Rupee Weakens To Near 79.90 Per Dollar As Oil Surge Weighs

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Rupee weakens to nearly 79.90 per dollar

The rupee weakened sharply to near 79.90 against the dollar as oil prices surged back to above $101 per barrel on Russian gas supply crisis.

That even as the dollar retreated from two-decade highs as investors awaited the latest response from the top central bankers in the globe to the rising inflation, at the US Federal Reserve’s Jackson Hole Conference on Friday.

Bloomberg showed the Indian currency fell to 79.8837 per dollar, compared to its previous closing of 79.8150 against the greenback.

PTI reported that the rupee fell 3 paise to close provisionally at 79.89 against the US dollar.

At the interbank foreign exchange market, the domestic currency opened at 79.80 per dollar. It hovered in a range of 79.80 to 79.93 during the session and finally settled at 79.93, down 7 paise over its previous close of 79.86, according to PTI.

“The Indian rupee stayed in a narrow range and underperformed among Asian currencies. China’s stimulus to boost the economy supported regional peers while the local unit remained under pressure following high crude oil prices and risk-off moods at the domestic bourses,” Dilip Parmar, Research Analyst, HDFC Securities, told PTI.

Mr Parmar further said that Spot USD/INR, in the near term, is expected to trade in the range of 79.60 to 80.10 ahead of monthly rebalancing tomorrow.

The dollar was down almost 0.5 per cent, including 0.4 per cent against the euro and 0.5 per cent against the yen to 136.62.

Still, what weighed on the domestic currency was commodity bulls pushing Brent crude to climb back up to near $102 per barrel driven by Russian gas supply crisis.

The benchmark crude is now up more than $10 from the lows witnessed last week.

India imports over 80 per cent of its oil needs and the demand for dollars by oil importers weighs on the domestic currency when crude prices rise.

“Oil is already above $100 per barrel and 10-year US yield has risen above 3.10 per cent, and both these factors are likely to increase selling pressure on central government bonds,” Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap, told Reuters.

Rising global oil prices added to inflation anxieties, traders said.

Deutsche Bank strategist Jim Reid said the worry was that the energy situation in Europe keeps getting worse.

“That’s adding to fears that “peak inflation” might not actually have arrived yet for some countries,” he said. “Policymakers are about to face some unenviable choices as they grapple with the worst stagflation we’ve seen in decades.”

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