Mumbai: The rupee has turned out to be Asias best performing currency since November, reversing its prolonged rout earlier in the year, with the steep fall in global crude oil prices burnishing the allure of the local monetary unit and helping improve Indias fiscal arithmetic.
“The rupee has regained its appreciation bias against the dollar in recent weeks following the sharp fall in global oil prices and amid the rising risk of a global growth slowdown,” said B Prasanna, head of global markets at ICICI Bank.
Indias shrinking trade deficit prospects and lower inflation risks should also draw more overseas investors.
Fund flows are likely to resume once the global risk-off sentiment were to subside, Prasanna said.
Between October 31 and now, the rupee has gained 5.39 per cent against the dollar, sitting on the top of the currency leader-board. The Indonesian rupiah rose 4.47 per cent, and is the second-best performing currency in the period.
Global Brent crude oil prices slumped 39 per cent in the past two and a half months. India, one of the major importers of oil, is set to gain from these declines.
To be sure, the rupee on Friday fell for the first time in five days, mirroring the weakness in the stock market. Month-end importers demand for dollars also weighed on the local unit.
“The stock market crash exerted pressure on the rupee, while oil companies were seen buying dollars to meet their month-end payment commitments,” said Anindya Banerjee, an analyst at Kotak Securities. “But this could only be a blip as the rupee is unlikely to log wild swings in the new year.”
During the year, the rupee hit a record low of 74.48 on October 11. For the full year, the rupee is the worst performing Asian currency and one of the worst-performing emerging market units.
“Calmer conditions are expected to prevail in the local currency market and we do not expect any huge currency volatility,” said Param Sharma, director at NSP Treasury Risk Management.
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