The Indian rupee on Tuesday strengthened against the dollar after international crude oil prices fell to a five-and-a-half-year low, raising hopes among investors that it will help the government to achieve its fiscal deficit target of 4.1% of gross domestic product (GDP). Auction proceeds from coal mines and spectrum is also likely to help the government meet its deficit target.
The Indian currency opened the session at 63.37 per dollar compared with its previous close of 63.42. At 2pm, the rupee was trading at 63.34 a dollar, up 0.13%.
Brent crude oil suffered a 1.8% drop on Monday to $55.42 per barrel, a fresh low going back to April 2009. Since a recent peak in June, the price of the international benchmark has now fallen by 51.8%, due to concerns of slowing demand coupled with a glut of global supply, Reuters reported.
Prime Minister Narendra Modi on Monday chose the ordinance route to allow the auction of iron ore and other minerals, the eighth time the seven-month-old government used executive powers to push through a key decision, ignoring criticism that it is bypassing Parliament.
The cabinet also cleared the Telecom Commission’s recommendations on spectrum auction that is expected to begin next month, the government said in a statement.
The fiscal deficit as a percentage of budget estimates from April to November has already reached 99% of the full-year target, the highest since the Lehman crisis, due to weak revenue collections.
India’s benchmark equity index, S&P BSE Sensex, was trading at 27,307.57 points, down 2%.
Most of the Asian currencies were trading higher against the dollar. The South Korean won was up 1%, Japanese yen 0.42%, Philippines peso up 0.21%, China offshore spot 0.19%, Singapore dollar 0.15%, Thai baht 0.15% and China renminbi 0.11%. However, the Malaysian ringgit was down 0.62%, Indonesian rupiah 0.22% and Taiwan dollar 0.04%.
The yield on India’s 10-year benchmark bond stood at 7.889% compared with its Monday’s close of 7.892%. Bond yields and prices move in opposite directions.
In 2014, the rupee weakened 2% against the dollar, while foreign institutional investors bought $16.12 billion from local equity markets and $26.36 billion from the debt market.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 91.409, up 0.03% from its previous close of 91.378.
Source:livemint.com
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