Rupee Weakens 41 Paise on Month End Dollar Demand, Elevated Oil Prices
There was possible front running on Sun Pharma’s overseas acquisition of $ 11. 75 billion which also took it lower.
Mumbai: The Indian spot rupee extended its recent losses to end 41 paise lower on Tuesday at 94. 56 to a dollar primarily driven by dollar gains abroad coupled with elevated crude oil prices weighing on rupee sentiment. Traders said that there were other factors also at work against the rupee such as the month end dollar demand in which SBI was seen buying at the lower end and then selling near 94. 50 to a dollar. There was possible front running on Sun Pharma’s overseas acquisition of $ 11. 75 billion which also took it lower.
Dilip Parmar, research analyst at HDFC Securities said, “The rupee, alongside its Asian peers, continues to face downward pressure as rising crude oil prices and risk-averse sentiment dominate the market. Anticipated dollar demand from upcoming corporate remittances is further weighing on the currency. With geopolitical uncertainty and a supply-demand imbalance persisting, the outlook remains weak for the local rupee. The spot USD-INR faces immediate resistance at 94. 85, with support holding at 94. 10. ”
“With oil hovering over above $ 111 per barrel there is bound to be more dollar buying to fund oil companies. Rupee looks vulnerable to the oil prices though outflows from FPIs and other quarters also continue to keep it weak,” said Anil Bhansali, head treasury at Finrex Trading Advisors.
The Brent oil prices were significantly up as a deadlock between the US and Iran showed few signs of improving with reports stating that the US President Trump is unhappy with Iran’s latest proposal to end their two month old war and reopen the Strait of Hormuz, leaving the shipping lane largely closed for the near-term.
At the interbank foreign exchange market, the rupee opened at 94. 35 against the dollar, then lost ground and touched an intraday low of 94. 58 to a dollar. The domestic unit finally settled for the day at 94. 56 registering a fall of 41 paise over its previous close of 94. 15 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was up 0. 245 at 98. 73 as market players largely stayed on the sidelines with the US Fed meeting beginning on Tuesday. The US Fed is widely expected to leave the interest rates unchanged.