Rupee opens high on 62.17 after yesterday close of 62.03. The currency continues depreciation on the second day as Global Stock indices fell after OPEC reduced estimate of demand in 2015 and Kuwait offers discounts to its Asian buyers.
After Saudi Arabia and Iraq it is Kuwait who offered discount to its Asian Buyers. It seems like these countries are defending their market share by selling oil at cheaper prices. Iran may also reduce oil prices if the solidity does not remain among OPEC members. Brent prices fell below $65 a barrel, lowest since 2009 and WTI near to $61.4 after touching five and half year low at $60.4/bbl on Wednesday. Yesterday data of U.S. oil inventory reported fall in demand at worlds largest oil consuming country.
After the OPEC forecast U.S. stocks collapsed and its effect spread across Asian markets. Yesterday S&P fell to the lowest level since October. Nikkei fell 1%, Shanghai Composite lost 0.3% and BSE Sensex fell 1.01% today.
Dollar index fell to 88.28 from yesterday level of 89.36 as Yen and EUR gained. Demand of Japanese currency and Bond increased as safe investment after weakness in U.S. market.
Fall in oil prices is good for India Trade Deficit and if lower prices sustained we may see its good result in coming months. At present falling Oil prices has started sell off in oil companies and this pace may slow after oil prices stabilize.
Overvaluation of INR is another reason behind its gradual depreciation. To keep rupee competitive it is necessary to let it flow according to market fundamentals. RBI may not intervene when it is actual time for currency depreciation.
In short run due to oil prices and geopolitical problems we are witnessing somewhat volatile movement that we have not seen since last year but improvement in fundamentals and upcoming reforms may revive the economic growth in long run.
Looking at present market scenario we may see rupee within the range of 61.80 to 62.30. If the currency makes new low above 62.30 then we may see further depreciation.
India is to release CPI and Industrial Production data tomorrow that will remain in watch and next week FOMC meet will remain crucial.