Indian rupee shrugged off the bearish tone in domestic equities on Thursday and gained against the American currency tracking the upside in Asian counterparts due to the overnight fall in Treasury yields. FOMC minutes that hinted at the continuation of a hawkish stance ahead led to a retreat in the US dollar against a basket of currencies that supported the rupee.
Notably, the performance also comes after relief in crude oil prices on Thursday which started the year 2023 with worst two-day drop in over three decades. The local currency is currently above 82.50 against the dollar.
At the interbank forex market, the rupee settled at 82.5550 against the US dollar compared to the previous day’s level of 82.8025 per dollar. This is likely a small win for rupee bulls.
Asian currencies such as the offshore Chinese yuan, the Korean won, and the Malaysian ringgit also gained against the greenback.
On FOMC minutes Ravindra V.Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities said, “The minutes for Dec FOMC meeting revealed Fed’s concerns on inflation and that the interest rates might remain higher for a longer time although the pace might drop.”
Both Brent crude futures and US WTI rose over 2% each at the time of writing. However, Brent crude stays below the $80 per barrel mark and WTI is under the $75 per barrel level. Brent had dropped by at least 9.5% in the past two sessions as demand concerns weighed.
On crude oil prices, “The COVID-19 situation in China and its impact on demand from world’s largest importer of oil is continuing to haunt the markets. Additionally, IMF’s warning of a potential global recession in 2023, slowing manufacturing activity and a Reuters survey showing OPEC oil output rose in December has put downward pressure on oil prices. Focus will now turn to the EIA oil inventory report due today after the API report showed a build in crude inventories by 3.298 million barrels as against a drop of 1.3 million the previous week.”
As per a Reuters report, traders who are short USD/INR will be hoping that oil prices are the trigger that pushes the dollar below the 82.40-82.50 support, a dealer at a private bank said. Also, Advisory firm CR Forex stated that the risks for the USD/INR lie on the downside and expects a range of 81.50 to 83.00 over the next three to four weeks.
Investors have now shifted focus on the private US jobs report which will be announced later on Thursday and further nonfarm payrolls that are scheduled to be presented on Friday.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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