Rupee falls by 36p to 60.39

Tags: News
The rupee depreciated by 36 paise on Wednesday to close at seven-week low of 60.39 against the dollar due to geopolitical tensions in Iraq that could disrupt oil supplies to the country. The rupee hadclosed at 60.03 on the previous day.

Analysts expect the rupee to depreciate to 60.80 to 61 levels in the next one month. The dollar-rupee pair made a high of 60.54 and a low of 60.06.

On the New York Mercantile Exchange, West Texas intermediate crude oil for delivery in August traded at $106.03 a barrel, up 0.15 per cent as Sunni militants pushed forward in northern Iraq, striking a key refinery near Baghdad and stoking worries about oil exports.

India imports nearly 80 per cent of its oil needs, leaving its currency especially vulnerable to price swings.

Anindya Banerjee, currency analyst at Kotak Securities said, “The rupee has become a proxy of global petroleum prices. Sustained oil prices will affect the government’s finances and if passed to the common man, it would stoke inflation and hurt consumption.”

“The near term outlook is that the rupee may depreciate to 60. 80-61 level in the coming days on back of high oil prices. At these levels, exporters will step into the market to sell dollars, while FIIs would find Indian equities attractive. However, the only caveat is that in case the situation Iraq escalates, leading to substantial increase in oil prices, the rupee, like any other emerging market currency, would depreciate way past the level of 61,” added Banerjee.

A report from India Forex Advisors said that in the short-term range, that is a week to a fortnight, the rupee may trade at 59.50–61, while over the next three to six months, it may trade between 58.80 and 61.50.

On the global front, Bank of England’s monetary policy minutes were released during the day. The central bank said that increase in bank rate would be gradual. But it also stated that more gradual the increase, the earlier it must be started. The precise timing would, however, depend on the inflation report. Japan’s monetary policy minutes were also released. Bank of Japan unanimously voted to keep the monetary base target of buying Japanese government bonds steady at 60-70 trillion yen annually. BoJ further stated that Japan’s economy was gradually improving, which was further warranted by the increase in consumer sentiment in May.

Federal open market committee statement will be released after the market hours and it can impact the movement of US dollar heavily. Fed is expected to cut monthly bond buying purchases by another $10billion, said a report from India Forex Advisors.

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