Rupee opens weak after U.S. withdraws from Iran nuclear deal

The rupee opened 0.4% or 28 paise weak against the dollar as compared to Tuesday close of 67.08 a dollar.

The rupee opened weak against the dollar on Wednesday after United States said it will withdraw from the nuclear deal with Iran which could have adverse consequences on oil prices. India which imports 80% of its crude oil requirements face the risk of worsening macroeconomic parameters if crude prices rise.

The rupee opened 0.4% or 28 paise weak against the dollar as compared to Tuesday close of 67.08 a dollar . The Indian currency was one of the worst performers among Asian peers on Wednesday.

Equity indices also opened in weak with stocks of leading oil marketing companies like HPCL, BPCL, IOC, were trading in red.

According to a report by UBS Securities, since India

is a net oil importer with inelastic demand, global crude oil price movement tends to have an important bearing on macro stability risks and, hence, economic growth prospects.

The report quotes PPAC (Petroleum Planning & Analysis Cell), saying a $10/bbl oil price rise increases India's CAD by $15bn (0.6% of GDP) and the fiscal deficit by 0.1% of GDP if domestic fuel prices are unchanged.

"We estimate the threshold for higher global oil prices for India is $70-75/bbl, wherein macro stability risks widen but remain manageable. However, oil strengthening and sustaining around $75-85/bbl could undermine macro fundamentals. In such a scenario, we see a risk of INR 3-6% depreciation against the USD from the current level and at least 50bp policy rate tightening in FY19," Tanvee Gupta Jain, Economist, UBS Investment Bank, said.