Rupee Falls to Historic Low of 92.36 as Oil Spikes

The Indian rupee on Monday plunged to a record low of 92.36 against the US dollar due to rise in dollar index, fall in equities and rise in oil prices to almost $120 per barrel amplifying concerns around inflation and external balances. Withdrawal of foreign funds in the domestic equity markets further pressured the rupee.

Forex traders said that the RBI intervention prevented the domestic unit from further weakening. All Asian currencies were lower as the dollar index rose higher towards 100 levels. The Indonesian rupiah and the Philippine peso also hit record lows.

Traders said that the RBI was present before the local spot ‌market opened, helping the rupee rebound slightly from around ‌92.30 to 92.20 in the interbank order matching system. The domestic unit made a high of 92.36 and a low of 92.15 to a dollar before ending the session down 60 paise at 92.32. Brent crude, the global oil benchmark, was trading higher by 15.18 per cent at $106.8 per barrel in futures trade as the war between the U.S.-Israel and Iran intensified. The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.35 per cent higher at 99.33.

Global bond yields also moved higher as rising crude prices intensified inflation concerns. The Indian 10-year yield also rose to 6.75 per cent with one month premiums up 3.75 per cent while the one year rose to 2.87 per cent. For now, the RBI is trying to manage all fronts by compensating for the INR dried up in forex markets with domestic bond buying and has conducted Rs one lakh crore of open market operations.

“The Rupee remains vulnerable to the vagaries of the market as higher oil prices command more buying of the commodity. It closed at its lowest at 92.3275 with consistent market bids on the dollar due to the risk aversion going on in the market. Foreign portfolio investors continued to be sellers on Indian equities and debt while the RBI has been seller of dollars during last week and today. The rupee is expected to stay between 92.00 to 92.50 on Tuesday tomorrow,” said Anil Bhansali head treasury at Finrex Trading Advisors.