Mumbai: The Indian rupee appreciated by 79 paise to close at 85.97 against the US dollar on Tuesday as crude oil prices fell and dollar weakened after US President Donald Trump announced a ceasefire between Israel and Iran.
The rupee opened at 86.11 level but crossed 86 levels as risk sentiment improved after President Trump announced Israel-Iran ceasefire though dollar buying from oil companies and foreign portfolio investors continued. The Anchor investors for HDB Financial services IPO sold dollars when the rupee touched 86.27 while importers bought at 85.91 levels thus keeping the rupee in a narrow range of 85.91 to 86.27 during the day. The rupee had plunged 23 paise to close at a five-month low of 86.75 against the US dollar on Monday.
Brent crude, the global oil benchmark fell 3.19 per cent to $ 69.20 per barrel in futures trade bringing relief to currencies of oil-importing countries like India. On the other hand the dollar index, which gauges the greenback’s strength against a basket of six currencies reversed its gains after the ceasefire announcement and due to the dovish comments from Fed Vice Chair Michelle Bowman when she called for an immediate rate cut as early as July meeting. The dollar index was trading 0.48 per cent lower at 97.94.
Asian currencies were up between 0.1 per cent and 1.7 per cent on the day and global stocks rallied with U.S. equity futures indicating that stocks would open in the green.
Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors said, “As oil prices fall the rupee can be expected to move to 85.50 as we have lot of flows apart from HDB Financial services, from FTSE rebalancing flows and State Bank of India’s Rs 25000 crore QIP this week. If oil prices stay below 70 and move towards 65 during the week we can expect rupee also to move towards 85.50 in this week based on the inflows.”
The markets now await Fed Chief Powell’s testimony on Tuesday and Wednesday, in which he may indicate rate cuts.
