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Journalism of Courage
Having strengthened significantly in March 2019, on account of strong inflow of funds by foreign portfolio investors (FPIs), the rupee fell 44 paise to close at 69.67 against the US dollar on Monday amid higher dollar demand from importers and rising crude oil prices.
This is the third straight session of loss for the domestic unit, during which it has lost 126 paise. The fall in rupee has been in line with jump in global crude oil prices. On Monday, the Brent crude was trading at $71.08 per barrel, its highest level in the last five months. Experts feel that if crude oil continues to rise, the rupee may come under further pressure as it will lead to a rise in the overall import cost.
With concerns growing over supply from OPEC and US sanctions on Venezuela, Brent crude oil prices have risen over the last 10-days from a level of $66 per barrel on March 28 to $71.08 a barrel at 1656 GMT on Monday.
However, expectations of weakening global growth may limit its rise.
Besides, a continued rise in inflow of FPI money will provide some support to the rupee. FPIs remained net buyers in the capital markets, putting in Rs 329.60 crore on a net basis Monday, as per provisional data.
Crude prices are a big determinant of rupee movement as India imports more than two thirds of its fuel requirements. In October 2018, the rupee had fallen to its all time low of 74.34 against the dollar in line with the rising crude oil prices. Brent crude had hit a level of $86 per barrel in October, putting pressure on rupee and India’s current account deficit.
However, as the crude oil prices declined over the following months to levels of around $52 per barrel by the end of December 2018, it offered a much needed relief to the rupee and the economy.
At the Interbank Foreign Exchange (forex) market, the rupee opened lower at 69.40 and fell further to touch the day’s low of 69.71. The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.21 per cent to 97.19. Continuation of foreign fund inflows in April has been supporting rupee. Sharp surge in flows last month led to appreciation in the local currency.
The FPI inflow in March alone amounted to Rs 33,980 crore — the largest monthly inflow in the stock market’s history — resulting in over 8 per cent jump in Sensex since March 1, 2019.
The previous high of foreign flows was Rs 30,906 crore in March 2017. After taking into account Rs 13,000 crore investment in the debt market, the total FPI inflow for March was at Rs 43,450 crore. Appreciating rupee also increases returns on foreign investors pumping money in Indian markets, as it helps boost their returns in dollar terms.
