Rupee Gains As Oil Prices Lowest Since February And Pullback In Dollar

The rupee strengthened sharply at open on Thursday, tracking a pullback in the dollar and oil below $90 per barrel for the first time since the start of the Ukraine crisis in late February.

PTI reported that the rupee gained 27 paise to 79.68 against the US dollar in early trade.

Bloomberg showed the rupee was last changing hands at 79.7437 per dollar, compared to its previous close of 79.9037.

The rupee opened on a positive note as crude oil fell below $90 per barrel, the dollar index eased to 109.78 and Asian currencies gained slightly, Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors, told PTI.

The dollar index continued its slide from Wednesday by edging lower in trading in Asia on Thursday, reaching almost 109.75, stalling the recent slide in Asian currencies.

The demand for the dollar decreased as a result of falling Treasury yields and increased risk appetite. Overnight, the S&P 500 Index increased 1.8 per cent, while the 10-year Treasury yield decreased by around 11 basis points from its peak.

On Wednesday, Brent crude futures fell more than 5 per cent on worries about demand, reaching their lowest point since February.

Fears of a slowdown in China and tightening monetary policy by the Federal Reserve and other central banks have contributed to the decline of more than a fifth in the value of oil prices since the beginning of August.

Concerns over the global economic outlook are "in a way" helping the rupee, as it is leading to a "sizeable" pullback in oil and other commodities, a trader at a Mumbai-based bank told Reuters.

"Obviously, growth concerns are likely to lead to portfolio outflows from emerging markets, but since the turn of July that has not been a problem for India," added the trader.

According to the data from the National Securities Depository Limited (NSDL), foreign investors purchased more than $6 billion worth of Indian equities in August. This month, investors have purchased goods worth around $330 million.

Focus now shifts to the European Central Bank (ECB) meeting and Fed Chair Jerome Powell's speech later in the day.

Forex traders said the Indian currency could weaken further tracking the strength of the dollar ahead of US Fed Chair Jerome Powell's speech and the ECB meeting.