The rupee (INR) today extended its upward momentum against the US dollar (USD) to the seventh day, strengthening past the psychological 71-a-dollar mark. Amid easing crude oil prices, the rupee today closed at 70.69 a dollar, its highest in three months. The rupee had closed at 71.46 a dollar on Tuesday. The foreign exchange market was closed on Wednesday for a public holiday. A Reuters report citing two dealers said that the Reserve Bank of India (RBI) was not seen intervening in the forex market to contain the sharp rise in the rupee. This is the longest winning streak of the rupee since February 2017, gaining over 3% in seven sessions.

Five things to know about rupee’s rise against the US dollar

India imports more than two-thirds of its oil requirement. The recent fall in the global crude prices has eased dollar demand from oil importers, traders said. “Traders are unwinding long dollar positions," the Reuters report said, citing a bank dealer.

Benchmark Brent crude prices were down below $63 a barrel after US inventories swelled to their highest since December. The sharp fall in global crude prices – down over 25% since reaching a four-year high of $86 on October 3 – has sparked talks of an output cut by the OPEC.

The fall of the US dollar against a basket of six major currencies also helped support the rupee’s rebound. The dollar fell for a second day running as investor worries mounted about slowing global growth. Markets expect the Fed to lift rates again in December, but concerns about a potential global slowdown raised doubts about the number of rate increases next year.

The rupee has also benefited from fresh inflows into Indian markets.

Despite its recent recovery, the rupee is down about 10% against the US dollar so far this year, weighed down by the increase in crude oil prices and a wider emerging-market rout. If crude oil prices remain soft, the rupee may outperform other emerging market currencies in an environment of lower crude prices and repricing (lower) of Fed rate hikes for 2019, forex advisory firm IFA Global said.

Close