Rupee Hits New Intraday Low Of 92.48 On Rising Oil Prices
A stronger greenback, heavy FII selling and weak sentiments in the domestic equity markets further weighed on the rupee, according to forex traders
Traders said that the RBI was present near to 92.48 levels this afternoon ensuring the fall was not steep enough. It has been intervening intermittently in the currency markets to smooth volatility and prevent sharp depreciation.
The rupee weakened to 92.48 per dollar intraday compared to its previous all-time low of 92.3575 hit on Thursday. It closed at 92.4550, down 0.7 per cent for the week and 29 paise weaker for the day.
Global oil benchmarks whipsawed sharply this week, book-ended by an initial rally in Brent crude to $ 120 per barrel before correcting sharply below $90 barrel. Higher fuel costs are already beginning to translate into increased transportation expenses, rising air travel costs, and renewed pressure on LPG supply, gradually affecting household budgets.
Says Radhika Rao, Senior Economist and Executive Director at DBS Bank, “There are three channels of impact for India – risk sentiment, energy pricing, and economic activity, from a prolonged war in the Middle East, with the intensity of fallout to be guided by the duration of the conflict and extent of resultant supply shocks.”
In March foreign portfolio investors (FPIs) sold around $ 6.55 billion while year to date the sale was to the tune of $ 5.622 billion. India’s 10 year yield also moved up by 2 basis points again saved by RBI buying bonds. The one-month premium was at 3.94 per cent while the one-year premium was at 2.86 per cent.
The rupee has also been under pressure from the non-deliverable forwards market, reflected in a persistent arbitrage between offshore and local markets on Friday. A near-tenor dollar-rupee volatility skew rose this week to its highest level since November 2022, signalling heightened appetite to wager against the rupee.
According to SBI Economic Research report, for every $10 per bbl increase in crude oil price, the Current Account deficit may widen by 36 bps in FY27, lead to 35-40 bps rise in inflation and slow economic growth by 20-25 bps in FY27.
