Rupee edges higher against US dollar after Monday's sharp fall: 5 things to know
INR Vs USD: Higher crude prices will continue to weigh on the rupee, say analystsGlobal oil prices jumped to 6-month highs today as the US tightened sanctions on Iran
The rupee (INR) gained marginally today against the US dollar, closing at 69.63 a dollar. On Monday rupee had closed at a two-week low of 69.67 after falling 32 paise, following a spike in crude oil prices. The rupee today traded in the range of 69.53 to 69.84 against the US dollar. Indian stock markets fell for the third day today, with rising crude prices hurting the sentiment.
Here are 5 things to know about USD vs INR trade today:
1) Global oil prices jumped to 6-month highs today as the US tightened sanctions on Iran. Brent crude oil futures rose above $74.50 per barrel, their highest since November, after Washington said it was ending all sanctions waivers for countries buying Iranian oil. So far this year, global oil prices are up around 40% as OPEC and its partners cut output to curtail a global glut. Disruptions in Venezuela, Nigeria and Libya have helped further squeeze supplies.
2) Kotak Institutional Equities expects global crude prices to remain elevated amid curtailment of supplies led by reduction in Iran’s crude exports due to the US decision to end sanction waivers and partial disruption of Libyan oil production amid escalating unrest. “Potential increase in OPEC+ crude supplies may mitigate the impact gradually, albeit with significantly curtailed global spare capacity," the brokerage said. Higher crude prices will continue to weigh on the rupee, says forex advisory firm IFA Global.
3) Elevated crude prices could widen the country’s current-account deficit and stoke inflationary pressures. The Indian government today issued a statement spelling out the country’s ‘robust’ energy sourcing plan starting May. “The government has put in place a robust plan to ensure that there is adequate supply of crude oil to Indian oil refineries from May 2019 onwards. There will be additional supplies from other major oil producing countries from different parts of the world," India's petroleum ministry said in a statement on Tuesday.
4) “The reaction of the Reserve Bank of India will be interesting as it has been protecting 70 levels," IFA Global added. Today, RBI also held a $5 billion forex swap auction, its second in two months. This will help inject another ₹35,000 crore of liquidity into the banking system, while bolstering RBI's forex reserves by $5 billion $420 billion, says IFA Global.
5) Bond yields also continued to harden as surging oil prices stoked fiscal slippage and inflationary concerns. The 10-year government bond yield hardened to 7.47% today. Bond yields and prices move in opposite directions.
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