USD/INR skids near 76.00 despite a rebound in oil prices

The USD/INR pair has witnessed a steep fall from March 8 high at 77.17 and is eyeing more downside despite the oil prices having jumped around 9% overnight.

West Texas Intermediate (WTI), futures on NYMEX, has attracted some significant bids after recording a low of $92.37 on Tuesday. The oil prices jumped after the International Energy Agency (IEA) said three million barrels per day (bpd) of Russian oil and products could be shut in from next month. That loss would be far greater than an expected drop in demand of one million bpd from higher fuel prices. The oil has reacted positively to the statement but it is important to understand that the black gold has already discounted the expected supply concerns in its previous rally. Therefore the reaction is merely a potential pullback, not a reversal. India, being a major importer of oil possesses an inverse relationship with oil prices.

The OPEC cartel has already announced that the members will pump more oil by using their unused capacity and will reduce the gap in the demand-supply mechanism. Therefore, oil is not likely to boil further and may fall against, other things remaining constant.

Adding to that, the return of Foreign Institutional Investors (FII) on the Indian bourses amid ease-off in volatility has supported the Indian rupee. The rising odds of a ceasefire between Russia and Ukraine have boosted the market sentiment and FIIs are pumping money into Indian equities.

Meanwhile, the US dollar index (DXY) is licking its wounds after falling from Monday’s high at 99.30 as Fed’s monetary policy dictation is disliked by the DXY investors.