The rupee depreciated 11 paise to 90.43 (provisional) against the US dollar on Wednesday, after a sharp rally in the previous trading session following India-US trade deal announcement, on suspected dollar buying by corporates and importers.

Forex traders said despite the positive sentiment after the India-US trade deal, caution still remains as there is no signed or officially released trade agreement yet — no framework text or final documentation.

At the interbank foreign exchange, the rupee opened at 90.35 and touched an early high of 90.26 and a low of 90.54 against the greenback.

The domestic unit finally settled at 90.43 (provisional), down by 11 paise from its previous close.

On Tuesday, the Indian rupee emerged as the best-performing Asian currency, registering a record gain of 117 paise or 1.28 per cent in a single trading session to settle at 90.32 against the US dollar, after India and the US agreed to a trade deal.

Indian Rupee dipped on Wednesday, after a sharp rally in the previous session, as investors looked for more clarity on the terms of the India-US trade deal.

RBI Mulls Supervision Revamp For Banks To Curb Risks

Weaker-than-expected services PMI also weighed on the rupee. The rupee rallied sharply on Tuesday amid trade deal optimism. However, an overnight surge in crude oil prices capped sharp gains, said Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan.

“We expect the rupee to trade with a positive bias as the India-US trade deal may boost domestic market sentiments. FII inflows and positive domestic equities may also support the rupee.

“However, elevated crude oil prices amid renewed tensions between the US and Iran may cap sharp gains. Traders may also take cues from ISM services PMI data from the US. USD-INR spot price is expected to trade in a range of 90 to 90.60,” Choudhary added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.03 per cent lower at 97.40.

Brent crude, the global oil benchmark, was trading 0.10 per cent lower at USD 67.26 per barrel in futures trade.

“Oil prices have been volatile amid the US–Iran standoff, turbulence across broader commodity markets, and movements in the dollar index,” said Kaynat Chainwala, AVP Commodity Research, Kotak Securities.

On the domestic equity market front, Sensex rose 78.56 points to settle at 83,817.69, while the Nifty was up 48.45 points to 25,776.

Foreign Institutional Investors purchased equities worth Rs 5,236.28 crore on Tuesday, according to exchange data.

India’s services sector growth rose to a two-month high of 58.5 in January, on faster expansion in new business intake and output, prompting service providers to hire additional staff, a monthly survey said on Wednesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index rose to a two-month high of 58.5 in January, from December’s recent low of 58.0, mainly driven by demand buoyancy, new business gains and tech investment.

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

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

U.S. President Donald Trump. File
| Photo Credit: AP

Washington DC:

Donald Trump has sniffed trouble brewing afar against the United States – one that may topple the US’s position as a dominant global power and end Washington’s ability to impose economic sanctions against those it deems fit for the case. The storm in question is the steadily-expanding BRICS+ grouping.

Within hours of taking office as President of the United States, Donald Trump went after the BRICS+, threatening to impose 100 per cent tariffs on member countries. The reason Washington feels threatened by the grouping is because it makes the US dollar, America’s greatest weapon – one it can actually use, vulnerable.

In recent times there have been reports of a possibility of the BRICS+ nations working on a common currency which would replace the US dollar for international trade. The founding members of the BRICS are Brazil, Russia, India, China, and South Africa – the acronym of which is BRICS. Over the years, several other countries have become members of the bloc, namely Egypt, Ethiopia, Iran, the United Arab Emirates (UAE), and Indonesia. Saudi Arabia has accepted the membership, but has not formally joined yet, saying that the matter is under consideration.

BRICS+, which is shaping up to be the developing world’s alternative to the West-led G7, has set up its own financial structure and institutions, and is cooperating economically and diplomatically to reduce its dependence on the US Dollar – the default currency for international trade.

Donald Trump has now said his administration will impose 100 per cent tariffs against countries of the BRICS+ bloc, should they take any steps to replace the US dollar. “If the BRICS nations want to do that (replace the US dollar), that’s okay, but we’re going to put at least a 100 per cent tariff on the business they do with the United States,” President Trump told the international media shortly after his presidential inauguration.

“They will have a 100 per cent tariff if they so much as even think about reducing the use of the US Dollar in global trade,” he threatened.

