paise from the previous close of 73.88.
The dollar index, the greenback’s measure against a basket of currencies, was up 0.2 per cent, with the US elections' uncertainty adding to the "risk-off" tone.
Its revenue from operations declined 10.7 per cent to Rs 485.4 crore for the quarter under review as compared to Rs 544 crore in the year-ago period, it added.
The rupee has appreciated close to 3% over the past two weeks after the central bank cut back on aggressive dollar-buying it has been undertaking in recent months to build reserves and keep the currency in check to help exports and its virus-hit economy.
RBI expects growth to restart from March quarter and continue into FY22, though at lower-than-trend rate of growth. After every period of a major economic stress, India has bounced back strongly in the past.
On Thursday, the rupee came under pressure in the latter half of the session following a plunge in domestic equities and strength in the dollar against its major crosses, and selling across the board was witnessed.
Reserve Bank of India's stated foreign exchange policy has been to only curb extreme volatility
Analysts expect weaker-than-expected economic data on the domestic front to keep the rupee weighed down against the US dollar.
The governor's announcement had an instant impact on the bechmark bond as its yield dropped to 5.91% from Thursday's close of 6.01% before ending at 5.94%.
During the session, the local unit witnessed an intra-day high of 73.29 and a low of 73.55 against the American currency.
Consensus forecasts by analysts surveyed suggest the rupee could struggle in the fourth quarter. The median estimate is for the the currency to end the year at 73.83 per dollar, slightly weaker than the 73.2875 it closed at on Monday.
On Tuesday, the Indian rupee settled at 73.86 against the greenback.
At the interbank forex market, the domestic unit opened at 73.78 per US dollar and traded between a high of 73.75 and a low of 73.91 during the session. It finally closed at 73.86, registering a fall of 7 paise over its previous close.
On Friday, the rupee had staged a smart rebound and close at 73.61 against the US dollar.
They had invested Rs 46,532 crore in August, Rs 3,301 crore in July and Rs 24,053 crore in June on net basis.
On Thursday, the rupee dived 32 paise to touch a near one-month low of 73.89 against the US dollar.
On Tuesday, the rupee depreciated 20 paise to settle at 73.58 against the US dollar.
The yellow metal had closed at Rs 52,000 per 10 gram in the previous trading session.
While the holdings may be safe, the low returns from those investments could crop the RBI's earnings, potentially reducing its payout to the government amid record low interest rates.
"The focus will be on the Federal Open Market Committee (FOMC) tonight. Market participants would expect further clarifications from the US Fed on how average inflation targeting framework would be implemented," said Abhishek Goenka Founder and CEO, IFA Global.
The real test for markets will come around the 14th of November when Diwali kicks in which will be the real test of demand for corporate India.
In the coming week, inflation data will be critical as it will make a base for RBI to decide on further rate cuts.
During the session, the domestic unit witnessed an intra-day high of 73.16 and a low of 73.50 against the greenback.
On the domestic front, market participants will be keeping an eye on the industrial production number that will be released on Friday and the weaker-than-expected number could keep gains capped for the currency.
Overseas investors pulled out Rs 900 crore on net basis from domestic markets in the first four trading sessions of this month as weak economic data and India-China border tensions hit market sentiment.
The US dollar advanced for the second straight day after remaining under pressure in the past few sessions despite private payrolls number falling short of expectations.
“Momentum in today’s session is likely to be curbed as the dollar rose marginally against its major crosses. For the day, we expect USDINR (Spot) to quote in the range of 72.70 and 73.20,” brokerage Motilal Oswal Financial Services said.
The central bank’s demand side measures for the bond market, such as in increase in Held-To-Maturity (HTM) limits and the new Operation Twist calendar, besides the reinforcement of its accommodative stance are positives for bond market inflows
At the interbank forex market, the domestic unit opened at 73.18 against the US dollar, gained further ground during the trading session and finally settled for the day at 72.87 against the greenback, registering a surge of 73 paise over its previous close of 73.60.
Bullion prices recovered on Monday after falling last week. Gold prices at the Multi Commodity Exchange (MCX) for the October contract were trading 0.5 per cent higher at about Rs 51,700 per 10 gm at in early afternoon trade, supported by rupee depreciation.
On Friday, local gold futures traded around 51,200 rupees ($699) per 10 grams, having retreated from a record 56,191 rupees hit earlier this month.
"The sharp fall in dollar/rupee spot has been very unexpected and traders are in shock, with every major support being tested," said Rahul Gupta, head of currency research at Emkay Global Financial Services.
