HEADLINES:
March 19 2019
Rupee hits 69.70 against dollar
21 December 2018

Drop in crude oil prices, U.S. Fed stance help currency to strengthen

Softening crude oil prices helped the rupee to continue strengthening its momentum for the fourth straight session, appreciating 1% against the dollar.

The rupee’s gain is also due to the dollar weakening against all major currencies, as there is expectation that the U.S. Federal Reserve is nearing its rate hike cycle, even as it raised the interest rate on Wednesday.

Intraday high of 69.65

After opening at 70.63, the rupee touched an intraday high of 69.65 on robust dollar selling, before ending the day at 69.70 to a dollar, an increase of 69 paise from its previous close.

“The U.S. Federal Reserve raised interest rates on Wednesday as expected, but forecast fewer rate hikes next year and signalled that its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth. The rate hike, the fourth in 2018, lifted the target range for the Fed’s benchmark overnight lending rate by a quarter of a percentage point to a range of 2.25% to 2.5%,” said Abhijeet Dey, Senior Fund Manager — Equities, BNP Paribas Mutual Fund.

In the last four sessions, the rupee has gained around 220 paise or a little over 3%.

Globally, Brent crude was trading at $55.45 per barrel, down 3.13%. Softening international crude oil prices bode well for the country’s current account gap, as India imports 80% of its crude oil requirements.

Rising oil prices in the earlier part of the year caused the currency account deficit (CAD) to widen, as rupee depreciated about 15% during the January-October period.

CAD had widened to 2.9% of GDP for the July-September quarter due to higher trade deficit, as compared to 1.1% during the same period of the previous year.

However, the rupee reversed the trend in November following softening crude oil prices.

 

 

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