Image used for representational purpose.
| Photo Credit: Reuters

The rupee appreciated 3 paise to 83.42 against the U.S. dollar in early trade on May 6, supported by a firm trend in domestic equities.

Forex traders said the strength of the American currency in the overseas market and foreign fund outflows weighed on the local unit and restricted the up move.

At the interbank foreign exchange market, the local unit opened at 83.43 against the greenback. It later touched 83.42 in initial trade, registering a rise of 3 paise from its previous close.

On Friday, the rupee inched up 1 paisa to settle at 83.45 against the U.S. dollar.

Indian rupee has not been able to make a dent against the dollar as FPIs and oil companies continue to buy U.S. dollars and ensure it remains range bound, as RBI protects it from depreciation beyond 83.50, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 105.16, higher by 0.13%.

“The dollar was broadly steady as a soft U.S. jobs report boosted traders that the U.S. may still cut rates twice in 2024,” Mr. Bhansali said.

Brent crude futures, the global oil benchmark, rose 0.23% to $83.15 per barrel.

On the domestic equity market front, the 30-share BSE Sensex climbed 434.04 points or 0.59% to 74,312.19 in early trade. The NSE Nifty advanced 91.60 points or 0.41% to 22,567.45 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Friday, as they offloaded shares worth ₹2,391.98 crore, according to exchange data.

Meanwhile, India’s forex reserves dropped $2.412 billion to $637.922 billion as on April 26, in the third consecutive weekly decline in the reserves, the Reserve Bank of India (RBI) said on Friday.

In the previous reporting week, the overall reserves had declined $2.28 billion to $640.33 billion.

Image used for representational purpose.
| Photo Credit: Reuters

The rupee depreciated 3 paise to 83.48 against the U.S. dollar in early trade on April 30 amid a strong American currency against major Asian rivals and an upward movement in the crude oil prices.

However, positive sentiment in the domestic equity markets and some inflow of foreign capital in the Indian equities capped the fall in the Indian currency, forex traders said.

At the interbank foreign exchange, the domestic unit opened at 83.46 against the greenback and then slipped further to 83.48, registering a loss of 3 paise compared to its previous closing level.

On Monday, the rupee had settled 7 paise lower at 83.45 against the U.S. dollar.

Gaurang Somaiya, Forex and bullion analyst, Motilal Oswal Financial Services Ltd, said the rupee weakened amidst rising concerns that the U.S. Federal Reserve could delay interest rate cuts as the country’s inflation stayed above the Central bank’s 2% target.

“U.S. economy remains resilient and with a hawkish stance from the Fed, the dollar remains well supported at lower levels,” he said, adding that the USD-INR (Spot) is expected “to trade sideways with positive bias in a range of 83.20-83.50”.

The Federal Open Market Committee (FOMC) meeting begins on Tuesday and the interest rate decision is expected to be announced on Wednesday.

Besides, market participants are expected to take cues from the U.S. consumer confidence index to be announced on Tuesday and the domestic manufacturing PMI data on Wednesday.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.27% to 105.73.

Brent crude futures, the global oil benchmark, inched up 0.06% to $88.45 per barrel.

In the domestic equity market, the 30-share BSE Sensex was trading 135.59 points or 0.18% higher at 74,806.87. The broader NSE Nifty advanced 47.65 points or 0.21% to 22,691.05.

Foreign institutional investors (FIIs) were net buyers in the capital markets on Monday, as they purchased shares worth ₹169.09 crore on a net basis, according to exchange data.

Image used for representational purpose.
| Photo Credit: Reuters

The rupee rebounded from its all-time low levels and appreciated 12 paise to 83.49 against the U.S. dollar in early trade on April 18, supported by a firm trend in domestic equities and tracking gains in Asian currencies.

Forex traders said the local unit gained ground as the American currency retreated from its elevated levels.

At the interbank foreign exchange market, the local unit opened at 83.51 against the greenback. It later touched 83.49 in initial trade, registering a rise of 12 paise from its previous close.

On Tuesday, the rupee plunged 17 paise to hit its lowest level of 83.61 against the U.S. dollar for the second time in four weeks.

