The Indian rupee fell from 72.430 to 74.325 versus the US dollar in June. Higher oil prices are expected to keep the Indian rupee under pressure, according to MUFG Bank economists.
“The rupee was pulled down by the mix of US dollar gains on a hawkish Fed and a surge in Brent crude oil prices above the $75/bbl barrier, and these risks are expected to persist in the near-term.”
“India’s oil import bill will climb in the coming months if global oil prices remain elevated. This is in addition to the possible increase in oil demand, as well as demand for non-oil products, as mobility restrictions in most states gradually lessen as new COVID-19 cases fall and vaccination rates increase. This will almost certainly result in larger trade imbalances.”
“Following a net inflow of $1.2 billion in June, there are a few IPOs scheduled for July, which could continue to entice foreign investors to the Indian stock market. On top of a probable decrease in foreign reserves, these inflows could assist limit rupee downside risks.”
“The rise in headline CPI to 6.30 percent YoY in May from 4.29 percent YoY in April confirms our belief that RBI rate reduction are limited.”/n
