High crude, gold prices weighing on

New Delhi: India's rupee is expected to weaken on the back of geo-economic pressures unleashed by the ongoing hostilities between Russia and Ukraine.

Higher prices of global crude oil, gold and other commodities are likely to weaken the rupee. Presently, India imports 85 per cent of its crude oil needs. Higher crude oil prices are expected to add Rs8 to Rs10 in petrol and diesel's domestic selling prices. Besides, the cascading effect of expensive fuel cost will trigger a general inflationary trend.

On last Friday, a rise in the US oil inventories along with assurance of energy supply from Russia doused international crude oil prices. Consequently, the price on last Friday came down to $95 per barrel after the Russia-Ukraine war pushed Brent Crude Oil prices to $105 per barrel.

"Rupee had been volatile and closed at 75.29 against dollar for the week. Higher crude and gold prices can keep it weak," said Sajal Gupta, Head, Forex and Rates, at Edelweiss Securities.

"Domestic fuel price hike is expected post the Assembly elections which would stroke inflation and this can weaken rupee further." Moreover, Gupta expects a range of Rs 74.80 to Rs 75.50 to a USD for the coming week.

Last week, the currency pair (USDINR) had closed at Rs 75.2950 to a USD. "The bias for spot USDINR remains bullish as long as it holds 74.80 while higher side 75.75 is the hurdle," said Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities.

According to Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services: "Greenback has been subdued recently as tensions in Ukraine have increased and fueled speculation that the US Federal Reserve may be less aggressive in tightening policy at its March meeting." "Next week, volatility will continue to remain elevated as more clarity will be needed on the ongoing tensions between Russia and Ukraine.

"In addition, Somaiya said that key economic data such as Q3FY22 GDP numbers and trade balance figures will be keenly watched and better-than-expected data could restrict major weakness for the rupee.

"We expect the USDINR (Spot) to trade sideways with a positive bias and quote in the range of 75.20 and 76.20."