Forex and money markets were closed on Wednesday on account of ‘Ram Navami’.

The Indian rupee which closed at record lows on Tuesday opened around 83.51 this morning as Asian currencies gained a bit against the dollar, said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

The rupee is likely to trade in the range of 83.45 to 83.65 as FPIs and oil companies buy dollars while RBI sells the American currency as it did on Tuesday when it might have intervened by $2 billion, Mr. Bhansali added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 105.88, lower by 0.07%.

The dollar took a breather as traders assessed U.S. interest rates outlook in the wake of comments from Federal Reserve officials that cemented expectations of monetary settings being restrictive for longer, Mr. Bhansali added.

Brent crude futures, the global oil benchmark, rose 0.33% to $87.58 per barrel.

On the domestic equity market front, the 30-share BSE Sensex climbed 226.69 points or 0.31% to 73,170.37 in early trade. The NSE Nifty advanced 89.05 points or 0.45 to 22,236.95.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday as they offloaded shares worth ₹4,468.09 crore, according to exchange data.

Gopalpur port.
| Photo Credit: Special Arrangement

The Shapoorji Pallonji Group has announced the sale of its brownfield Gopalpur Port to Adani Ports and SEZ Ltd for an enterprise value of ₹3,350 crore.

“The under construction Gopalpur Port, located in Odisha, was acquired in 2017, with significant issues hampering its development. Post acquisition, the Shapoorji Pallonji Group commenced port operations by building the port infrastructure and stabilizing industrial relations,” the company said in a statement issued early in the morning on March 26.

Currently, Gopalpur Port operates the port which is capable of handling 20 MTPA cargo.

Further, Gopalpur Port had recently signed up with Petronet LNG for setting up a greenfield LNG regasification terminal.

This is the second port divestment in the last few months from the diversified Construction & Infrastructure, Real Estate and Energy conglomerate.

It had earlier divested its Dharamtar Port to JSW Infrastructure Limited for an enterprise value of ₹710 crore.

A Shapoorji Pallonji Group spokesperson said “The planned divestments of Gopalpur Port and Dharamtar Port, at a significant enterprise value, demonstrate our Group’s ability to turn around assets and create stakeholder value in a relatively short period of time, capitalising our core strengths in project development and construction.”

“These divestments are key milestones in our roadmap to reduce Group debt and set the stage for growth, taking advantage of the macro trends for demand in our core businesses, both in India and overseas,” the spokesperson said.

Image used for representational purpose only.
| Photo Credit: Reuters

The rupee declined 20 paise to 83.33 against the U.S. dollar on March 22 due to a stronger greenback in the global markets and dollar buying by importers.

At the interbank foreign exchange market, the local unit opened lower at 83.28 against the previous close of 83.13 to a dollar. The unit moved in a range of 83.23 to 83.33 in morning deals.

The local unit was trading at 83.33 against the dollar at 9.30 a.m., down by 20 paise from its previous close of 83.13.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, gained 0.72% to 104.17 as concerns over the slowing global economy boosted demand for the greenback.

The U.S. dollar index had retreated from 104 levels on Thursday after the Federal Open Market Committee (FOMC) kept interest rates unchanged in the range of 5.25-5.5% range.

Fed Chair, Jerome Powell stuck to his previous forecast of three rate cuts in 2024.

Brent crude futures, the global oil benchmark, fell 0.70% to $85.18 per barrel.

Analysts said dollar demand from importers, mainly oil companies, and debt repayment outflows weighed on the rupee.

On the domestic equity market front, Sensex declined by 372.64 points to 72,268.55 while broader Nifty dropped 94.45 points to 21,917.50 in the morning session.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday as they offloaded shares worth ₹1,826.97 crore, according to exchange data.

Image used for representational purpose only.
| Photo Credit: Special Arrangement

The rupee appreciated by 2 paise to trade at 82.84 against the U.S. dollar in the opening session on March 18 following foreign fund inflows.

An uptick in crude oil prices and listless trade in domestic stocks capped rupee gains in opening trade, forex dealers said.

The local currency moved in a narrow range of 82.83 to 82.84 against the dollar in early deals. The rupee closed at 82.86 on Friday.