Less than a month before he took office, Mr Trump had made a similar reference warning the BRICS+ countries. “We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US dollar or, they will face 100 per cent tariffs and should expect to say goodbye to selling into the wonderful US economy,” Donald Trump, then President-elect, had warned in December.

HOW THE US DOLLAR IS WEAPONISED IN SANCTIONS

The US Dollar, has for decades, been the world’s principal reserve currency. It has been the case since the Second World War, following which global institutions like the United Nations, World Bank, and International Monetary Fund, among many others were set up. All these institutions were set up in the United States – And America being the largest trading country of the world at that time led to US Dollar becoming the default currency for global trade.

In 1973, a new system was set up to moderate international transactions. This system is known as SWIFT, which is short for Society for Worldwide Interbank Financial Telecommunication. Since then, this has become the world’s commonly accepted and standardised model for international money transfers.

According to its website, SWIFT is a member-owned cooperative connecting more than 11,000 banks, financial institutions and corporations in more than 200 countries and territories. SWIFT is neither a payment nor a settlement system, and is therefore is not regulated as such by any of the world’s central banks.

SWIFT is overseen by the central banks of G10 nations – namely, Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, United Kingdom, United States, Switzerland, and Sweden.

Since the US Dollar is the default currency of trade globally, and SWIFT is the method or channel of settlement, sanctions are imposed by controlling these two. Sanctions are imposed via SWIFT by restricting access to the network or completely prohibiting individuals, institutions, and countries from using its services. When sanctions are imposed, it completely freezes an account and restricts any further transactions from it.

SWIFT sanctions can freeze any bank’s ability to transact with the rest of the world. Under an international rules-based order, much of the global financial governance is dominated by the US-led West.

MULTI-POLAR WORLD

In the 21st Century, with the rise of Asia, and economies like China, India, Russia, Indonesia, UAE, Saudi Arabia, and others, the world has become much more multi-polar, instead of being bipolar – which was the case during the Cold War between the US and USSR through much of the 20th Century, post the two world wars in the first half of the century.

Brazil in South America and South Africa in Africa were also rising global economies.

With time, emerging economies became increasingly disgruntled with the dominance of the US Dollar being the default in almost all global transactions. This also kept them under a constant threat of Western sanctions, should they not two the line. To deal with this, BRICS leaders have for long reportedly advocated for de-dollarisation, and been in favor of increased trade in local currencies and even reportedly explored the possibility of a potential common BRICS currency.

The BRICS members have even set up the New Development Bank (NDB) and the Contingent Reserve Arrangement or CRA – which act and function exactly like the World Bank and the International Monetary Fund or IMF, respectively.

The so-far 10-member BRICS+ grouping already comprises nearly half of the world’s population and over a third of the global economy. It also has more than 25 per cent of the world’s landmass, produces more than 30 per cent of the world’s oil output and is on track to surge ahead of the G7 economies in less than 20 years.
 

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| Photo Credit: Reuters

The rupee recovered slightly from its record low and settled with a gain of 4 paise at 85.87 (provisional) against the U.S. dollar on Thursday (January 9, 2025) amid firm American currency and elevated level of crude oil prices.

According to forex analysts, relentless selling in domestic equities and outflow of foreign capital kept the local unit under pressure, while dollar strengthened on improved macroeconomic prospects in the U.S.

They said, uncertainties related to trade restrictions ahead of the change in US administration under President Donald Trump continued to fuel dollar demand, while concerns over Federal Reserve’s move to delay interest cut kept the country’s benchmark treasury yields elevated.

At the interbank foreign exchange, the rupee opened at its historic low level of 85.94 and touched an intra-day peak of 85.84 before ending the session at 85.87 (provisional) against the greenback, 4 paise higher from its previous close.

On Wednesday, the rupee plunged 17 paise to settle at its all-time low closing level of 85.91 against the dollar.

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said the surge in US bond yields and FII outflows pressured the rupee. The US macroeconomic data was mixed, with weekly unemployment claims favouring the greenback while non-farm employment data was disappointing.

