Rupee strengthens to 71 with softer oil, fund flows

Softer crude oil prices, along with foreign fund inflows, helped the rupee post over 1% gain against the dollar on Thursday, giving hope for the current account deficit to remain within the tolerance limit and for a further reduction in petrol and diesel prices.

The rupee gained for the seventh straight session and appreciated by 1.07%, or 77 paise, against the dollar to close the day at 70.70 — its highest level in 12 weeks. The Indian currency has gained around 3% in the last three trading sessions and has appreciated over 5% now from its record low.

Brent crude, the international oil benchmark, was trading 0.39% lower at $62.85 per barrel on Thursday, while foreign funds poured ₹446.24 crore into the stock markets on a net basis and domestic institutional investors net bought shares worth ₹49.68 crore, provisional data showed.

Soumya Kanti Ghosh, group chief economic adviser, State Bank of India, said that the recent decline in oil prices was likely to compress the current account deficit by $5 billion-$6 billion from the estimates of $78 billion this fiscal.

Rupee strengthens to 71 with softer oil, fund flows

As a result, the current account deficit could be at 2.6% of the GDP against 2.8% of the GDP previously estimated.

In a report Mr. Ghosh said that if the rupee stayed at 70, petrol and diesel prices could fall by ₹4 or more. “If crude averages $65 and the rupee stays at 70, petrol and diesel prices could fall further on an average by ₹4 or more. This implies that diesel prices could head well below ₹70 per litre and petrol well below ₹75,” Mr. Ghosh said.

While currency dealers said the Reserve Bank of India was not present in the market, the strengthening of the rupee gave an opportunity to boost foreign exchange reserves. The total foreign exchange reserves for the week ended November 9 were $393 billion, down by $33 billion since its peak in April this year.

This article is closed for comments.
Please Email the Editor

Printable version | Jan 17, 2021 9:52:08 AM |

Next Story