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Re tracks crude, falls 44 paise to `70.90/$

DNMUM427570 | 12/7/2018 | Author : Manju AB | WC :440

Mumbai: A day after Reserve Bank of India (RBI) sharply revised downwards its inflation forecast for the second half of the fiscal, global crude oil prices fell by 2.5%, renewing expectations in the market that a cut in interest rates could be a possibility in the next policy announcement on February 5.
Business houses are waiting for rates to soften so that they can access cheaper credit and step up production to meet the growing consumer demand. RBI on Wednesday had lowered its retail inflation forecast for the second half to 2.7-3.2% from 3.9-4.5% earlier.
RBI has been hitching its lower inflation projections on food prices and on the cost of oil. The depreciating rupee will make oil imports more expensive.
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The rupee, which is crucial for RBI to tame inflation, fell 44 paise on Thursday over previous close. It opened weaker at Rs 70.79 against the dollar following the global sell-off in the equity market. The local currency continued to be jittery in anticipation of the Organisation of Petroleum Exporting Countries (Opec) meeting falling to 71.14 against the dollar. Following Opec’s decision it erased losses, closing at Rs 70.90 against the dollar.
The fall in crude oil prices continued after the Opec decided on a production cut of 1 million barrels a day, in line with what the markets had factored in. The international crude oil prices fell 2.5% to $58 a barrel.
“The rupee is in a safe spot with the demand matching the supply at this point. Half the Iran oil payments will be done in rupees, which will take part of the demand of the oil companies from the market. But the beginning of the month there is a pent up demand from importers, from the defence sector,” Gopikrishnan said.
There were also reports that the Indian government had reached an agreement with Tehran on making 50% of the oil payments sourced from Iran to be paid in dollars. “The rupee is following crude oil prices. Making half of the oil payments to Iran in rupees rather than in dollars will also keep the rupee strong,” Jayesh Mehta, managing director and treasurer at Bank of America, said
Oil payments to Iran in rupees will also lift the oil marketing companies demand for dollars from the market.

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