The Indian rupee saw a steeper fall in the price of oil; US yields could cap gains


A customer hands Indian currency notes to an attendant at a gas station in Mumbai, India August 13, 2018. REUTERS/Francis Mascarenhas

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MUMBAI, Aug 17 (Reuters) – The Indian rupee is expected to open higher against the dollar on Wednesday after oil prices fell to their lowest level since mid-February amid concerns over global growth prospects.

The rupiah, which is expected to resume trading after a four-day weekend, is expected to open at 79.25-79.30 to the dollar, from 79.6550 on Friday.

Brent crude futures fell around 3% to near $92 a barrel on Tuesday on concerns over a potential global economic slowdown as traders await clarification on talks to revive a deal which could allow more Iranian oil exports. Read more

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The decline in oil prices – to levels seen before Russia’s invasion of Ukraine – should ease worries about India’s record trade deficit and inflation outlook.

India’s trade deficit in July was $30 billion, while consumer inflation has remained above the Reserve Bank of India’s upper tolerance limit for seven consecutive months.

A trader at a foreign bank said that “the lower oil falls, the less there will be a need to hedge against an extreme drop in the rupee”.

The combination of weak oil prices, strong US Treasury yields and good risk appetite suggests the rupiah will remain in a trading range of 78.50 to 80 to the dollar, he added.

US Treasury yields rose on Tuesday amid bets that the US Federal Reserve is unlikely to significantly alter its hawkish stance despite July inflation data.

Politicians have indicated that they will continue to raise interest rates to head off the threat of inflation.

Minutes from the Fed’s July meeting are due Wednesday. The 10-year Treasury yield is above levels it was at before weaker-than-expected US inflation data, while the 2-year yield is almost at the same levels.

The dollar index was flat before the Fed minutes. Read more

KEY INDICATORS:

** One month forward non-deliverable rupee at 79.43; one-month forward onshore premium at 21.5 paise

**USD/INR NSE August futures closed Friday at 79.82

** The USD/INR futures premium as of August 12 for the end of the current month is 7.5 paise

** Dollar index little changed at 106.40

**Brent futures up 0.4% to $92.7 a barrel after falling 3% on Tuesday

** US 10-year bond yield at 2.82%, Indian 10-year bond yield at 7.289%

** Nearest month SGX Nifty futures up 0.2% to 17,895

**According to NSDL data, foreign investors bought $282.9 million net worth of Indian stocks on August 11.

** NSDL data shows foreign investors bought $19.9 million net worth of Indian bonds on August 11

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Reporting by Nimesh Vora; Editing by Neha Arora

Our standards: The Thomson Reuters Trust Principles.

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