Continued oil production loss from countries like Venezuela and political instability in the MENA region may impact crude oil supply.
Crude oil prices have inched up and sustained at higher levels during the current calendar year due to various geopolitical events witnessed during the period.
In the near term, various demand-supply equations will play an important role in determining the direction of crude oil prices. Oil supply from OPEC countries and increase in US production may provide some respite to rising crude oil prices.
Continued oil production loss from countries like Venezuela and political instability in the Middle East and North Africa (MENA) region may impact crude oil supply.
More importantly, renewed sanctions on Iran exports from November and the gravity of its implementation will keep oil prices volatile with limited downside in the near term.
Outlook on Rupee
The rupee's path is likely to remain volatile.A lot of headwinds are still looming large, most important including
(a) US Fed interest rate hike twice in 2018, as US economic data continues to remain strong. This will keep the rate divergence and stronger dollar story intact;
(b) Brewing EM contagion that is becoming more systemic from being peculiar, with weakness making inroads into countries that have vulnerable macros;
(c) Escalating trade wars between US and rest of world with China at the centre stage, keeping EM recovery in check.
The silver lining is that most of these news flows have been priced in the rupee as it has depreciated over 13 percent already in 2018.
Hence, a positive surprise in the form of a dovish Fed or decline in crude prices, softening of trade tensions or government’s policy intervention could help the rupee to stage a recovery. We expect the rupee to trade in the range of 70-74 a dollar.
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