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Rupee to weaken as oil prices jump on unexpected OPEC+ output cut
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The Indian rupee is expected to open lower versus the U.S. dollar on Monday after a surprise production cut by OPEC+ fuelled a jump in oil prices.
The non-deliverable forwards indicate the rupee will open at around 82.35-82.40 to the U.S. dollar compared with 82.1650 in the previous session.
Saudi Arabia and other OPEC+ oil producers on Sunday announced further output cuts of around 1.16 million barrels per day, in a surprise move that analysts said would cause a rise in prices.
Brent crude futures rose by as much as 8.3% on Monday to near $86.50. It pared a part of its rally and was last at $84.40.
A rise in oil prices directly affects the Indian economy and the rupee as the country imports about 83% of its oil requirements, said Anil Bhansali, head treasury at Finrex Treasury Advisors.
According to estimates by some economists, a 10% hike in oil prices leads to an increase in India’s current account deficit by 0.3% to 0.5% of the GDP.
Asian currencies declined. The Korean won was down about 1.5%, the Thai baht dropped 0.8% and the offshore Chinese yuan fell to 8.8940 to the dollar.
The rupee "will definitely" struggle at open, but we do not think "there is enough" to take the pair (USD/INR) above the 82.50 resistance level, a trader at a Mumbai-based bank said.
Apart from oil prices, the Reserve Bank of India's (RBI) policy decision on Thursday and the U.S. jobs report on Friday will be key for the rupee this week.
The RBI is likely to raise the interest rate by 25 basis points and then pause for the rest of the year, according to a Reuters poll of economists, who said the central bank would continue to maintain its tightening stance.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.52; onshore one-month forward premium at 15.5 paise ** USD/INR NSE April futures settled on Friday at 82.3175 ** USD/INR April forward premium at 10.5 paise ** Dollar index at 102.90 ** Brent crude futures up 5.6% at $84.4 per barrel ** Ten-year U.S. note yield at 3.52% ** SGX Nifty nearest-month futures up 0.2% at 17,455 ** As per NSDL data, foreign investors bought a net $101.4mln worth of Indian shares on Mar. 29
** NSDL data shows foreign investors sold a net $474mln worth of Indian bonds on Mar. 29
