View: Falling crude oil prices may prop up rupee

By Gaurang Somaiya

Rupee continued to remain under pressure, but fall for the currency was limited, after the dollar at the end of the week was weighed down by US President Donald Trump’s comments on US Fed.

Asian currencies also saw some relief rally after remaining under pressure in the last few weeks. Rupee is one of the weakest in the Asian pack and year-to-date fall has been to the tune of over 9 per cent.


On the other hand, falling crude oil prices could be supportive for the currency that could lead to cool-off in inflation in the near future.

Most importantly, market participants will be keeping an eye on the movement of the dollar and will continue to influence the move for the local currency.

Euro gained, last week, for the second successive week after closing in the red in the past few weeks, following strength in the dollar and better-than-expected economic numbers from the US.

Recent economic data released from the euro zone have been in line with estimates, suggesting the economy is recovering, but the ECB would need more time before considering raising rates.

ECB minutes showed that officials were concerned that protectionism and threat of global trade war were the biggest risk to euro zone economy.

This week, from the euro zone, market participants will be keeping an eye on German retail sales and preliminary inflation to gauge a view for the currency. We expect that gains for the EUR-USD pair could be limited, as it faces resistance close to 1.1730 levels and support for the currency lies at 1.1500 levels.

Pound traded steady against the US dollar, but gains for the currency were limited compared with upside in the euro.

Concerns over forthcoming talks may decide whether Britain gets a trade deal with the EU before it quits the bloc. With less than eight months to go until Britain leaves the EU, the government has yet to agree with Brussels on the terms of its departure and this uncertainty could keep volatility for pound.

Last week, economic calendar from the UK was muted and this week too, no major economic data is expected to be released from the UK. Market participants will be keeping an eye on any fresh updates from Brussels on Brexit. For the week, the GBP-USD pair is expected to quote in the range of 1.2750 and 1.2960.

(Gaurang Somaiya is Currency Analyst at MOFSL)