Rupee rises sharply and retreats from lows of over 80 to the dollar

The rupee rebounded dramatically early on Monday from close to its all-time lows of around 80 per dollar, after a broader rise in risk assets, a drop in crude oil prices to below $100 per barrel, and as the dollar hovered below multi-year highs.

The rupee was quoted by Bloomberg at 79.7663 against the dollar after starting the day at 79.7713. The rupee increased 6 paise to 79.76 against the US dollar in early trade, according to PTI.

This was due to the dollar starting the week edging lower from multi-year highs, however concerns about Europe’s gas supply restrained the selling of the currency.

Prior to Thursday, when gas is anticipated to resume flowing through the Nord Stream pipe from Russia to Germany after a shutdown for scheduled maintenance, Reuters reported that traders were holding their breath.

According to Joseph Capurso, head of international economics at Commonwealth Bank of Australia, if that doesn’t happen, “that would be a very bad thing for a lot of currencies,” with the euro likely to be the greatest loss and the dollar a gain.

As a result of falling crude prices, which implied somewhat tempered inflation forecasts and, consequently, rate hikes, Asian markets, especially domestic benchmark indices, rose.

Crude oil prices have been fluctuating, and on Monday they dropped under $100 a barrel, relieving consumers and policymakers throughout the world.

As attention returned to the mounting COVID-19 cases in China and the possibility of lockdowns once more decreasing fuel demand in the world’s biggest oil importing country, crude prices slipped $1 in early Asian trading to below $100 per barrel, erasing gains from Friday.

Analysts cautioned, though, that the dollar will continue to rule.

In an outlook report that instead lifted the bank’s dollar estimates broadly, analysts at HSBC stated that there has been a fascination with how the dollar is ready to weaken.

“The dollar is overvalued because there has been too much focus on the flaws of the dollar but not enough on the growing ones elsewhere. Global growth is slowing and the risks to the negative are increasing, which is good for the dollar because the bull market in the dollar has not yet ended “said the analysts at HSBC.