Indian rupee to weaken as oil prices jump on unexpected OPEC+ output cut

Indian rupee to weaken as oil prices jump on unexpected OPEC+ output cut

MUMBAI - The Indian rupee is expected to open lower versus the U.S. dollar on Monday after a surprise production cut by OPEC+ fuelled a jump in oil prices.

The non-deliverable forwards indicate the rupee will open at around 82.35-82.40 to the U.S. dollar compared with 82.1650 in the previous session.

Saudi Arabia and other OPEC+ oil producers on Sunday announced further output cuts of around 1.16 million barrels per day, in a surprise move that analysts said would cause a rise in prices.

Brent crude futures rose by as much as 8.3% on Monday to near $86.50. It pared a part of its rally and was last at $84.40.

A rise in oil prices directly affects the Indian economy and the rupee as the country imports about 83% of its oil requirements, said Anil Bhansali, head treasury at Finrex Treasury Advisors.

According to estimates by some economists, a 10% hike in oil prices leads to an increase in India’s current account deficit by 0.3% to 0.5% of the GDP.

Asian currencies declined. The Korean won was down about 1.5%, the Thai baht dropped 0.8% and the offshore Chinese yuan fell to 8.8940 to the dollar.

The rupee "will definitely" struggle at open, but we do not