2024-12-30 07:21

MUMBAI, Dec 30 (Reuters) - India's central bank will need to rethink its foreign exchange strategy and loosen its hold on the rupee in 2025, economists said, with the currency at its strongest against peers in at least two decades in trade-weighted terms. The rupee's 40-currency trade-weighted real effective exchange rate (REER) stood at 108.14 in November, indicating the currency was overvalued by around 8%, the Reserve Bank of India's latest bulletin showed. The rupee's overvaluation relative to its trading partners makes India's exports more expensive. This is the most overvalued the rupee has been since 2004, RBI data showed. Data prior to 2004 is not available. The rupee's overvaluation on a REER basis reflects its appreciation in nominal terms against its peers and the widening interest rate differentials, economists said. The former is largely thanks to a central bank that has intervened regularly in the forex markets to slow the pace of rupee's decline, keeping volatility in check. In fact, the RBI's repeated two-sided intervention this year has meant the rupee has been the least volatile Asian currency after the pegged Hong Kong dollar. But that could change in 2025. "Given the rise in rupee's overvaluation...the pace of RBI forex intervention will need to slow," said Gaura Sen Gupta, India economist at IDFC FIRST Bank. That would mean the currency is likely to weaken and witness higher volatility. There is already evidence of this. The rupee's 30-day daily realised volatility is at a six-month high and the currency is on course to post its biggest monthly decline in two years having dropped 1.2% so far in December. Last Friday, the rupee dropped to an all-time low of 85.8075 against the U.S. dollar and traded in a 50-paisa range, the widest this year. Considering the "flagging" overvaluation, there is likely to be further rupee depreciation, said Kanika Pasricha, chief economic advisor at Union Bank of India. MULTIPLE HEADWINDS A shallow rate cut cycle by the U.S. Federal Reserve, worries over the likely impact of Donald Trump's trade policies, rising U.S. bond yields and India's growth slowdown will be challenges for the rupee. "It is after several years that both 'pull' (growth slowdown) and 'push' factors (external headwinds) for portfolio flows are not in favour of the rupee," said Dhiraj Nim, an economist and FX rates strategist at ANZ. "So, an adjustment is warranted." NEW RBI GOVERNOR The appointment of Sanjay Malhotra as the RBI's new governor earlier this month, a development that market participants had not expected, is further fuelling expectations of a change in how the rupee is managed. "The RBI governor plays an important role in driving the central bank's currency management strategy," Nomura said in a note released immediately after the change in guard at RBI. "It is possible that a bit more flexibility is allowed in currency fluctuations, going forward, as compared to the relatively tighter leash seen over the last one year and more." Sign up here. https://www.reuters.com/markets/currencies/indian-central-bank-seen-loosening-stranglehold-rupee-2025-2024-12-30/

2024-12-30 06:59

MUMBAI, Dec 30 (Reuters) - The Indian rupee was slightly stronger on Monday as most regional currencies rose, while very-near-tenor dollar-rupee swap rates surged to unusually high levels amid panic bids, according to traders. The rupee was at 85.4750 against the U.S. dollar as of 11 a.m. IST, up from its close of 85.5325 in the previous session. Very near-dated dollar-rupee swap rates surged, with traders pointing to year-end adjustments and tightened rupee liquidity, alongside the absence of intervention by the Reserve Bank of India to manage levels. The tomorrow-next dollar-rupee swap rate soared to 14 paisa while the overnight swap rate jumped to 3 paisa in early trading on Monday. The levels are "berserk ... and the bank who has paid (the swap) is prowling for more," a trader at a bank said, referring to the panic bids in the market. Meanwhile, an uptick in Asian currencies helped the rupee on Monday. The currency had declined to its all-time low of 85.8075 last week, pressured by a spike in dollar demand while strong intervention by the Reserve Bank of India helped the rupee pare its losses. Significant portfolio outflows coupled with India's slowing growth and widening trade deficit have kept the rupee under strain this quarter, Amit Pabari, managing director at FX advisory firm CR Forex said. Foreign portfolio investors have sold over $10 billion of local stocks and bonds over this quarter on a net basis, according to stock depository data. Pabari expects the rupee to trade in the 85.20-85.80 range in the near term. Despite last week's slump, the rupee has fared better than most of its Asian peers over the December quarter. It is down 1.8% on the quarter so far while its peers have weakened between 2.9% and 11.2%. Sign up here. https://www.reuters.com/markets/currencies/rupee-gains-slightly-very-near-tenor-dollar-rupee-swap-rates-surge-2024-12-30/

