Rupee drops 39 paise against US dollar as crude oil rebounds

The rupee Monday dropped by 39 paise to settle at 72.89 against the US currency as oil prices rebounded after Saudi Arabia announced plans to cut production and the dollar strengthened in global markets.

Cutting short the 10-day selling trend, crude oil prices rose by around 1 per cent to touch USD 71 per barrel mark after the world's largest oil exporter Saudi Arabia announced plans to cut production by 500,000 barrels per day from December and called for a global output cut of one million barrels per day to support oil price.

The dollar also rose to an 18-month high against its global peers after the British pound tumbled nearly 1 per cent due to growing worries about the Brexit deal with EU.

Weighed by heavy dollar demand amid firming crude oil prices, the rupee opened lower at 72.74 and fell further by 57 paise to the day's low of 73.07.

"Oil reversing successive days of fall, and dollar's resurgence dragged rupee lower today. This bucks the trend of strengthening rupee in the last few days, which was helped by FII buying in equities. Key retail inflation and industrial production data due for release later in the day also kept the rupee tentative," Anand James, Chief Market Strategist at Geojit Financial Services said.

The rupee finally settled at 72.89 per dollar, showing a loss of 39 paise or 0.54 per cent over the last close.

"OPEC talked of cutting supply next year to support falling crude oil prices. Traders rushed to cover their shorts and crude oil surged by 1 per cent in today's trade. Dollar strengthened across the board as jitters over the BREXIT deal in the UK stroked uncertainty in global markets. Rupee was also not spared," said V K Sharma, Head PCG & Capital Markets Group, HDFC Securities.

Domestic stock markets also tumbled on worries about resurging oil prices and caution ahead of the release of key macroeconomic data.

BSE Sensex dropped by 345.56 points or 0.98 per cent to close at 34,812.99. The broader NSE Nifty slipped below the 10,500-mark by falling 103 points, or 0.97 per cent, at 10,482.20.

FIIs remained net buyers in capital markets with net purchases of Rs 832.15 crore, provisional exchange data showed. Foreign investors had put in more than Rs 600 crore on a net basis on Friday.

Meanwhile, Financial Benchmarks India fixed the reference rate for the US dollar at 72.9078. It set the rate for the British pound at 93.9947 and at 82.4315