DNA Money Edit: Rupee may fall to 70/$ as crude slips

The rupee is on a high. On Tuesday, it rose 112 paise, its best single-day gain in over five years, to settle at 70.44 against the US dollar as crude oil prices dropped by more than $2 per barrel to $57.20, a 14-month low, and were trading in the $57.20-$58.50 range. This has eased concerns over possible swelling of India's current account deficit (CAD). Sustained selling of the US dollar by exporters and banks ahead of the US Federal Reserve meeting on Wednesday has definitely helped rupee regain its lost ground.

India is keenly awaiting the decision by the Federal Open Market Committee (FOMC) that will give a direction to interest rates in 2019. Donald Trump's repeated exhortations against the Fed raising rates seem to have fallen on deaf ears as the central bank is all likely to raise rates by a quarter of percentage, setting them at a range of 2.25% to 2.5%. Rates in the US continue to be historically low but they are at the highest level in a decade now. Interest rate increases are meant to stem inflation, but Trump is worried that they would slow the economy, posing another challenge to him.

If crude prices remain at current levels or lower, the rupee is probably heading towards 70-levels. This is definitely good news as we bid adieu to a highly volatile 2018.