Indian rupee to weaken on oil, market turmoil

Dubai - Experts predict upward move of 6-7% in Brent prices this week.

The Indian rupee continued to weaken against the dollar to close above 71 on Friday, consequent to a sharp rise in crude oil prices, turmoil in the equity markets and uncertainty around US-China trade relations.
As experts predict an upward move of 6 to 7 per cent in Brent crude prices in the coming week, the rupee will remain under pressure. The currency is likely to depreciate further in the coming sessions, and if it breaches 71.80 per dollar, there is a strong possibility for it to head towards 72.50, they said.
The Indian currency lost heavily towards the end of the week - over 70 paise in the last three trading sessions - as traders reacted to sanctions on Venezuela and production cut by Opec and Saudi Arabia.
Analysts said a plunge in Brent oil prices to levels of around $50 per barrel by the end of December 2018 had offered a big relief to the rupee as it strengthened to trade between 69 and 70 against the dollar towards the December end and first week of January. However, a sharp rise in oil over the last month has pushed the currency back to levels of 71 against the dollar.
Pradeep Unni, head of strategic business development at Richcomm Global Services DMCC, said as currency markets largely depend on the capital flows, the fear of escalating tensions in the aftermath of the Pulwama attack is having an immediate impact on equity markets.
"As the dollar gains strength and political turmoil deepens in the run up to the Lok Sabha elections the rupee appears to be heading to the 73.00/73.50 levels," said Unni.
"As there are lots of uncertainties, both on economic and political fronts, the rupee, which has recovered nearly 6 per cent after touching a record low of 74.485 per dollar or ?20.29 per dirham on October 11, is expected to fall further in the coming weeks," said a currency expert.
A poll of more than 65 analysts between the period of January 2-8 showed that the rupee will weaken again after witnessing about a 9 per cent fall in 2018 - the biggest decline since Prime Minister Narendra Modi took office in 2014.
Sajal Gupta, head forex and rates at Edelweiss, said among other factors impacting the currency, trade deficit data released on Friday after the market's close was also not very encouraging with the monthly deficit touching almost $15 billion.
"Political tensions would also remain heightened with key leaders vowing strong retaliation in wake of the biggest terror attack in Kashmir valley," Gupta added.
- issacjohn@khaleejtimes.com

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