The Indian Rupee slumped on Thursday, ending its three-day winning streak with a 0.27% loss against the United States currency, falling to 85.52 from an earlier high of 85.28 at the previous day, Bloomberg data showed. Even with a crash in crude oil prices and weakening of the dollar index, the domestic currency could not push further higher, suggesting that the market is still volatile and policy uncertainties remain.
The rupee has lost 1.4% in the first few days of the month, with traders sailing in the sea of global and domestic economic cues. One of the reasons Thursday’s decline was triggered by was the continued decline in world prices of crude oil. But Brent crude declined 3.80% to $ 63.58 a barrel, while WTI crude fell by 4.04%, trading at $60.60 a barrel as of 3.35 PM IST. The bear pressure on oil prices comes on the back of reports that Iran and the United States made gains in their negotiations over the former’s nuclear program, which may open the door for more oil being exported out of the Islamic Republic.
At the same time, the US dollar index also declined, losing 0.26% to close at 100.77, after US authorities said they did not intend to weaken the dollar with the country’s trade policy. Despite a softer dollar, the rupee filtered down owing to investor caution before the monetary policy decisions that are lined up.
The Reserve Bank of India (RBI) is in the limelight, closely observed by market players with an increasing expectation of cutting interest rates in front of its June policy meeting. This is after positive inflation data – Wholesale Price Inflation eased to a 13-month low at 0.85% in April, while Consumer Price Inflation stayed below the RBI’s 4% target for a second straight month. Economists are now expected to lead a string of rate cuts that may begin with cuts of 25 basis points in the next month, which can, in the short term, impact currency movements.
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