The Indian rupee hit the 72 per dollar level for the first time since September 21 as oil prices posted the deepest plunge in more than three years in the international market. Brent crude, used to price international oils, dropped to $65.17 a barrel. Oil has now fallen roughly 30 percent for 12 straight days, driven by worries over rising oil production around the world and weakening demand from developing countries, with expectations for increased supply from the US and OPEC.
Reacting to the falling brent crude prices, the Indian currency opened 52 paise higher at 72.15 level today compared to the previous close of 72.67 per dollar (22 paise higher) on Tuesday.
Positive macro data which showed retail inflation dropping to a 13-month low in October also bolstered the market sentiment.
Besides, fund inflows by foreign investors and the US dollar's weakness against some currencies overseas also supported the domestic unit, dealers said.
"The rupee was seen appreciating again today as the factors that were putting it in pressure faded away substantially. We have been bullish on Rupee for quite some time give the fact there is multiple confluence of resistance that was present at 74.5-74.8. That was the completion of a major wave. Since then we have seen rise now what has aided this is a continuous fall in crude oil which has depreciated more than 26% in last 1 month. Then we have seen Fed not changing its rates which again has provided some relief to us as an economy. These things have played out in favour of rupee in the last couple of days as we think this rise shall be seen to levels of 71.2 - 71.5," said Mustafa Nadeem, CEO at Epic Research.
Oil prices started retreating on Tuesday after US President Donald Trump flayed Saudi Arabia's call for production cuts and pressed oil cartel OPEC for lower prices based on supply. Weak oil demand outlook by OPEC and worries about oversupply and US-China trade war also weighed on oil prices.
Retail inflation fell to a one-year low of 3.31 per cent in October, raising hopes of a pause in RBI's interest rate hikes.The Indian market too welcomed the fall in international oil prices and opened higher today. Every dollar per barrel change in crude oil prices impacts the import bill by Rs 823 crore ($0.13 billion). The same is also the impact when currency exchange rate fluctuates by Re 1 per US dollar.
While the Sensex rose 106 points to 35,250, the Nifty gained 33 points to 10,615.
However, Asian markets were down tracking lower close on the Wall Street as oil prices put investors in a selling mood. Japan's benchmark Nikkei 225 inched down 0.1 percent to 21,779.22 in early trading, while Australia's S&P/ASX 200 lost 1.3 percent to 5,759.90. South Korea's Kospi edged down 0.4 percent at 2,062.34. Hong Kong's Hang Seng fell 0.4 percent to 25,684.65, while the Shanghai Composite was down 0.4 percent at 2,644.64. Shares were also lower in Taiwan.
The S&P 500 index fell 4.04 points, or 0.1 percent, to 2,722.18. The Dow Jones Industrial Average lost 100.69 points, or 0.4 percent, to 25,286.49, half of which was attributable to a drop in Boeing. The Nasdaq composite was little changed at 7,200.87. The Russell 2000 index of smaller companies gave up 3.99 points, or 0.3 percent, to 1,514.80.
Copyright©2021 Living Media India Limited. For reprint rights: Syndications Today