Rupee opens 31 paise lower against US dollar as oil prices soar

The rupee on Friday opened 31 paise lower at 69.75 against the US dollar amid spike in crude oil prices. 

The domestic unit on Thursday surged 24 paise to close at a one-week high of Rs 69.44 on the back of a rally in equities and losses in the dollar after the US Federal Reserve hinted at a possible rate cut in near future.

Foreign funds, however, pulled out Rs 438 crore from capital markets on a net basis Thursday, provisional data showed.

On the global front, oil prices extended gains amid Middle East tensions, US interest rate cut hopes. On Thursday, oil prices soared more than 5 per cent after Iran shot down a US military drone, raising fears of a military confrontation between Tehran and Washington. Brent crude, the global benchmark, settled up $2.63, or 4.3 per cent at $64.45 a barrel. US West Texas Intermediate crude rose $2.89, or 5.4 per cent, to $56.65 a barrel, Reuters reported. 

"The rupee is likely to react more to global factors than to domestic factors which could keep the volatility high. Focus will now shift to the G20 meeting that is scheduled next week and market participants will be keenly awaiting for outcome on the trade talks between US and China. Today, USD/INR pair is expected to quote in the range of 69.20 and 69.90," says Gaurang Somaiya, Research Analyst (Currency) at Motilal Oswal Financial Services (MOFSL). 

In the equity market, Asian stocks struggled on Friday as anxiety over Sino-US trade negotiations clouded the investor mood in the region. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1 per cent. Japan’s Nikkei was flat, capped by the yen’s big surge, Reuters reported. 

In the currency market, the dollar index against a basket of six major currencies struggled near a two-week low of 96.567 brushed the previous day, the report added.