2024-12-30 06:24

ADDIS ABABA, Dec 30 (Reuters) - At least 71 people died in Ethiopia when a truck packed with passengers plunged into a river, according to the spokesperson for the southern Sidama regional government and a statement. The accident occurred in the Bona district, the regional communication bureau said in a statement issued late on Sunday. Wosenyeleh Simion, spokesperson for the Sidama regional government, told Reuters on Monday at least 71 people had died, including 68 males and 3 females. "Five are in a critical condition and taking treatment at Bona General Hospital," he said. In a statement late on Sunday the regional communication bureau had given the death toll as 60. Wosenyeleh said the truck had missed a bridge and fell into a river and that the road had many bends. Some of the passengers were returning from a wedding ceremony and some families had lost multiple members, he said, adding traffic police in the region had reported the truck was overloaded, which likely caused the accident. The state-run Ethiopian Broadcasting Corporation (EBC) also reported that the passengers were travelling to a wedding when the accident occurred on Sunday. Deadly traffic accidents are common in Ethiopia, where driving standards are poor and many vehicles badly maintained. At least 38 people, mostly students, were killed in 2018 when a bus plunged into a ravine in Ethiopia's mountainous north. Sign up here. https://www.reuters.com/world/africa/least-60-killed-ethiopia-road-accident-2024-12-30/

2024-12-30 05:45

BPCL turns to Middle East due to Russian supply shortfall BPCL diversifies oil sources, including first-time Argentinian crude purchase BPCL plans $19.94 billion investment by 2028/29, half through debt NEW DELHI, Dec 30 (Reuters) - State-run Indian refiner Bharat Petroleum Corp (BPCL.NS) , opens new tab is buying Middle Eastern crude to make up for less supply of cheaper Russian oil, its head of finance Vetsa Ramakrishna Gupta said in a recent interview. Indian state refiners, which typically buy Russian oil in the spot market rather than under long-term contract, are unable to procure about 8 million to 10 million barrels of crude for January loading that they have previously seen available in the market, sources said earlier this month. India became a top buyer of Russian seaborne oil after the European Union shunned purchases and imposed sanctions on Moscow following its invasion of Ukraine in 2022. Russian oil accounts for more than one-third of India's energy imports as the country has sought to take advantage of discounts on the crude. BPCL is not getting its full Russian oil supply from the spot market, Gupta told Reuters in an interview on Dec. 26. "There may be a shortage of two to three cargoes per month ... whatever is the shortage of Russian crude, we are purchasing that from Middle East only," he said, adding that its recent purchases included Omani oil. Russian oil makes up about 35% to 37% of the crude BPCL processes at its three refineries, which have a combined capacity of 706,000 barrels per day (bpd), he said. "Next year if there is any major impact on Russian supplies, we will explore more sources including WTI (West Texas Intermediate) crude or Middle Eastern crudes, whichever is cheaper," Gupta said. Russian oil exports have fallen as domestic demand is rising and as Moscow has to meet output quotas under its pact with the Organization of the Petroleum Exporting Countries (OPEC). The country's output is also set to decline in 2024 from last year, the Interfax news agency reported on Dec. 5. Additionally, Russian state oil firm Rosneft (ROSN.MM) , opens new tab has signed a deal with Indian private refiner Reliance to supply 500,000 bpd of crude for 10 years starting in 2025. That contract will account for about half of the company's exports, reducing the supply available for other traders. BPCL is constantly diversifying its oil sources and buys about 53% of its supply through term deals. It recently bought Argentinian crude for the first time, he said. For the fiscal year 2025/26, BPCL plans to lift 10,000 bpd of crude oil from Qatar under an annual deal while keeping contracts with other term suppliers intact, Gupta said. INVESTMENT PLANS BPCL plans to invest 1.7 trillion rupees ($19.94 billion) in the five years to 2028/29, with half of that met through debt, Gupta said. The company has already tied up about 320 billion rupees of loans with Indian banks for the expansion of its Bina refinery in central India, he added. BPCL will refinance 40 billion to 50 billion rupees in loans next year and would go for external borrowings in 2026/27, when it plans major investments, Gupta said. He added that more interest rate cuts are required by the U.S. to make overseas borrowing attractive. BPCL has foreign debt of $2 billion at the group level that include investment in overseas exploration projects. It will invest 250 billion rupees for the development of its oil and gas projects in Mozambique and Brazil in the next five years, Gupta said. ($1 = 85.2540 Indian rupees) Sign up here. https://www.reuters.com/markets/commodities/indias-bpcl-buys-middle-east-grades-replace-russian-shortfall-2024-12-30/

