Rupee to appreciate against US dollar on soaring crude oil prices, Fed rate cut hopes

On account of soaring crude oil prices that saw two-weeks high and Federal Reserve expected to cut the interest rates from July onwards, the US dollar is expected to become weak leading to an appreciation of the Indian rupee at the Forex market. As per the experts, the rupee may get some push from the geopolitical tensions going on between the China-US and China-Iran as OPEC may cut the supply of oil to pare the US President Donald Trump's pressure on them and their member nations.

Speaking on the INR versus USD outlook Anindya Banerjee, Deputy Vice President at Kotak Securities said, "The Federal Reserve has indicated that it would cut the interest rates from July onwards and if that happens, crude oil prices may further appreciate leading to the weaker dollar in the currency market. In such case, emerging market currencies are expected to gain against the US dollar and hence we can expect some appreciation into the Indian national rupee against the American greenback." He said that if the Federal Reserve decides to cut interest rates then it would fuel inflation, which is also going negative against the US dollar.

Commenting upon the targets where one can expect Indian rupee to appreciate Anindya Banerjee of Kotak Securities said, "Rupee may show around Rs 69.30 levels by end of June if the Fed chief Jerome Powell announces the rate cut decision in today's meeting."

Standing in sync with Anindya Banerjee's views Anuj Gupta, Deputy Vice President — Currency and Commodities at Angel Broking said, "Fed Chief's announcement about interest rate cut will have negative impact on the Euro, which would further fuel the Indian currency and we can expect around 50 paise gain by the Indian national rupee against the US dollar." He said that the ongoing geopolitical tension between the US-China and US-Iran may also play a vital role in crude oil supply but in the short-term perspective, it won't have much impact on the emerging market currencies." However, Anuj Gupta of Angel Broking warned that if crude oil continues to surge, then the government of India will be compelled to increase oil prices and hence Indian rupee will come under pressure.