RBI expects rupee to hover around 75/dollar; Indian crude basket to average $35 per barrel in FY21
The rupee came under intensified and sustained depreciation pressures from mid-January, reflecting a generalised weakening of emerging market currencies amid flights to safety, RBI said.
Mumbai: The Reserve Bank of India (RBI) expects the value of the domestic currency to hover around Rs 75 to a dollar and Indian crude basket to average about $35 per barrel during 2020-21.
The rupee came under intensified and sustained depreciation pressures from mid-January, reflecting a generalised weakening of emerging market currencies amid flights to safety, RBI said in its Monetary Policy Report.
Taking into account the sizable two-way movements in the nominal exchange rate during October-December 2019, RBI expects the value of Indian rupee to be around Rs 75 to a dollar.
“…the nominal exchange rate (INR vis-à-vis US dollar) exhibited sizable two-way movements during October-December 2019. The INR came under intensified and sustained depreciation pressures beginning mid-January, reflecting a generalised weakening of emerging market currencies amidst flights to safety," the RBI report said.
“Accordingly, the baseline assumes an average of Rs 75 per US dollar to reflect these recent developments,” said the RBI report.
As regards the crude oil prices, the report said “given the current demand-supply assessment, the baseline scenario assumes crude oil prices (Indian basket) to average around $35 per barrel during 2020-21.”
Observing that the international crude oil prices (Indian basket) have fluctuated in a wide range since October 2019, the report said these prices initially increased during late December 2019 and early January 2020 to around $70 per barrel, triggered by US-Iran tensions.
However, the prices subsequently softened to reach $51 by early March in anticipation of lower global demand following the outbreak of COVID-19 and its rapid geographical spread.
Brent prices crashed to $32 on 9 March 2020 following Saudi Arabia’s decision to cut prices and increase production over the failure to reach an agreement with Russia on production cuts.
Brent fell further to $23 on 30 March 2020 while US crude prices dipped briefly below $20. Brent rebounded to $34 per barrel on 3 April, the report said.
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