Rupee: The rupee gains against the dollar as oil prices fall and gilts remain stable
The national currency stood at 74.7750 per US dollar on Thursday, stronger than 74.9750 per dollar on Wednesday.
So far this week, the rupee has seen tremendous volatility as the surge in global crude oil prices has made investors nervous about rising domestic inflation as well as a worsening trade deficit, given that India is a huge importer of the raw material.
In the four trading days so far, the Indian currency has weakened 0.9 percent against the US dollar and currency traders and analysts say the rupee is expected to head towards the 75.00 mark. for the dollar in the coming weeks, given the degree to which oil prices have climbed and the Fed has signaled a decrease in its bond purchases.
Crude oil futures for November delivery on the New York Mercantile Exchange fell $ 1.50 per barrel to close at $ 77.43 per barrel on Wednesday, while Brent crude futures for November lost $ 1.8 to close at $ 81.08 a barrel. Earlier in the week, oil futures hit their highest levels since 2018, as OPEC and its allies stuck to a plan to increase supply by a relatively small amount. .
Inflation concerns have led to speculation that the Reserve Bank of India, in its monetary policy statement on Friday, may signal a faster path to normalize the ultra-loose policy adopted to deal with the crisis. of Covid-19.
Currency traders are also awaiting data on non-farm wages in the United States on Friday, a key variable used by the Federal Reserve to decide interest rates. Early reports suggest a healthy increase in jobs in September, a factor that would strengthen the case for raising interest rates in the world’s largest economy.
Government bonds ended flat on Thursday, with a yield on the 10-year benchmark index of 6.10%, with the 2031 paper closing one basis point lower at 6.27%.
Traders sat on the sidelines ahead of Friday’s monetary policy statement. Key things to watch are RBI indices signaling a rise in the repo rate (3.35%), currently the overnight cost of funding for money markets.
RBI’s plans for open market operations and whether or not to announce another round of the Government Securities Acquisition Program are also eagerly awaited.
The purchases of bonds by the RBI are critical to the success of the Centre’s extensive borrowing program. However, the large excess liquidity in the banking system has shaken the ground for the central bank.