Moneycontrol
Last Updated : Nov 30, 2018 06:36 PM IST | Source: Moneycontrol.com

Rupee gains 5.5% in November on drop in crude prices, speculative positioning

The currency ended the session at 69.58 per US dollar, a gain of 26 paise (0.38 percent).

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The Indian rupee on Friday closed the month with gains of around 5.5 percent. The currency ended the session at 69.58 per US dollar, a gain of 26 paise (0.38 percent).

The currency closed 77 paise higher, a three-month high on Thursday.

As opposed to the sharp fall that occurred between August and October, it has been a phenomenal month for the currency on the back of multiple factors. To name a few, fall in crude oil prices, speculative positions as well as demand-supply mismatch and global events have led the cues responsible behind this upmove.

The currency, in October, had touched an all-time intraday low of 74.49 per US dollar, while on a closing basis, it fell to 74.06 per US dollar. It has now appreciated a little over 5.5 percent between October 10, 2018 and November 30, 2018, up by over Rs XX.

A sharp 20 percent-plus cut in crude oil prices has had a major effect on the rupee’s upmove. “The rupee is firm on account of sharp decline in the crude oil prices in the international market. This is positive for India as decline in crude oil prices may push inflation and current account deficit lower,” Maru of Anand Rathi Shares and Stock Brokers added.

Further, demand-supply insights in merchant and interbank forex market also throw up interesting aspects.

“In the merchant market (in both spot and forward segment), there was an excess demand in the range of $9-14 billion since February 2018. However in the interbank market, the trend is quite opposite and there has been excess supply. Specifically, in the month of August the excess demand in Merchant segment was far outstripped by oversupply in Interbank market, said the report titled 'Rupee for a Turnaround',” the report further added.

Emerging market currencies have gained against the US dollar as well. After mid-term polls, the results hint at impact on tax cut laws and faltering of US economic growth. US Fed Chair Jerome Powell also hinted the same recently.

Equities also received support in the last two weeks as trade war worries between US and China showed signs of cooling off. Both these nations are set to meet and discuss trade issues in the G-20 summit and there are hopes of a positive outcome of this meeting.
First Published on Nov 30, 2018 06:36 pm
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