Rupee closes at 79.8 against dollar amid rising crude oil, Fed hawkish view

The rupiah weakened sharply against the dollar on Friday on a surge in crude oil prices and weaker U.S. jobless claims data, bolstering arguments in the Federal Reserve’s favor in raising interest rates amid an overheated economy, dealers said.

The national currency, however, posted its first weekly gain in four as large foreign equity inflows and a strong defense of the rupee by the Reserve Bank of India supported local unity.

The rupiah settled at 79.80 to the US dollar on Friday from 79.56 at the previous close. For the week, the rupee appreciated 0.1%, showing resilience against a rising greenback.

In fact, for the past week, the Indian unit has outperformed 15 emerging market currencies, ranking as the best performer among its peers. Most other emerging market currencies lost 0.3-3% against the dollar last week.

“It managed to post the first of four weekly gains and became the biggest gainer among its Asian peers amid month-end dollar inflows from the MSCI rebalancing. Over the past month, foreign institutions have purchased $6.79 billion in stocks and $538 million in debt,” said Dilip Parmar, research analyst at HDFC Securities.

Data released on Thursday showed that initial jobless claims in the United States last week fell to a two-month low of 232,000, reflecting continued tightness in the labor market. The dollar index, which measures the U.S. currency against six major rival currencies, hit a new 20-year high at 109.61 on Friday.

While US inflation has persisted for several months at roughly 40-year highs, the Federal Reserve has raised interest rates by a total of 225 basis points so far in 2022. It is expected to raise again rates at its next meeting at the end of this month. Higher US interest rates lead to a stronger dollar, generally reducing global investors’ appetite for emerging market assets.

“Hawkish bets from the Fed and firmer US 10-year UST yields keep the dollar in the bid. At the same time, the Fed is also clear that the future trajectory of rate hikes will be data dependent and therefore all major US data is of key importance in creating volatility in the market,” said Kunal Sodhani, Vice President, Global Trading Center, Shinhan Bank. . Sodhani forecasts a range of 79.30 to 80.20 per dollar in the near term.

Meanwhile, speculation of a production cut by major oil producers and exporters led to a sharp rise in global crude prices.

Brent crude futures rose $2.72, or 2.9%, to $95.08 a barrel at 0900 GMT (2:30 p.m. IST) and US West Texas Intermediate (WTI) crude futures ) rose $2.62, or 3%, to $89.23, Reuters reported.

Concerns about weak global growth, intensified by new Covid restrictions in China, also eroded appetite for emerging market currencies such as the rupee, traders said.

“Risk moods and rising crude oil prices also weighed on the local unit. After a steady open, the rupiah remained under pressure throughout the day on demand for dollars from importers,” Parmar said.

Foreign exchange reserves

Data released on Friday showed the RBI’s overall foreign exchange reserves stood at $561.05 billion on August 26, about $3 billion lower than the previous week. The decline was mainly due to a $2.6 billion drop in foreign currency assets to $498.65 billion.

As of July 29, RBI’s reserves stood at $573.88 billion. The central bank intervened heavily in the currency market through dollar sales to avoid excessive volatility of the rupee.

Reserves have fallen by about $70 billion since late February, when Russia invaded Ukraine.

Earlier this week, the rupee hit a new low of 80.13 to the dollar. The national currency has depreciated 6.8% against the greenback so far in 2022.

In an interview on Friday, RBI Governor Shaktikanta Das said the country’s foreign exchange reserves were strong and had helped keep the rupee’s exchange rate stable.

. rupee close against dollar in context rise oil crude view hawkish Fed

. Rupee closes dollar rising crude oil Fed hawkish view

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