Rupee Falls 65 Paise As Oil Spikes, Dollar Strengthens
RBI deadline-led unwinding of dollar positions drains support, weakens rupee
Mumbai: The Indian rupee on Monday depreciated 65 paise against the dollar, recording its deepest drop in a fortnight as oil prices spiked to above $102.8 per barrel and demand for safe-haven dollars rose after US President Donald Trump ordered a blockade of the Strait of Hormuz.
Traders said that with banks mostly closing out their excessive speculative and arbitrage positions in the forex market (as per RBI's April 10 deadline) to unwind long dollar positions, supportive dollar flows for the currency dried adding to the pressure on the rupee.
At the interbank foreign exchange market, the rupee opened at 93.28 to a dollar, it made a low of 93.41 and a high of 93.28 before finally closing at 93.37 compared to its previous close of 92.72 on Friday, a fall of 65 paise.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was higher by 0.32 per cent at 98.75.
Over the month so far, overseas investors have net sold more than $6.5 billion worth of local stock and bonds, adding to March's $13.6 billion outflow.
Ritesh Bhansali, deputy chief executive officer at Mecklai Financial said, "Crude prices have spiked 8 per cent to $102-103 per barrel, global equity markets are down, and investor sentiment remains negative. The Rupee's performance is inversely proportional to the oil prices. Right now, the Brent crude price that you are seeing is the future prices on the exchange and not the price of physical oil. Brent Crude's actual cost is at $ 120-130 per barrel."
"Till the time we do not see a de-escalation between the US and Iran, physical Brent Crude prices will continue to be quoted at a premium which will have a direct impact on the rupee. We expect the rupee to gradually depreciate to 94 per dollar in the short term in absence of a truce between US and Iran," added Bhansali.
Dilip Parmar, Research Analyst, HDFC Securities, said, "The downward pressure on rupee stems from a spike in crude oil prices after President Trump ordered a blockade of the Strait of Hormuz. All eyes are on the 10:00 AM EST window for potential U.S. Military movement following failed diplomatic talks. Technically, the USDINR pair is trading between a support level of 92.70 and a resistance at 93.65."