2024-12-30 05:36

Dollar slips but set for 6.6% annual gain Japanese yen on track for 11.4% annual loss Euro on pace for 5.8% annual decline Dec 30 (Reuters) - The dollar rose broadly on Monday, holding near a two-year high, while the Japanese yen edged up from five-month lows against the greenback as traders continued to digest the likelihood that the Federal Reserve will make fewer rate cuts next year. The U.S. currency has rallied in recent weeks on expectations for a less dovish U.S. central bank as inflation remains above the Fed’s 2% annual target. Analysts also expect policies from President-elect Donald Trump's U.S. administration to both bolster growth and add to price pressures next year. Fed policymakers this month cut their interest-rate forecast for 2025 to 50 basis points of cuts, from 100 basis points, and Fed Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering inflation. The dollar index is on track for a 6.6% gain this year. It was last up 0.1% on the day at 108.08, after reaching a two-year high of 108.54 on Dec. 20. The yen has suffered from a wide interest-rate differential between Japan and the United States. The dollar is on pace for a 11.4% return against the Japanese currency this year, its fourth yearly increase. It was last down 0.51% at 157.02 yen. Some analysts see the yen as likely to benefit next year from expected Bank of Japan interest-rate hikes while the Fed eases, but with U.S. Treasury yields continuing to rise, this has not yet been captured in the exchange rate. "With above-target inflation remaining persistent for much of 2024, price pressures could increase further should the yen weaken even more. To support its currency, the Bank of Japan may wish to start raising rates more meaningfully," said Fawad Razaqzada, market analyst at City Index. Some Bank of Japan policymakers saw conditions falling into place for an imminent rate hike, with one predicting a move "in the near future," a summary of opinions at the bank's December meeting showed on Friday, keeping alive the chance of a January hike. Traders are also watching for any potential intervention by Japanese officials if the yen continues to weaken. Japan Finance Minister Katsunobu Kato on Friday reiterated concerns over a sliding yen, repeating his warning that the government would take action against excessive currency moves. The euro is heading for a 5.8% drop on the dollar this year, after the European Central Bank cut interest rates four times in 2024 and with markets expecting the ECB to take a quicker pace with rate cuts than the Fed in 2025. It was last down 0.25% at $1.0401 . The next interest-rate cut by the ECB could be longer in coming after a recent uptick in inflation, ECB Governing Council member Robert Holzmann was quoted as saying on Saturday. Sterling fell 0.26% to $1.2546 and is on pace for an annual loss of 1.4%. Bitcoin fell 0.17% to $94,222, and is down from a record high of $108,379.28 on Dec. 17. The cryptocurrency has surged about 122% this year. Sign up here. https://www.reuters.com/markets/currencies/dollar-reigns-with-support-higher-yields-2024-12-30/

2024-12-30 05:29

Gold has gained nearly 27% this year US jobs data, December Fed meeting minutes due next week Platinum hit over three-month low on Friday Dec 30 (Reuters) - Gold prices dipped in thin trade on Monday as traders awaited fresh catalysts, including next week's U.S. economic data, which could influence the Federal Reserve's interest rate outlook for 2025, as well as policies from incoming President Donald Trump. Spot gold fell 0.6% to $2,604.49 per ounce as of 01:42 p.m. ET (1842 GMT). U.S. gold futures settled 0.5% lower at $2,618.10. "I think it's just the holiday thin trade. Perhaps some squaring of the books before year-end," said Peter Grant, vice president and senior metals strategist at Zaner Metals. Geopolitical tensions are expected to remain high into next year, with central banks continuing to buy gold, while the U.S. debt situation is likely to worsen and the deficit to grow under the Trump administration, fuelling ongoing safe-haven demand for the metal, Grant said. Gold has surged nearly 27% this year, reaching a record high of $2,790.15 on Oct. 31, as investors sought the yellow metal amid geopolitical uncertainty and U.S. rate cuts. Anticipation of major U.S. policy shifts in 2025, including potential tariffs, deregulation and tax changes, has grown as Trump prepares to take office in January. Earlier this month, Fed Chair Jerome Powell signaled a cautious stance on further rate cuts after delivering a quarter-point reduction, aligning with market expectations. A slew of U.S. economic data due next week includes job openings figures, the ADP employment report, the Fed's December FOMC minutes, and the U.S. employment report, to gauge the health of the economy. Bullion is considered a hedge against inflation and turmoil but high rates reduce the appeal of holding the non-yielding asset. Spot silver lost 1.3% at $28.98 per ounce and platinum fell 1.5% to $905.62, having hit a more than three-month low on Friday. Palladium was down 1% at $902.16. Sign up here. https://www.reuters.com/markets/commodities/gold-edges-up-focus-shifts-incoming-trump-administration-2024-12-30/