Rupee falls most in a month as crude oil prices weigh The rupee witnessed its highest decline in a month as it was dragged lower by a strengthened US dollar and a sharp increase in crude oil prices. The rupee fell by 29 paise to end at Rs 83.04 against the dollar on Tuesday, according to data from Bloomberg. Similarly, it had fallen by 33 paise on August 2. “This depreciation can be attributed to the overall strength of the US dollar and a significant increase in crude oil prices, which surged by more than 10% to reach $85 per barrel,” says Jateen Trivedi, VP research analyst, LKP Securities. The weakness in the Chinese yuan has put Asian currency markets under pressure and this has led to the weakness in the rupee, say analysts. “China’s slow performance is prompting new concerns about the country’s economic growth. The Caixin service PMI data from the Chinese economy, issued on Tuesday, was lower than the previous month, thereby putting pressure on Asian currency markets,” says Nirpendra Yadav, senior commodity research analyst, Swastika Investmart. The South Korean won led losses among Asian currencies, falling nearly 0.9% on Tuesday. Similarly, the Chinese yuan fell 0.4% “The rise in the dollar index indicates expectations of an impending interest rate hike, and this is impacting currency markets, including the rupee,” says Trivedi. Going ahead, the movement of the rupee will be influenced by Federal Reserve’s meeting, scheduled for later this month, say analysts. In the near term, the rupee is expected to trade between 82.70 and 83.25, with a bias toward weakness, especially if it faces upward pressure. Traders and investors will monitor developments in the currency and oil markets, and any news related to the Federal Reserve’s policy decisions, to gauge the rupee’s future trajectory.
If the current trend continues for a longer period of time, not only oil mills but oilseeds growers will also not be able to get good rates of their produce, says Samir Shah, president of Gujarat State Edible Oils and Oil Seeds Association (GEOA). Shah who is also past president of SOMA says that due to various international factors rates of edible oils had gone up considerably, especially imported oils earlier this year.
“With a view to curb rising prices of edible oil, the Government of India reduced import duty on edible oils. Considering the fact that India is producing hardly 30 percent of its edible oil requirement, the decision was right at that point of time. Now when international prices of edible oils have gone down by 15 percent to 25 percent and high production period has started in edible oil exporting countries, the government should gradually increase import duty to protect local oil mills and oilseeds growers,” said Shah. GEOA has also made representation before Union Minister for Commerce & Consumer Affairs, Piyush Goyal to increase import duty.
In June import duty on edible oils was ranging from 35 to 55 percent, since then the government gradually reduced import duty and at present it is ranging from zero percent to 15 percent on different edible oils, he said.
Just a month back prices of edible oils were through the roof and the government took appropriate measures by reducing import duty in order to protect consumers, says Atul Chaturvedi, president of Solvent Extractors Association of India (SEA). “Prices of edible oils are coming down globally. Kharif sowing has already started across the country. In the interest of local farmers, it is high time to enhance import duty in a phased manner to encourage local edible oil value chain,” opined Chaturvedi.
On Thursday imported Palm oil prices were at around Rs 2100 per 15 kg as against local Rs 2700 and Rs 2550 of groundnut and cottonseed oils. Prices of other local oils including ricebran, coconut, soyabean and mustard remained as high as Rs 2350, Rs 2520, Rs 2500 and Rs 2580 respectively.
India imports around 13-13.5 million tonnes of edible oils, of which around 8-8.5 million tonnes (around 63 per cent) are palm oil. Though the price of other imported Sunflower oil remained at around Rs 2700 per 15 kg, but import quantity of the oil is much lower than that of palm oil.