The rupee (INR) fell sharply against the US dollar (USD) today to breach the 67 mark against the greenback. The rupee fell to as much as 67.16 per dollar, its lowest level since February 2017. The rupee had closed at 66.86 per dollar on Friday. The rupee was dragged down by a broad strengthening of the US dollar and a rise in global crude prices, says forex advisory firm IFA Global. Higher domestic equity markets helped provide some support to the rupee at lower levels. The Sensex was up around 250 points in afternoon trade today.
Here are 5 things to know about the rupee’s fall against the US dollar:
- The recent run of solid US economic in contrast with a softer turn in European data has lifted the US dollar to its highest for the year so far against the euro. The dollar also reached its highest since December against a basket of currencies and was last trading at 92.463. A firming US dollar has also been negative for some commodities like gold.
- Global crude prices hit their highest in more than three years as global supplies remained tight and the market awaited news from Washington on possible new US sanctions against Iran. US President Donald Trump has set a May 12 deadline for Europeans to “fix” the deal with Iran over its nuclear program or he would refuse to extend US sanctions relief for the oil-producing country. Brent crude futures added 31 cents to $75.18 a barrel.
- The Reserve Bank of India (RBI) last week announced purchase of sovereign bonds via open market operation (OMO). The RBI said it will buy Rs. 10,000 crore of government bonds on May 17. “The RBI announced an OMO purchase on Friday which is mainly intended to sterilize the rupee liquidity taken out of the system due to forex intervention. However it could lift sentiment in rates market temporarily,” says forex advisory firm IFA Global.
- The rupee may trade in the range of 66.73-67.10 against the US dollar in the short term, according to the forex advisory firm.
- On the domestic front the key trigger would be the Karnataka polls on Saturday, the results of which will be out on next Tuesday, it added.