USD/INR dropped below 94.00 as a 16% slide in Brent crude and shifting foreign investment flows bolster the rupee ahead of an expected December RBI rate hike.
USD/INR has broken below 94.00, the rupee's strongest level in over six months, driven by a 16% plunge in Brent crude that improves India's terms of trade and eases inflation concerns. An expected RBI rate hike to 5.75% in December adds further support for the rupee. Improving foreign flows into Indian equities and bonds reinforce the downward pressure on the pair.
Brent crude already fell sharply, by 16% last week, and this decline is cited as the driver of rupee strength rather than a new forecast of further downside. The article's focus is the currency effect, not the oil price outlook, so no clear directional signal for Brent over the coming days.
The Indian Rupee reached its strongest level in over six months, with USD/INR breaking below 94.00 following a 16% decline in Brent crude prices. Societe Generale analysts highlight that improved terms of trade and a rotation of foreign capital into Indian assets are supporting the currency, while the RBI remains on track for a 25bp rate hike to 5.75% in December.
Brent crude dropped 16% last week, which lowers India's oil import bill and eases inflation worries, while improving foreign investor flows into Indian equities and bonds are also lifting the currency.
Societe Generale expects the RBI to raise rates by 25bp to 5.75% in December, a move that would keep the rupee supported if it materialises.
Brent crude declined sharply, by 16% last week, which boosted India's terms of trade and helped push the rupee to its strongest level in more than six months.