“We expect rupee to trade with a negative bias on weak domestic markets, strong dollar and rising US treasury yields. Elevated crude oil prices and FII outflows also put downside pressure on the domestic currency. However, any RBI intervention may support rupee at lower levels. Investors may watch out for non-farm payrolls report. USD-INR spot price is expected to trade in a range of Rs 85.75 to Rs 86.10,” Choudhary said.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.05 per cent higher at 108.98. The 10-year US bond yields also remained elevated at 4.67 per cent.

Brent crude, the global oil benchmark, fell 0.03 per cent to USD 76.14 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex declined sharply by 528.28 points, or 0.68 per cent, to settle at 77,620.21 points, while the Nifty dropped 162.45 points, or 0.69 per cent, to 23,526.50 points. The indices have been on the downward track for the past three sessions.

Foreign institutional investors (FIIs) offloaded Rs 3,362.18 crore in the capital markets on a net basis on Wednesday, according to exchange data.

Doha/New Delhi:

No decision has been taken to start a new currency to compete with the US dollar, External Affairs Minister S Jaishankar has said in Qatar, where he has gone to attend the Doha Forum.

Mr Jaishankar’s comments came a week after US President-elect Donald Trump demanded that BRICS member countries, which include major emerging economies such as India, Russia and China, commit to not creating a new currency or supporting another currency that would replace the dollar.

Trump had threatened to apply 100 per cent tariffs if BRICS members start a de-dollarization policy, or move away from the US dollar.

“We had a good relationship, a very solid relationship with the first Trump administration, yes there were some issues mostly trade related issues, but there were a whole lot of issues on which Trump was very international, and I remind people that it was actually under Trump that the QUAD was restarted,” Mr Jaishankar said.

He also noted the personal connection between Prime Minister Narendra Modi and President-elect Trump, which has contributed to the strong bilateral ties between the two countries.

“There is a personal relation between PM Modi and Trump… Where the BRICS remarks were concerned, we have said that India has never been for de-dollarisation, right now there is no proposal to have a BRICS currency. The BRICS do discuss financial transactions… The US is our largest trade partner, we have no interest in weakening the dollar at all,” he added.

While warning BRICS members to not commit to creating a new currency or supporting another currency that would replace the US dollar, Mr Trump had said they can go find another ‘sucker’.

“We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US Dollar or, they will face 100 per cent tariffs, and should expect to say goodbye to selling into the wonderful US economy,” Trump wrote on his social media platform, Truth Social.

“They can go find another ‘sucker’. There is no chance that the BRICS will replace the US dollar in international trade, and any country that tries should wave goodbye to America,” the US President-elect had said.

Photo used for representation purpose only.
| Photo Credit: Reuters

The rupee fell 1 paisa to a new lifetime low of 84.39 (provisional) against the U.S. dollar on Tuesday (November 12, 2024) as persistent foreign fund outflows and a strengthening greenback against major crosses overseas dented investor sentiments.

Forex traders said the rupee is likely to trade between 83.80 and 84.50 in the medium term, with the Reserve Bank of India likely limiting any significant downside, aided by its robust foreign exchange reserves.

At the interbank foreign exchange, the rupee opened at 84.39 against the U.S. dollar. During the session, the local currency touched a high of 84.39 and a low of 84.41. It finally settled at 84.40 (provisional), a decline of just 1 paisa against the US currency, registering a loss for the fifth straight session.

On Monday, the rupee dropped 1 paisa to hit a new lifetime low of 84.38 against the U.S. dollar.

In the last five sessions, the local unit has lost 32 paise against the greenback.

“The rupee traded weaker as foreign funds continued their selling spree in the Indian market. However, the rupee received some relief from falling crude and gold prices, as the reduced pace of decline could potentially improve India’s import bill in the coming months,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.

Despite this, the dollar index’s continued strength above 105 is expected to maintain pressure on the rupee, limiting any significant recovery in the near term.

“With resistance near the 84.25-84.30 zone and support is seen lower at 84.55. This week’s focus will be on the US CPI data release, which could influence the dollar’s trajectory. Additionally, US Fed Chairperson Jerome Powell’s upcoming speech is expected to provide insights that may drive price action in the dollar, currently trading at a four-month high of 105.75,” Trivedi said.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.06 per cent higher at 105.60.

Brent crude, the global oil benchmark, rose 0.60 per cent to USD 72.26 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex fell 820.97 points, or 1.03 per cent, to close at 78,675.18 points, while Nifty fell 257.85 points, or 1.07 per cent, to settle at 23,883.45 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday, as they offloaded shares worth Rs 2,306.88 crore, according to exchange data.

