Indian Rupee depreciated on Wednesday by 12 paise to end at 86.09 to a US dollar, one day after recording the best performance in a year. The domestic currency on Tuesday rose by 78 paise to hit an attractive 85.97, and this is the sharpest one-day climb since May 23. This growth was, however, momentary as the international oil prices rose marginally again, and the dollar revived.
The recent volatility of the Rupee is highly associated with the continued geopolitical activities and the instability of the prices of crude oil. Even though it seems that the situation in West Asia has grown calmer due to the ceasefire between Iran and Israel, the presence of US President Donald Trump blaming both sides for breaching the agreement created confusion. Though crude prices had fallen almost 15 per cent in two trading sessions after the ceasefire, the prices rose on Wednesday. Brent crude increased 1.19 to 67.94 dollars per barrel, and WTI crude gained 1.20 to 65.14 dollars per barrel as of 3.30 PM IST.
The rupee, which is very sensitive to the price of crude oil as India is a large importer, has been Asia’s biggest laggard financially this quarter. Growth of oil prices in India costs it more in payments for its imports, expands the trade deficit and hikes up the rupee.
To the trouble of the rupee, there was a stronger US dollar, which rose after the Federal Reserve Chair Jerome Powell issued mixed messages on future interest rates. Whereas Powell admitted that tame inflation and feeble job gains may influence the interest rate reduction before the end of the year, he stated that the effects of trade tariffs proposed should be considered when making monetary policy decisions. The index that measures the strength of the US greenback against six major currencies moved up by 0.27% to 98.12.
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