Rupee likely to depreciate amid elevated crude prices, strong dollar; USDINR pair to trade with upward bias The Indian Rupee is likely to depreciate on Friday amid rising crude prices, strong dollar and cautious domestic equity markets. The range for the day is 79.60 to 80.00, according to analysts. In the previous session, rupee declined against the US dollar after moving in a narrow range due to firm crude oil prices and losses in the domestic equity markets. A weak dollar in the overseas markets ahead of a speech by the US Federal Reserve chief on Friday and forex inflows into equities restricted losses in the local unit At the interbank foreign exchange market, rupee opened at 79.80, and it hovered in a range of 79.80 to 79.93 before finally settling at 79.92, down 6 paise over its previous close. Also Read: Syrma SGS Tech, HDFC Bank, Dr Reddy’s, Eicher Motors, IDBI Bank, DFL, Yes Bank stocks in focus on 26 August “The rupee opens at 79.87 as brent crude oil is lower at around $ 100 per barrel while the dollar index is slightly higher before the crucial deliberation of Mr Powell in the Jackson Holes meeting tonight. Asian currencies are unchanged from yesterday. The range for the day is 79.60 to 80.00. US economy slowed by 0.6% in the second quarter which was better than a 0.9% slowdown expected earlier. There were no signs of recession though technically it is in a recession. Exporters may sell near 79.90 to 80.00 levels as RBI protects the crucial 80 levels though no one knows for how many days more. Importers should keep buying the dips.” “Rupee traded in a narrow range ahead of the Fed Chairman statement at the Jackson Hole Symposium scheduled later today. Fed officials at this point are noncommittal about the size of the rate hike they will approve at their September meeting, but continued hammering the point they will drive rates up and keep them there until inflation has been tamed.Yesterday, the dollar retraced after data showed the U.S. economy contracted at a more moderate pace than initially thought in the second quarter as consumer spending blunted some of the drag from a sharp slowdown in inventory accumulation, dispelling fears that a recession was underway.” “The underlying economic strength fits in with recent upbeat readings on the labor market, retail sales and industrial production. In today’s comments the Fed Chairman could shed more light on whether the Fed can engineer an economic slowdown without triggering a recession. We expect the USDINR(Spot) to trade sideways and quote in the range of 79.40 and 80.05.” Also Read: Petrol and diesel price August 26: No change in fuel cost; Check prices in Delhi, Mumbai, other cities here “The USDINR pair is opening near 79.88 continuing to struggle in the tight range of 79.70 -79.90 from the past few sessions. RBI should be well appreciated to cut down the volatility in the rupee despite of wild momentum in the global FX markets. The recent tameness in the rupee hints that the pair will soon witness greater volatility likely to be on the upside, as the major factors are dollar bull and rupee negative while the RBI has to let rupee sync with the other emerging markets. For now, the USDINR pair keeps consolidating between 79.50-80.06 levels where 80.06 remains the strong resistance for the pair, the breaking of which will trigger the stop losses of importers and shall lead to another 50 paise to 1 rupee move in the pair. On the flip side, 79.50 remains crucial support.”
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.