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Energy -Sensitive Rupee Weakens At Higher Oil Prices And Records Rise In Fuel Rates


The energy -sensitive rupee weakened following higher oil prices and recorded a rise in fuel rates

The energy -sensitive rupee weakened to nearly 76 per dollar on Wednesday as oil prices rose amid supply concerns, and a record rise in domestic fuel rates has put the focus back on already high inflation.

Brent crude futures rose more than 2 percent for the last trade of nearly $ 113 a barrel, while domestic fuel rates have risen by ₹ 5.60 a liter each after eight rate revisions in the last nine days as of Wednesday, the steepest rise since the daily price revision was implemented on Jun 2017.

Still, rallies in domestic equities in hopes of ending Russia-Ukraine conflict negotiations curbed the rupee’s weakness.

Most global equity markets reacted positively to Russia’s promise to reduce its military operations near Kyiv and surrounding cities, however, on the ground, reports of attacks continued, with Asian stocks joining the rally early Wednesday.

Domestic bourses closed in the green following positive news from the latest peace talks in Istanbul more than a month after the most significant attacks on European countries since World War II.

But oil prices rose as a fall in American crude stockpiles put the focus back on supply shocks.

PTI reported the rupee opened strong at 75.65 against the dollar in the interbank foreign exchange market but soon entered negative territory as investors dumped risky assets. During the session, it oscillated between a high of 75.62 and a low of 75.97.

The currency finally closed to close at 75.94 against the dollar, down from Tuesday’s close at 75.73.

Still, a reversal in capital outflows is likely to boost the attractiveness of the Indian currency, with the latest stock exchange data showing foreign institutional investors (FII) turning into net buyers in the capital market on Tuesday when they bought shares worth ₹ 35.47 crores.

What may help the rupee is the Reserve Bank of India’s willingness to intervene in the event of a currency shock, as the central bank did when the rupee fell to an all -time low against the US dollar earlier this month.

Agrasmartcity

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