Indian Rupee: Elevated Crude Prices Likely To Weigh

4 Feb 2022 , 09:01 AM

Sharp rise in crude oil prices is expected to send negative signals for the Indian rupee in opening trades on Friday, 04 February 2022, although weakness in dollar could limit losses in the local currency. Lack of impetus from global markets could further add to rupee woes.

On Thursday, rupee declined 5 paise to close at 74.88 against the US dollar. At the interbank foreign exchange, the rupee opened at 74.84 against the American dollar, and later witnessed an intra-day high of 74.75 and a low of 74.92 against the greenback. The local unit finally ended the day at 74.88, down 5 paise from the previous close of 74.83.

Domestic benchmark indices ended with deep losses on Thursday as investors locked profits after a three-day rally. The barometer index, the S&P BSE Sensex, dropped 770.31 points or 1.29% at 58,788.02. The Nifty 50 index lost 219.80 points or 1.24% at 17,560.20. Foreign portfolio investors (FPIs) sold shares worth Rs 1,597.54 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 370.58 crore in the Indian equity market on 3 February, provisional data showed.

Overseas, Asian stocks are trading mixed on Friday, following heavy losses overnight on Wall Street that saw the tech-heavy Nasdaq Composite plunging nearly 4%. Markets in Hong Kong returned to trade on Friday after being closed for most of this week due to the Lunar New Year holidays. Over in mainland China, markets remain closed on Friday for the holidays.

US stocks fell on Thursday, dragged down by technology and social-media companies, as Facebook owner Meta Platforms plunged after a disappointing earnings report. In commodities, front-month U.S. oil futures rose 2.3% to settle at $90.27 per barrel, the first time the benchmark had topped $90 since October 2014. Crude prices rose as demand for petroleum products surges while supply remains constrained.

In Europe, the Bank of England pressed ahead with raising borrowing costs Thursday, nudging up its policy rate to 0.5% from 0.25%. The European Central Bank kept its key interest rates unchanged, but ECB President Christine Lagarde signalled concern about inflation and opened the door to a possible rate hike later this year.

Meanwhile, the dollar index was heading for its worst week in nearly two years on Friday as the euro held firm at a three-week high and sterling gained after hawkish shifts from the European Central Bank and the Bank of England. The index, which measures the greenback against six major peers was at a three-week low of 95.19, having tumbled 2% this week – its biggest such fall since March 2020.

Powered by Commodity Insights