After a long six-week hammering, the rupee came out relieved of the pressure from the greenback during the festive season. The relief came from multiple quarters, the foremost being a fall in Brent crude prices to $70 and WTI to $60.
India imports nearly 220 MMT of crude oil, which converts to nearly 1.5 billion barrels, depending on the specific gravity of the crude. The average price of the Opec basket was $52.5 a barrel in 2017, which was 30 per cent higher than the average price of $40 a barrel in CY2016.
The oil continued its northwards movement in CY2018 to hit $84 by Oct and softened thereafter to $70 last week. The average price for CY18 till date is nearly $70. Every $10 rise in crude oil price adds $15 billion to India’s trade and current account deficits.
This puts additional pressure on the fragile exchange rate dynamics. With nearly 17 per cent drop in crude oil prices from their peak, the rupee has recovered nearly 2.25 per cent. Read More
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