The Hindu Business Line : Rupee gains due to easing of oil prices

The rupee appreciated against the US dollar on Friday, for the third day in a row, thanks to the easing of crude oil prices in the global market and gains made by the domestic equity market. The currency opened higher at 42.71/73 and closed at 42.75/76, against the previous close of 42.81/82. During the day, it moved in a range of 20 paise.

Oil was around $130 for a barrel, which helped improve sentiment in the spot rupee market. The upswing in the stock market, which gained by 523 points on Friday, also aided the rupee, said a dealer with a private bank.

"The rupee has appreciated mainly because the overall sentiment is positive - global oil prices have come off, stock markets are up and the yield on the 10-year bond has eased. However, oil companies continue to be in the spot market and the situation remains highly uncertain because of the volatile situation globally and rise in domestic inflation," said the treasury head at a public sector bank.

It is too early to see an easing of dollar demand from oil companies as oil prices have seen a cooling off only in the last few days, said the chief forex dealer with another public sector bank.

The companies having the option of buying dollars from the Reserve Bank of India, through the special open market operations, has to some extent taken off the artificial pressure from the spot market. “But, oil companies are not the only participants in the spot market which reacts mainly to sentiment and speculation,” he said.

Market participants said that the Reserve Bank of India would keep the monetary policy tight since inflation remains high and earlier inflation figures are being revised upwards by 60-70 basis points.The rupee could remain in the range of 42.80-43.10 next week.

“Most of the short-term volatility has been recognised and filtered in by the markets. There is expectation that the rupee will weaken to 43.50 against the dollar in the next three months, but will subsequently stabilise around the 43 mark after six months”, said Mr R.V.S. Sridhar, Vice-President, Treasury Chief Dealer, UTI Bank.

In the forward market, the 6-month premium closed higher at 5.07 per cent (4.78) and the 12-month ended at 4.30 per cent (4.14). –

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