The Indian rupee rose today as the exporters had to convert their overseas earnings after the India’s currency has been losing significantly to the U.S. dollar in May.
The rupee recovered from two days of losses this week as the oil continued to drop today, easing the concerns that the commodity importers will have to sell even more rupees for dollars. On the other hand, large exporters found 13-month high USD/INR rate attractive enough to start converting their overseas earnings.
The demand for rupee formed by the exporters offers a nice support level for the Indian currency as at such low levels natural currency conversion will always be profitable for some companies. Apart from that, dollar demand may slow even further if oil prices go for a large scale correction soon.
From the other point of view, in case energy prices continue to rise at a current pace, the India’s current-account deficit may double by the year’s end. Judging from that, such investment banks as JPMorgan Chase & Co. and Goldman Sachs Group Inc. decreased their forecasts on rupee.
USD/INR dropped almost 0.3 percent to 42.855 as of 8:11 GMT; it may continue to drop even further during the next weeks, after gaining almost 5.3 percent in May.
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