The U.S. dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading flat at 103.43.

Crude oil prices firmed up in early Asian trade. Brent crude, the global oil benchmark, gained 0.35% to trade at $85.64 per barrel. Oil for Indian basket was up at $84.50 per barrel.

Domestic equity markets were trading almost flat in morning session on Monday. Benchmark Sensex gained around 0.1% to trade at 72,718.72 while Nifty edged up 0.06% to 22,036.20.

Foreign investors turned net buyers in Indian stocks on Friday as they purchased shares worth ₹848.56 crore on net basis. FPIs bought shares worth ₹40,710 crore in the first fortnight of the month amid an improvement in the global economic landscape and robust domestic macroeconomic outlook.

Tipping points: U.S.’s rivalry with China, Ukraine war fuel talk of moving away from the dollar.
| Photo Credit: AFP

Once hurt by crises and deflation, the euro is gaining popularity among central bank reserve managers on a return to positive rates and geopolitics challenging dollar’s appeal.

About one in five of the 75 central banks surveyed by the London-based OMFIF think-tank anticipate increasing euro holdings over the next two years, its recently-published 2023 report showed.

While 7% looked to cut euro holdings, net demand was higher than for any other currency during the period and a jump from the 2021 and 2022 surveys of reserve managers controlling almost $5 trillion.

Shifts can take years to play out. The dollar, which makes up 60% of global reserves versus the euro’s 20%, will not lose its crown overnight.

Notable changes

Yet, a more positive euro outlook speaks to notable changes taking place.

For starters, the European Central Bank’s exit from negative interest rates in 2022 drove euro area government bond yields higher after almost a decade below 0%, and they should remain elevated even as rate cuts near.

Germany’s 10-year Bund yield has stayed above 1.9% since late 2022.

“Now the euro is positive yielding, (reserve managers) are looking to increase their currency allocation to the euro and specifically away from the dollar,” said Taylor Pearce, OMFIF senior economist.

“For some central banks, because the euro wasn’t yielding anything, they had held a higher share of dollars and especially dollar-denominated government bonds.”

Poland’s central bank, whose reserves are dominated by dollar and euro-denominated assets, told Reuters while it did not comment on changes to reserves, “medium-term expected returns for euro area government bonds have improved considerably, which certainly increases the appeal of the asset class”. Romania said it planned to maintain the target weight of euros in its reserves at 40-75%; the current share is around 59%.

Reuters contacted 10 central banks in Europe, Africa and Asia; two declined to detail intentions and six did not respond.

De-dollarisation

While an energy shock and war in Europe has hurt the euro, the U.S’ rivalry with China and fallout from Russia’s war in Ukraine fuelled the talk of diversification away from the dollar.

The United States, Europe and others froze around $300 billion of Russian assets after it invaded Ukraine, prompting analysts in China to evaluate how it could mitigate losing access to dollars.

Several currencies, including the euro, could benefit from de-dollarisation.

OMFIF’s survey showed a net 13% of reserve managers plan to hold more Chinese yuan over the next two years, though down from over 30% in 2022.

“Europe has not really followed U.S. foreign policies against China or on the Middle East,” said Eurizon SLJ Capital CEO Stephen Jen. “A shift in balance in allocations away from dollars toward euros makes a lot of sense.”

The dollar’s share of total foreign exchange reserves slid to 59% in 2023 from about 72% in 2000, IMF data shows. The yuan’s share has inched up. While still dwarfed by the $26.5 trillion U.S. Treasury market, ‘safe’ European assets have been boosted by surging bond sales to fund spending and joint EU bond issuance of up to €800 billion for the post-Covid recovery.

Foreign interest is growing too. Belgium saw demand from non-European investors for a 10-year bond sold via a syndicate of banks in January, double compared with a similar bond sale a year ago. Its debt agency head Maric Post said most foreign investors were from Asia and the rise in interest from public institutions came from central banks globally.

File picture of RBI Governor Shaktikanta Das, who said that India accounts for 40% of all digital payments in the world
| Photo Credit: ANI

Reserve Bank of India Governor Shaktikanta Das said on Monday that digital transactions in India have grown 90-fold in 12 years.

