Rupee Hits Record Low Of 96.40 Per Dollar

anticipation of prolonged elevated interest rates. Additionally, elevated energy prices and sustained dollar strength, continue to intensify pressure on India’s import bill, inflation outlook and
broader macroeconomic stability.

The benchmark 6.48 per cent 2035 bond yield rose about 7.5 basis points to 7.1427 per cent, hovering around a six-week high, nearing its highest in two years. Bond prices move inversely to yields.

Brent crude neared $110 per barrel amid ongoing tensions in the Middle East and disruptions to shipping flows through the Persian Gulf. For India, which imports close to 90 per cent of its crude oil
requirements, the sustained rise in oil prices sharply worsened concerns over the country’s external balances and inflation outlook.

India’s trade deficit widened to $28.4 billion in April, significantly above expectations while Wholesale price inflation accelerated sharply to 8.3 per cent y/y in April from 3.88 per cent previously, far exceeding market expectations.

A weakening rupee is impacting the common man as his everyday expenses have started to rise. Already fuel prices have increased and last week milk prices were increased by Rs 2 per litre across the country. Many experts believe that there could be more fuel price hikes in the coming weeks.

Explains Ponmudi R, chief executive officer, Enrich Money, “A weak rupee silently acts like inflation for the common man. What becomes expensive are imported essentials — fuel, cooking gas, electronics, mobile phones, laptops, foreign travel, education abroad, and products
dependent on imported raw materials. Since India is a major crude oil importer, a weaker rupee can gradually increase transportation costs and eventually impact everyday expenses from groceries to household goods.”

“At the same time, what becomes relatively cheaper or more competitive are Indian exports and services. Sectors such as IT services, pharmaceuticals, textiles, manufacturing exports, and tourism can benefit because foreign buyers get more value for their currency. For the common man, however, the immediate effect is usually felt more on the cost side than the benefit side, because imported inflation reaches households faster than export gains.”

The strong US dollar at 99.15 kept rupee lower as RBI stepped in at 96.34 to calm down the market which was biddish for the dollar. The rupee has become Asia’s worst performing and in the last two years has fallen by more than 15 per cent while the other underperformers like the Indonesian Rupiah has fallen by 8 per cent though both are at their lowest. Inflows are the biggest requirement to arrest the rupee’s slide.

“The RBIs support to the rupee has been just to slow down the fall as it has allowed all levels to be breached consistently. For tomorrow, the range will be between 96.00 to 96.75 unless we see some
developments on the Iran front or fresh steps being taken by the RBI/government to control the fall,” said Anil Bhansali, head treasury at Finrex Trading Advisors.



“Going forward, the trajectory of crude oil prices, US monetary policy expectations, and the RBI’s ability to stabilize the rupee are likely to remain the key drivers for Indian financial Markets,” said a
currency expert.

At the interbank foreign exchange market, the rupee opened at 96.16, it made a low of 96.40 and a high of 96.11 before closing the day at 96.34, down 38 paise compared to its previous close of 95.96.
Meanwhile, Brent crude futures, regarded as the global benchmark for oil prices, rose 0.65 per cent to USD 109.97 per barrel.

India has moved silver imports to the restricted category from free. This means one needs to have genuine underlying exposure and permit to import. It is intended at curbing investment related demand. However, these measures aimed at containing the import bill, offered only limited relief and have failed to halt the depreciation trend.