Rupee Falls on Oil Demand Speculations

The Indian rupee showed a weakening today at the Forex market as the speculations that the domestic companies will have to buy oil rose in the country.

As the commodities prices stopped falling today on the global markets the fears that the companies will have to convert the national currency into dollars to buy the oil pushed the rupee down. It was among the worst performing Asian currencies today.

While rupee’s behavior is seen as closely correlated with the oil prices, it will remain volatile and its fluctuations on the Forex market will be exploited by the traders. The central bank can interfere in this process with artificial appreciation.

The widening current-account deficit in India adds another reason for this Asian currency to go down compared to other world currencies. Even the high interest rates in the country won’t help as the deficit remains at record above $13 billion.

USD/INR rose today to in Mumbai trading 42.9050 from its close value of 42.8925 yesterday.

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