Rupee closes just 2 paise shy of 80 against US dollar as oil prices rise

The rupee on Monday settled just shy of the 80 per US dollar mark, closing at 79.98 against 79.88 per dollar on Friday, as crude oil prices rose sharply, worsening the outlook on India’s current account deficit, dealers said. 

In the past six days of trade, the rupee has settled at a new low versus the dollar in five days. So far in 2022, the rupee has weakened 7.1 per cent versus the greenback. A Business Standard poll comprising 10 market experts pegs the rupee at 80.20 per dollar at the end of July and at 80.50 per dollar at the end of September.

Crude oil prices jumped on Monday as US President Joe Biden’s talks with West Asian countries failed to culminate in an agreement to increase output.

Brent crude futures climbed more than 2 per cent, edging towards the $104 per barrel mark. Given that India imports more than 80 per cent of fuel needs, rising oil prices exert considerable pressure on the country’s current account deficit.

The Reserve Bank of India (RBI) was said to have intervened through dollar sales around the 79.91-79.92 per US dollar mark, helping rein in the rupee’s depreciation.

Currency traders, however, see the rupee breaching the psychologically significant 80 per US dollar mark in coming days, as the RBI may not wish to further deplete its foreign exchange reserves at a time when market fundamentals warrant a depreciation in the rupee.

Latest data showed India’s Consumer Price Index inflation at 7 per cent, well above the RBI’s mandated band of 2-6 per cent. Meanwhile, the country’s trade deficit was at a record monthly high of $26.18 billion.

“The weaker economic data and foreign fund outflows are weighing on the rupee. However, the central bank’s efforts have supported the rupee from sharp depreciation. If we look at the recent forex reserves data, it fell by more than $8 billion to $580.06 billon on the back of intervention and adjustments of other than dollar currencies value,” HDFC Securities wrote in a note.

“The (dollar-rupee) pair is having near-term resistance at 80 followed by 80.90 while on the downside (for the US dollar) it has support in the area of 78.80 to 78.50,” the firm wrote.