How decline in Rupee can impact MCX Crude Oil and Natural Gas

Commodity OnlineBrent crude oil and WTI crude oil on the NYMEX have been behaving weak for a while. Natural gas on the Globex is trading marginally up. While the said trend reflects in commodity markets here on MCX, one should also look at the way Rupee is trading against USD when assessing impacts on natural gas and crude oil.

With Rupee in free-falling mode weighed against Dollar—as of writing this at 57.917 registering a gain of 0.851 or 1.49%– crude oil and natural gas traded on the MCX have been climbing up. If the weakness in Rupee prevails, both commodities would continue to trade up. It should be noted that experts are predicting a Rupee downfall all the way to 60 against Dollar. That gives a lot of room for both commodities to appreciate, if the fundamentals are also favourable.

MCX crude oil

MCX crude oil for June delivery is trading up by 0.67% up at Rs.5551/barrel. The traded range of the commodity stands at 5519-5562 so far into the day. Support: 5419, 5324; Resistance: 5571, 5628

MCX natural gas

MCX natural gas was seen trading up by 1.27% at Rs.222.90 as of 03.51 PM IST. Support: 217, 214
Resistance: 224, 227.

On the weakness in Rupee

“It is not Rupee depreciating, it is Dollar appreciating”, said V.K. Vijayakmar, Investment Strategist with Geojit BNP Paribas, Kerala, recently, on the current weakness in Rupee against US Dollar.

“Dollar is appreciating primarily due to weakness in Yen,”said Vijayakumar. The Abe government recently introduced Quantitative Easing measures of unprecedented scale. On April 4, 2013 the Bank of Japan declared war against Japanese deflation and said that they would expand their Asset Purchase Program by $ 1.4t USD in value in two years.

That is definitely a lot of Yen; each month would see 7 trillion Yen getting deployed in markets! That would weaken the currency considerably .

This prompted businesses in Japan to buy US Dollar in swathes, by far the safest and best option. This in turn sent the demand of Dollar upwards and caused enhanced selling of Yen. Yen fell from 85 levels to above 100 levels in a short span of time.

Meanwhile forex market strategists at Barclays, “expect USD/JPY to rebound to 103 over the next 3-6 months because they expect it to be a bellwether if the government’s policy for targeting higher inflation is credible. Additionally, they expect the US economy to gain strength in H2, 13 and support market expectations of Fed tapering, leading to broad USD strength.”

Hopefully, a good news for crude oil bulls! Get two days free trial on Mcx Tips which is provided by the Sonictrades.com which is a leading Financial Advisory Company  for uses of brokers & trader. We provide Online Trading, NSE, Forex , BSE, MCX tips, NCDEX and Intraday Tips. All services are provided through SMS and call.