On Tuesday, the duo of USD/INR made a positive performance on the trading floor by reaching an all-time high of 77.17 amid the rising value of crude oil, which halted the potential of the Indian rupee against the intimidating greenback.
As one of the major importers of petroleum products globally, India has experienced significant outflows to tackle the rising price of crude oil. Additionally, the West Texas Intermediate (WTI) oil price continues to hover near the $125.00 price level, which points to a substantial fiscal deficit for India in the coming days.
As it stands, there is no end in sight yet to the rally in crude oil as the ongoing standoff between Russia and Ukraine continues. Meanwhile, Indian equities might face a heavy plunge in margins in the upcoming earnings period.
The FII Actions
It is not just the surging oil prices that India has to contend with as it tries to balance the market and keep its currency buoyant enough for its booming economy. Another challenge for India is from foreign institutional investors (FII).
The FII has been consistent in withdrawing its assets following the happenings in Eastern Europe. Their actions have continued to intensify the majority’s fears as the fears of stagflation looms in Europe.
India is known to rely heavily on the FII as it constitutes the bulk of the country’s fiscal, which will, in turn, hurt the Indian rupee in no small way.
Ukraine Agrees To Russia’s Demand
Another exciting development that may indicate a move towards bringing the ongoing war to an end is that the Ukrainian president has agreed to Putin’s request to withdraw its membership application to join NATO.
The resulting impact of this news has seen a rise in the follow-up transactions of global equities, but currencies more prone to risk need more assurances from the market. Weaker currencies do not possess the vital support to shield them from the harsh market changes that occur in times like this.
According to reports, the U.S. dollar index (DXY) is swinging around 99.10, ready to shoot up as investors calmly wait for a new trigger that would bring them further action. Any new trigger that translates to greenlight is what investors need here.
The currency market has been anticipating a bullish trend for some days now to recover from what has been a tumultuous period for most currencies following the escalation of hostilities between Russia and Ukraine on February 24. The war broke out after Putin ordered a full-scale military offensive on Ukraine, which halted the global financial markets and the cryptocurrency industry.
Everything points to the news headlines coming out of Eastern Europe as the key driver for the pair of USD/INR to affirm the market.
But at the moment, investors are focusing on the United States Consumer Price Index (CPI) metrics, which are due to come out tomorrow, before making any informed decisions on the next step.