The rupee rose 40 paise from its closing level of 74.30 on Wednesday.In morning trade on Thursday, it had touched 74.36 against the American currency.
With palm oil accounting for over 60 per cent of the 15 million tonne annual vegetable oils import in India, a drop in global prices will impact the domestic prices of all edible oils, industry executives said.
MCX October gold opened at Rs 51,350 per 10 gm and touched a high of Rs 51, 468. MCX September silver opened on a positive note at Rs 65,983 per kg and touched a high of Rs 66,159.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.12 per cent down at 93.18.
Overseas investors have poured in over Rs 40,000 crore in domestic markets on a net basis in August so far as the excess liquidity in global markets found its way to emerging markets like India.
The rupee gained 0.70% to close at 74.32/$, its strongest level since March 18.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.15 per cent at 93.11.
Non-resident Indians are betting big on India, a sign of their faith in the Indian rupee as well as the economic outlook for the country, as bank deposits from the diaspora swelled in sharp contrast to the prevailing historic low interest rates.
It purchased $30 billion of foreign exchange in the four months to July to bolster what is already the world’s fifth-largest FX hoard.
Forex traders further said that markets will look ahead to the US Federal Reserve minutes scheduled to release tonight.
Prime Minister Narendra Modi wants to pitch India as a new Asian destination for global fund flows rivaling the likes of Singapore and Hong Kong.
ICICI Bank Ltd., Axis Bank Ltd. and mortgage lender HDFC Ltd. have raised a combined 350 billion rupees ($4.7 billion) this month.
At the interbank forex market, the local unit opened at 74.85 against the US dollar, then lost ground and finally settled at 74.90 against the American currency, registering a decline of 6 paise over its previous close of 74.84.
The central bank bought $14.8 billion from the spot currency market in June, the highest since it bought $19,1 billion in November 2016. I
During the session, the domestic unit witnessed an intra-day high of 74.78 and a low of 74.92 against the greenback.
At the interbank forex market, the local unit opened at 74.83 against the US dollar and gained further ground to settle at 74.78, up 12 paise over its previous close of 74.90.
Shares of mid-tier IT company KPIT Technologies hit an upper circuit with 5 per cent gain on Tuesday morning amid a weakness among the stocks of its top-tier peers.
Earlier, the local currency on Friday closed with a marginal 3 paise gain at 74.81 to the US dollar amid weakness in the greenback against key global peers.
Among the three, Infosys stood out. Its reported revenue dropped by 2.4% sequentially to $ 3,121 million in the June quarter while its two peers recorded a steeper drop of over 7%.
Quantum Asset Management Co. also recommends avoiding higher-risk India credit because the world’s-biggest lockdown has significantly weakened the debt-servicing capacity of many companies
‘IT stocks will benefit from any weakness in the rupee’
The latest withdrawal has come after investment of Rs 24,053 crore by FPIs in domestic markets in June.
‘Gold has really proven its value as a safe haven in the first half of 2020’
Here is a weekly tracker of returns from Sensex, 10-year government bond yield and US dollar vis-a-vis Indian rupee.
The portfolio inflows have done little to arrest the decline in the rupee.
Globally, gold prices edged up on Tuesday after notching a more than one-month high in the previous session.
‘The leadership that Reliance has gained will continue for some more time’
MOSL expects rupee to quote in the range of 75.80 and 76.40 for the day.
At 10.08 am, the rupee was down 19 paise at 75.7850 against the US dollar. It had opened at 75.80, compared with a previous close of 75.59.
On the domestic front, market participants will be keeping an eye on inflation and industrial production number that will be released later this week.
Policy makers are leaving no stone unturned to help NBFCs overcome the credit crisis.
The euro was at $1.2025, down 0.3% and retreating from three-month highs.
Re is the worst performer in emerging Asia this quarter and that’s because RBI is mopping up dollar, analysts say.
For the day, MOSL expects the rupee (Spot) to quote in the range of 74.80 and 75.25.
Revenue for the Jan-Mar quarter grew just 4.5% to Rs 8,635 crore from Rs 8,260 crore a year earlier.
“For the day, we expect the rupee (Spot) to quote in the range of 75.40 and 76.20,” MOSL said.
India has a comfortable foreign exchange reserves of $487 billion currently.
The dollar index, which measures the strength of the US dollar against a basket of six currencies, dropped 0.12 per cent.
The acceptance of Indian currency is good news for Indian tourists as earlier they lost a sizeable amount due to exchange rates.
On the domestic front, market participants are awaiting for an announcement from the finance minister on the stimulus package to support MSMEs.