The rupee appreciated 0.5%, or 36 paisa, against the dollar as international crude oil prices dropped to $65 a barrel, which is seen as positive for the current account deficit since India imports 80% of its oil requirement.
After opening at 72.16 to a dollar compared to Tuesday’s close of 72.67, the rupee briefly went below the 72 mark to touch 71.99, before closing at 72.31 a dollar.
“The rupee has strengthened in the last few days on the back of falling crude prices. Also, improving risk appetite amid optimism over Brexit and U.S.-China trade talks has led to marginal, broad USD weakness today,” said Madhavi Arora, economist, Edelweiss Securities Ltd.
Brent crude dropped almost 7% to a one-year low of $65 a barrel, before staging a modest recovery. Global oil prices have dropped about 25% since October.
The rupee also gained as dollar weakened against some of the major global currencies, apart from dollar selling by exporters.
The significant fall in rupee in 2018, by about 11% now, had led to concerns over the current account deficit which widened to 2.4% of GDP in the April-June period. Key events like OPEC meeting in the first week of December and the RBI’s monetary policy will shape the rupee’s trajectory.
“Rupee trajectory ahead will be tracking movement in Brent, which will get influenced by the outcome of the Dec. 6 OPEC meeting. Other key events, namely the RBI and Fed policy meets, could also impact rupee trajectory in the near term,” Ms. Arora said.