Mumbai: The Indian rupee suffered a major setback and endured a sharp reversal in fortunes against the US currency on fresh bouts of dollar demand amid fears of a flare-up in global crude prices.
Breaking an extreme bullish uptrend, the home currency retreated sharply from a fresh three-year high and ended lower by 26 paise at 63.63, capping a spectacular two-week upsurge. The home currency had strengthened by a whopping 68 paise.
Though, expectations of more inflows from foreign investors after the government allowed foreign direct investment across several sectors, largely cushioned the fall.
It was a highly volatile week for the forex market and witnessed wild swings following a sudden revival of the elasticity pessimism on hardening worries over fiscal slippage and higher inflation pressure after international crude oil prices hit a new three-year high.
The expensive oil prices have been making some headlines recently worldwide. Fresh demand for the American currency from banks and importers alongwith the broad based dollar strength against some currencies overseas put the rupee on backfoot despite a record breaking rally in local equities, a forex dealer said.
The sudden spike in crude prices can play spoilspot for the currency market, which started the New Year with a bang, he added.
The Indian rupee hit a fresh 3-year high of 63.37 against the US dollar last Friday. But, India’s oil demand grew at its slowest pace in four years in 2017 at only 2.3 percent.
In the meantime, country's foreign exchange reserves surged by USD 1.758 billion to mount a new record high of USD 411.124 billion in the week to January 5, the RBI said.
In the international commodity front, global crude prices rallied for the fourth straight week with the Brent topping the key USD 70 a barrel for the first time in more than three years fueled by a surprise drop in U.S. production and lower inventories. Brent crude futures settled at USD 69.80 a barrel.
At the Interbank Foreign Exchange (forex) market, the home currency opened the week with a strong footing at 63.33 from last weekend close of 63.37 on steady dollar selling from exporters and banks.
It touched a fresh three-year high of 63.25 before retreating due to mmense dollar pressure.
The Indian currency, later plummeted to hit a fresh 2018 low of 63.85 in early breakneck selloff before similarly climbing back to regain some lot ground to end at 63.63, showing a loss of 26 paise, or 0.41 per cent.
The RBI, meanwhile fixed the reference rate for the USD at Rs 63.5263 and Euro at Rs 76.5301, respectively.
On the global front, the dollar slumped to a more than three-year low against the euro on Friday, as the common currency extended its gains on hopes that European Central Bank policymakers are preparing to reduce their vast monetary stimulus program.
The dollar index, which measures the greenback's value against a basket of six major currencies, was down at 91.10 in early trade.
Elsewhere, the Euro surged ahead to hit its highest level in three-years against the US dollar following a breakthrough in German coalition talks to form a so-called Grand coalition.
The British Pound continues to push higher against the greenback, snapping a 3-day slide.
