Finance
On Thursday, the Indian rupee reversed a five-day winning streak, owing to a drop in crude oil prices and a weak dollar index.
According to Bloomberg, the native currency fell 9 paise to 85.60 against the dollar, down from 85.51 on Wednesday. On Tuesday, the currency began higher at 85.43 against the dollar, up 8 paise. The Asian currencies were largely stronger during the session.
All eyes will be on May’s consumer price inflation statistics, which will be revealed later today. CPI is expected to fall to a more than six-year low of 3% in May, owing to a favorable base and continued decrease in food costs.
The rupee traded weak as expected foreign institutional investor (FII) selling in the capital markets weighed on sentiment, according to Jateen Trivedi, VP research analyst – commodity and currency at LKP Securities. “Weakness in secondary markets points to potential outflows, which could push the rupee towards 86.00. Global uncertainty over the US debt ceiling is also adding pressure due to external vulnerabilities.”
The dollar index is trading marginally lower, a day after US inflation fell short of expectations. The consumer price index, excluding the volatile food and energy sectors, rose only 0.1% from April. Following the inflation report, calls on the Federal Reserve to cut interest rates came from all sides.
However, trade tensions remained as President Donald Trump announced that he would impose unilateral tariffs within two weeks. This came after China and the United States agreed to ease trade tensions. China will offer rare earths and magnets “up front,” while the United States will admit Chinese students as part of a trade agreement.
The dollar index, which measures the greenback against a basket of six major currencies, fell 0.24 percent to 98.39. The dollar fell Thursday on hints of a softer US tariff posture and increased anticipation of Fed rate reduction following weaker CPI data, according to Anil Kumar Bhansali, head of treasury and executive director of Finrex Treasury Advisors LLP.
According to sources, dollar-rupee forward premiums have moved sharper following the Reserve Bank of India’s (RBI) surprise rate decrease last week and adjustments in expectations of US rate cuts.
Meanwhile, crude oil prices fell following yesterday’s rise due to the escalation of tensions in the Middle East. Brent crude prices fell 1.35 percent to $68.83 per barrel, while WTI crude prices fell 1.39 percent to 67.20 as of 3:40 PM IST.
Source: BS
