Indian rupee (INR) today extended fall against the US dollar (USD) as higher oil prices stoked concerns about inflation, economic growth and deficits. Opening at 71.83 a dollar, the rupee fell to a low of 71.97. So far during the day, the rupee traded in a range of 71.73 to 71.97 a US dollar. On Monday, the rupee had closed at 71.60 a dollar. The rupee settled at 71.78 a dollar. On Monday, the Indian rupee had plunged by 68 paise to 71.60 against the US dollar amid concerns over soaring crude prices following drone attacks on Saudi Arabia's oil facilities.
Here are 5 things to know about USD-INR trade today:
1) "Higher oil prices have stoked concerns about inflation and the nation’s finances. India imports more than 80% of its oil and around two-thirds of that comes from the Middle East," HDFC Securities said in a note. The brokerage sees USD (US dollar)-INR (rupee) pair having support at 70.86 and resistance at 71.90.
2) Global oil prices shed some of its massive gains today but remained significantly higher than last week's prices. Brent crude, the international benchmark, today traded around $68 per barrel in Asia. Oil prices came off highs after the US signalled possible release of crude reserves, but the threat of military action over the attacks on Saudi oil facilities kept prices elevated.
Crude prices may continue to remain elevated as there are concerns over how quickly Saudi would be able to restore production, says forex advisory firm IFA Global.
3) "The rupee is likely to continue to underperform its emerging market peers given its reliance on imported crude," IFA Global added.
A $10 per barrel increase in global oil prices widens India's trade deficit by approximately $1.5 billion a month and pushes up consumer inflation by 0.3%, says IFA Global.
4) The rupee is down nearly 3% against the US dollar so far this year as outflows from Indian capital markets continue to hurt the Indian currency. On Monday, foreign portfolio investors sold Indian shares worth a net of ₹751.26 crore. Indian stock market benchmark Sensex fell over 600 points today.
5) Rupee traders are also focused on Federal Reserve's meeting later this week, when policy makers are widely expected to cut interest rates.