Oil price increases have a detrimental influence on India’s trading terms and currency.
The Indian rupee fell to 20.36 against the UAE dirham on Wednesday morning, after the currency fell 15 paise to 74.70 versus the US dollar.
The rupee’s depreciation against the dirham reflects the rupee’s depreciation against the US dollar, to which the UAE currency is linked.
Investor mood was also dragged down by a strong dollar, rising crude oil prices, and widespread weakness in the local equities market, according to forex traders.
The rupee started at 74.60 versus the dollar on the interbank foreign exchange, then slipped to 74.70, a drop of 15 paise from its previous finish.
The rupee had closed at 74.55 versus the US dollar on Tuesday. The Indian rupee depreciated against the US dollar on Wednesday, owing to broad dollar strength and weak regional risk appetite.
The rupee is expected to continue under pressure in the coming months due to growing petroleum costs and the relative strength of the dollar in the foreign markets.
Asian currencies have started the day lower versus the US dollar, which might impact emotions, according to the report.
Brent crude prices dipped 0.03 percent to $74.55 a barrel, the global benchmark.
On the domestic front, the BSE Sensex was up 14.54 points, or 0.03 percent, to 52,875.72, while the wider NSE Nifty was up 0.60 points at 15,817.65. According to exchange statistics, foreign institutional investors were net sellers in the capital market on Tuesday, offloading shares worth Rs 5.43 billion.
Because India relies on imported crude for 80% of its needs, local inflation is vulnerable to variations in the global crude oil benchmark price.
At the end of May 2021, India’s foreign exchange reserves were $598 billion, enough to cover 17 months of imports.
With the arrival of summer, oil prices increased by more than 10%. India, the world’s third-largest oil user, is anxious about domestic pricing pressures, with the country anticipating a return to pre-pandemic levels of gasoline consumption by the end of this year.
Because of the ongoing uncertainty about crude supply, economists predict that the rupee will trade in a band of 74.60 to 75.20 in the coming week.
Although falling petroleum prices are anticipated to affect terms of trade, India’s central bank, which holds close to $600 billion in foreign exchange reserves, is likely to intervene to keep the rupee stable.