Rupee flat as dollar demand offsets boost from oil plunge
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The Indian rupee was little changed on Friday as the benefit from a plunge in oil prices was countered by continued corporate demand for the dollar.
The rupee was at 81.6650 per dollar, against its previous close of 81.65. The currency has declined 1% in volatile trade so far this week, giving back half its gains from last week in the wake of slightly soft U.S. inflation data.
There is persistent demand for dollars from oil importers and other corporates, said foreign exchange traders.
"Any dips in USD/INR are being bought out this week," said Ritesh Agarwal, head of treasury at CTBC Bank.
When the pair fell near 80.5 on Monday, it became extremely attractive for importers to start covering after having been in a loss-making position for a while, Agarwal added.
He expects the rupee to weaken to 82 as soon as next week. The rupee last traded in the 80-handle in mid-September.
Asian currencies were mostly higher as the onshore yuan rose on a firmer mid-point fix by the Chinese central bank, while regional stocks climbed.
Brent crude futures plunged more than 3% overnight to slip under $90 per barrel on demand concerns due to mounting COVID-19 cases in China and fears of more aggressive U.S. interest rate hikes. Oil was steady at $90.4 in early Asian trade. [O/R]
Lower crude prices bode well for not only India, but most of Asia as a majority of them are oil-importing countries.
The dollar index eased a bit, having taken support earlier from yet another Fed official dousing investors' expectations for a pause in rate hikes. [FRX/]
U.S. bond yields also firmed as St Louis Fed President James Bullard said that even on dovish assumptions, the funds rate needs to rise to at least 5-5.25% to curb inflation from 3.75%-4% currently.
