Rupee Gains as Oil Prices Fall, Inflation Remains a Concern

The Indian Rupee has started the week on a positive note against the US Dollar, driven by falling oil prices. The USD/INR pair dropped to near 95.75 as the Indian currency gained ground due to the correction in oil prices.

The price of MCX Crude Oil contract expiring today (September 21) has fallen 2.7% to Rs. 9,400, which is supporting the Rupee. Economies that rely heavily on oil imports, like India, tend to outperform when oil prices correct.

Oil prices have been under pressure for over a week due to improving hopes of increased energy supply from Saudi Arabia. Strategists at DBS note that oil prices are 'easing a tad' following reports that China has requested Iran's help in rein in Houthi attacks on behalf of Saudi Arabia.

The meeting between US President Donald Trump and leaders from Gulf Nations at the UN General Assembly later today will likely discuss ways to increase energy supply from the Middle East. Meanwhile, India's inflation rate rose 4.8% year-over-year in August, firming price pressures and underscoring the need for a tighter policy bias.