Finance
The Indian rupee reversed early gains on Friday, finishing modestly higher despite a drop in the dollar index and crude oil prices.
According to Bloomberg, the native currency closed 3 paise higher at 85.52 against the greenback, up from 85.55 on Thursday. The currency gave up its early gains versus the dollar, having opened 25 paise higher.
On a weekly basis, the euro declined for the second consecutive week, falling 0.16 percent.
The dollar index fell after the United States reaffirmed that it does not intend to weaken the dollar as part of trade agreements. The dollar Index, which measures the greenback against a basket of six major currencies, was trading 0.12% lower at 100.75.
The dollar index fell as the US 10-year yield fell to 4.42 percent following downside surprises from US data this week, cementing bets that the Federal Reserve will cut rates more than three times this year, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors.
According to Amit Pabari, managing director at CR Forex Advisors, recent global data points to a potentially weaker US economy, which might weigh on the dollar more and give medium-term support for the rupee.
Meanwhile, the currency’s movement follows the country’s trade data. India’s goods trade imbalance increased sharply to $26.42 billion in April from $21.5 billion in March, as a 9% year-on-year increase in exports was offset by a much sharper increase in imports. While exports in April totaled $38.5 billion, imports increased to $64.91 billion, a 19.1 percent increase over the previous year.
The sharp rise, driven by an imbalance in trade growth, adds pressure to the rupee by expanding the current account deficit, Pabari said. “Given a softer dollar and strong equity inflows, the rupee may stay range-bound near term. However, a widening trade deficit and geopolitical risks pose downside pressure.”
Crude oil prices fell, following a significant drop on Thursday, as the US-Iran nuclear deal raised concerns about oversupply. Brent crude prices fell 0.02 percent to $64.52 per barrel, while WTI crude prices down 0.06 percent to 61.58 as of 3:45 PM.
Source: BS
