Rupee back below 70 a US dollar after biggest gain in 5 years
Lower global oil prices and a higher Sensex boosted the rupee. On Tuesday, the rupee had posted its biggest one-day gain against the US dollar.
The rupee continued its uptrend against the US dollar today, extending its advance against the greenback. The rupee had posted its biggest single-day advance against the US dollar on Tuesday. The rupee today opened at Rs 70.05 against the US dollar at the Interbank Foreign Exchange and advanced further to 69.85 against the US dollar, its highest since December 3. The rupee today settled at 70.40 against the US dollar, as compared to its Tuesday’s close of 70.44 a dollar. On Tuesday, the rupee had risen a whopping 112 paise, its best single-day gain in over five years.
INR Vs USD – Five things to about rupee’s gain against US dollar
1) A sharp drop in global oil prices and higher domestic equity prices boosted the rupee. The bond markets also rallied today. On Tuesday, global oil prices tumbled more than 5% due to fears of oversupply and deteriorating demand, deepening a selloff that has pulled down major crude benchmarks down more than 30% from October highs.
2) India imports two-thirds of its oil needs and the sharp fall in crude prices has strengthened India’s macro-economic indicators, including inflation and its trade deficit.
3) Foreign investors have turned more optimistic on Indian markets, and in November net dollar flows turned positive for the first time since March, barring a small positive in July. Net foreign dollar inflows into Indian debt and equity were $1.8 billion in November and have reached $831.8 million so far this month, although since January, there have been net outflows of $11.4 billion.
4) Meanwhile, Indian stock markets posted their seventh successive session of gains. The Sensex ended 137 points higher.
5) Forex traders will be closely watching the outcome of US Federal Reserve’s rate decision after its two-day meeting ends today. Though the Fed is widely expected to raise rates this month, analysts will focus on its outlook for 2019 amid worries of a global slowdown. The dollar’s weakness against other major currencies also lifted the rupee. US bond yields have also slipped on expectations of a dovish outlook from Fed. Apart from a fall in crude oil prices, “overall weaker US dollar on falling US rates also contributed to rupee strength,” forex advisory IFA Global said in a note.
(With Agency Inputs)
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