The rupee fell 12 paise to 66.51 against the US dollar in early trade on Friday after data released by the US Labor Department showed the number of US workers who applied for unemployment benefits declined last week to the lowest level in 43 years.
A strong data in the US may give room to the US Fed to hike interest rate going ahead. This would be negative for emerging market currencies such as the rupee. The domestic currency had settled 18 paise lower at 66.39 on Thursday on fresh demand for the greenback from banks and importers.
The rupee so far seems to be in a nice spot after having been above the 66.50 level. The two factors which have been very decisive for the rupee include ‘risk on’ trade, as we define it. Despite the fact that the dollar index has edged up above 94, EM currencies are having a nice time. The foreign flows, which at least are muted in April compared to March, should see a resumption soon,” said K Harihar, Head – Global Markets, FirstRand Bank.
The dollar index, which tracks the movement of six major world currencies, stood at 94.52. Commodity prices including oil have gone up to $46 and this is despite the fact that there is no consensus that there will be a production cut between the OPEC and the non-OPEC countries. Should a production cut actually materialises, oil prices should go up and that will probably put a pause to the rupee strength. But it should still range in the 66-67 levels for the short term,” Harihar added.
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