Mr. Das was speaking at the RBI headquarters in Mumbai during the central bank’s Digital Payments Awareness Week programme.

The RBI chief went on to note that India accounts for 40% of all digital payments in the world, and that UPI transactions now account for 80% of all digital payments in India.

“In 2012-13, there were 162 crore digital payments. This number has grown to 14,726 crore in 2023-24 till February,” he sid.

 On May 19, 2023, RBI announced withdrawal of ₹2,000 denomination banknotes from circulation. File.
| Photo Credit: R. RAGU

The growth in currency in circulation decelerated to 3.7% for the week ended February 9 from 8.2% a year ago, reflecting the impact of the decision of the Reserve Bank of India (RBI) to withdraw ₹2,000 banknotes.

Currency-in-circulation (CiC) refers to notes and coins in circulation, while currency with the public comprises notes and coins in circulation minus cash with banks.

Also read | More than 97% of ₹2,000 notes returned: RBI

According to the RBI, commercial banks have reported double-digit growth in deposits in January, which too can be attributed to withdrawal of ₹2,000 currency notes.

The growth of Reserve Money (RM), as per the RBI data, decelerated to 5.8% as on February 9, 2024 from 11.2% a year ago (8.8% adjusted for the first-round impact of change in Cash Reserve Ratio (CRR).

Components of RM include CiC, banks’ deposits in RBI and other deposits with the central bank.

The growth in CiC , the largest component of RM, decelerated to 3.7% from 8.2% a year ago, reflecting the withdrawal of ₹2,000 banknotes, according to the RBI.

On May 19, 2023, RBI announced withdrawal of ₹2,000 denomination banknotes from circulation.

As on January 31, nearly 97.5% of the ₹2,000 banknotes were returned to the banking system, and only about ₹8,897 crore worth of such notes are still with the public.

The total value of ₹2,000 banknotes in circulation was Rs 3.56 lakh crore at the close of business on May 19, 2023, when the withdrawal of ₹2,000 banknotes was announced.

Public and entities holding such notes were initially asked to either exchange or deposit them in bank accounts by September 30, 2023. The deadline was later extended to October 7, 2023. Deposit and exchange services at bank branches were discontinued on October 7, 2023.

Starting October 8, 2023 individuals have been provided with the choice of either exchanging the currency or having the equivalent sum credited to their bank accounts at the 19 offices of RBI.

The ₹2,000 banknotes were introduced in November 2016, following the demonetisation of the then-prevailing ₹1,000 and ₹500 banknotes.

Representational image of people walking past the Bank of England in the City of London financial district in London, Britain
| Photo Credit: Reuters

The U.K. economy slipped into a “technical” recession in 2023, with the final quarter for last year showing a decline in GDP of 0.3%, on the back of a 0.1% decline in growth in the third quarter, as per data released by the country’s Office for National Statistics (ONS) on Thursday. The news was quickly deployed by the opposition Labour Party as a reason to vote out Rishi Sunak’s Conservative government in elections later this year.

“Rishi Sunak has failed to turn the corner on 14 years of Tory economic decline,” Labour leader Keir Starmer said, adding that Labour alone could deliver the change that was needed. Construction, production and services were all down in the final quarter of 2023 as per the ONS. The U.K. grew at 0.1% over 2023 — the weakest growth registered since the 2009 financial crisis, barring 2020, when the pandemic began.

Labour’s shadow chancellor said Mr. Sunak’s plan to grow the economy was “in tatters”.

“Growing the economy” was one of five promises Mr. Sunak had made in January 2023 to energize his party’s flagging poll prospects.

With an eye on the elections, Chancellor Jeremy Hunt is expected to cut taxes in the Budget, which is due on March 6. The tax cuts are reportedly being financed by billions of pounds in funding cuts for public services, which are already in disarray.

“But I would only cut taxes in a way that was responsible,” Mr. Hunt told Sky News on Thursday, adding that he did not want to jeopardize inflation levels, which have fallen since last year. Despite being faced with the latest GDP figures, Mr. Hunt insisted that the economy was “more resilient” than most people had predicted, as he pointed to falling inflation and growing real wages.