Rupee reverses early gains amid oil price surge; ends flat at 86.41/$

Indian Rupee today: The domestic currency closed flat at 86.41 against the dollar on Thursday, according to Bloomberg

The Indian Rupee reversed early gains on Thursday to end near the one-month low mark, amid a rise in crude oil prices and a firm dollar index. 

 

The domestic currency closed flat at 86.41 against the dollar on Thursday, according to Bloomberg. This comes after the unit opened nine paise stronger during the session. The rupee has witnessed nearly 0.95 per cent depreciation in the current calendar year. 

 

The currency opened strongly supported by a weaker dollar index near 97.30 in early trade, but, as the dollar index began to recover intraday, the rupee gave up its gains, according to Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities. "Market participants remain cautious ahead of next week’s US Federal Reserve policy decision, which is expected to provide further direction. The rupee is likely to trade in a range of 85.85–86.65 in the near term." 

 

The Real Effective Exchange Rate (REER) for June stood at 100.36, indicating that the rupee is fairly valued. However, after the recent appreciation in other currencies, the rupee may now be slightly undervalued, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. A REER value above 100 indicates an appreciation of the rupee relative to the base year, potentially making Indian exports less competitive.

 

The Reserve Bank of India (RBI) net bought $1.76 billion in May, after a net sell of $1.6 billion in April. The central bank bought $9.12 billion, while it sold $7.36 billion of foreign currency in May. 

 

Meanwhile, most equity markets in Asia rose amid optimism fueled by the US-Japan trade deal and positive signals pointing to a potential agreement with the European Union. The EU and US are moving towards a trade agreement that could include a 15 per cent US baseline tariff on all EU exports, as per reports. The dollar index, a measure of the greenback against a basket of six major currencies, was up 0.2 per cent at 97.38.

 

In commodities, crude oil prices advanced, with investors looking to the US trade talks progress and low inventory levels. Brent crude price was up 1.26 per cent at 69.37 per barrel, while WTI crude prices were higher by 1.38 per cent at 66.15, as of 3:35 PM IST.