Meanwhile, a SBI research report on Monday said that the rupee may depreciate 8-10% against the US dollar during the Trump 2.0 regime.

The report, titled U.S. Presidential Election 2024: How Trump 2.0 Impacts India’s and Global Economy, emphasised that the rupee can have a brief spell of depreciation against the US dollar, followed by appreciation.

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| Photo Credit: Reuters

The rupee settled flat at 84.07 (provisional) against the US dollar for the second straight session on Tuesday (October 22, 2024), tracking negative domestic equity markets and unabated outflow of foreign funds.

The local unit was also weighed down by elevated crude oil prices as well as firm American currency amid rising U.S. treasury yields, forex traders said.

At the interbank foreign exchange market, the domestic unit opened at 84.07 against the greenback and witnessed a restricted movement between 84.06 and 84.08 during the session. The unit finally settled at the previous day’s closing level of 84.07 (provisional) against the dollar.

On Monday, the rupee settled flat at 84.07 against the US dollar.

The Indian currency has been struggling to recover since October 11 when it closed at its lowest level of 84.10 against the dollar.

According to analysts, the rupee has been under pressure due to the continuous selling of Indian equities by FIIs in pursuit of better gains from the Chinese market.

Also, they said, a surge in the US treasury yields raised concerns about slower rate cuts by the Federal Reserve, steering investors towards a safer bet dollar.

Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said the rupee traded on a flat note amid weak domestic markets and a surge in US treasury yields. However, reports of RBI interventions supported the rupee at lower levels.

“Investors may take cues from PMI data from the US this week. USD-INR spot price is expected to trade in a range of ₹83.90 to ₹84.30,” he added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell marginally by 0.07 per cent to 103.76.

At the interbank foreign exchange, the rupee opened at 84.06 against the greenback and traded in a tight range. In initial trade it touched 84.05, registering a rise of 5 paisa over its previous close. File
| Photo Credit: Reuters

The rupee rebounded from its all-time low levels and appreciated 5 paise to 84.05 against the U.S. dollar in morning trade on Monday (October 14, 2024), weighed down by elevated crude oil prices and strong dollar as risk-off sentiment gripped the markets.

Forex traders said there have been significant foreign fund outflows and crude oil prices have surged by nearly 10%, fueled by Hurricane Milton’s impact on U.S. production along with the tensions in the Middle East between Israel and Iran.

However, the Reserve Bank of India’s intervention, backed by record-high reserves, has supported the local unit at lower levels.

At the interbank foreign exchange, the rupee opened at 84.06 against the greenback and traded in a tight range. In initial trade it touched 84.05, registering a rise of 5 paisa over its previous close.

On Friday (October 11, 2024), the rupee fell 12 paise to a record low of 84.10 against the U.S. dollar.

“Indian equities saw substantial outflows, with FIIs offloading nearly $6.4 billion in October, as risk-off sentiment gripped the markets. Adding to the strain, crude oil prices have surged by nearly 10%,” CR Forex Advisors MD-Amit Pabari said.

Mr. Pabari further added that the Reserve Bank of India’s intervention, backed by record-high reserves and strong resistance at the 84.10 level could trigger a pullback below 84 as FII outflows begin to ease.

“Thus, in the short term, we expect the USD-INR pair to trade in a range of 83.90 to 84.10,” he said.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.13% higher at 103.02.

Brent crude, the global oil benchmark, declined 1.21% to $78.08 per barrel.

On the domestic equity market front, Sensex advanced 461.97 points, or 0.57%, to 81,843.33 points. The Nifty rose 140.40 points, or 0.56%, to 25,104.65 points.

Foreign institutional investors (FIIs) were net sellers in the capital markets on Friday (October 11, 2024) as they offloaded shares worth ₹ 4,162.66 crore, according to exchange data.

Meanwhile, “India’s forex reserves dropped by $ 3.709 billion to $ 701.176 billion for the week ended October 4,” the Reserve Bank of India said on Friday (October 11, 2024).

In the previous reporting week, the reserves had jumped by $ 12.588 billion to an all-time high of $ 704.885 billion.