Tuesday, December 5

Rupee slips as oil price rises, bond inclusion delay weighs

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MUMBAI — The Indian rupee was trading lower against the dollar on Thursday, weighed by the uptick in oil prices and the delay in the inclusion of local bonds into a widely followed index.

The rupee was quoted at 81.63 per US dollar by 0426 GMT, against 81.52 in the previous session.

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The local unit opened almost flat at 81.51, before slipping on dollar demand by foreign banks and speculators, traders said.

Brent crude futures inched up to $93.56, extending its advance after OPEC+ agreed to slash production by about 2 million barrel per day, the largest reduction since 2020.

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Brent futures has dropped to near $83.70 last week on concerns over the demand outlook.

Meanwhile, JP Morgan said in its latest review that India would remain on its radar for inclusion in its emerging market debt index, dashing hopes that Asia’s third-largest economy would be added to the influential index this year.

The inclusion was estimated to bring in dollar inflows of up to $30 billion in a phased manner, according to analysts.

JP Morgan’s decision comes at a time when the rupee is being pressured by a large trade deficit and volatility in portfolio flows.

The local unit has dropped to just shy of 82-per-dollar multiple times in recent session, which, traders said, likely prompted the Reserve Bank of India to step in to curb the drop.

Traders reckon than the rupee’s new range is probably between 81 and 82, with risks tilted towards a fall below 82.

That could be prompted by US jobs data due on Friday. A robust reading on job additions and wage growth will mean the Federal Reserve will remain on an aggressive rate hike path.

The dollar index was hovering near 111. It has witnessed a downward correction from 114.78 on back of the recovery in the pound and a slight pullback in US yields. (Reporting by Nimesh Vora; Editing by Savio D’Souza)