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Collateral Damage: High Crude Prices Weaken the Rupee (IANS Currency Forecast)


By Rohit Vaid

New Delhi, Feb. 27 (IANS): The Indian rupee is expected to weaken due to geo-economic pressures triggered by the ongoing hostilities between Russia and Ukraine.

Rising world prices for crude oil, gold and other commodities are likely to weaken the rupee.

Currently, India imports 85% of its crude oil needs. Rising crude oil prices are expected to add Rs 8 to Rs 10 in domestic gasoline and diesel selling prices.

In addition, the cascading effect of high fuel costs will trigger a general inflationary trend.

Last Friday, a rise in oil inventories in the United States as well as the assurance of energy supplies from Russia caused international crude oil prices to fall.

As a result, last Friday’s price fell to $95 a barrel after the Russian-Ukrainian war pushed Brent crude oil prices to $105 a barrel.

“The rupiah was volatile and closed at 75.29 against the dollar for the week. Rising crude and gold prices may keep it weak,” said Sajal Gupta, head, Forex and Rates, Edelweiss Securities. .

“A rise in domestic fuel prices is expected after the assembly elections, which would boost inflation and this could further weaken the rupee.”

Moreover, Gupta expects a range of Rs 74.80 to Rs 75.50 per USD for the coming week.

Last week, the currency pair (USDINR) closed at Rs 75.2950 per USD.

“The bias for the USDINR spot remains bullish

as long as it holds 74.80 while the upper side 75.75 is the hurdle,” said Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities.

According to Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services: “The greenback has come under control recently as tensions in Ukraine have increased and fueled speculation that the US Federal Reserve may be less aggressive in policy tightening. at its March meeting.

“Next week, volatility will continue to remain elevated as more clarity is needed on ongoing tensions between Russia and Ukraine.”

In addition, Somaiya said key economic data such as Q3FY22 GDP figures and trade balance figures will be closely watched and better than expected data could limit major rupee weakness.

“We expect USDINR (spot) to trade sideways with a positive bias and range within 75.20 and 76.20.”