Rupee Falls 45 Paise on Dollar Demand, High Crude Prices
The Indian currency has fallen by 7 per cent to consecutive record lows, including an all-time low of 96.96 per dollar last week
Mumbai: The Indian rupee on Tuesday snapped its three-day winning streak with a sharp 45-paise depreciation to 95.68 per dollar following fresh US military strikes on Iran. Oil prices rose to near $ 100 per barrel following the strikes.
Traders said that the month end dollar demand remained consistent while the RBI support was wavering.
The RBI was seen protecting the rupee at 95.45 level vehemently but suddenly left it after there was heavy dollar demand during the day and oil prices rose. The central bank was again seen trying to protect 95.6150 rupee level for the day, a trader said.
Dilip Parmar, research analyst at HDFC Securities said, “The tumbling Asian currency basket, a wave of global risk aversion, and surging crude prices, ignited by US military strikes, pulled the local currency down. For now, spot USD-INR remains tightly bound, finding a floor at 95.10 and facing a ceiling at 95.86.”
“Overall the trend seems within the range of 95 to 96 for coming days with no particular side holding. Premiums moved higher making hedging for importers costly as one month forward was at 4.36 per cent and one year at 3.29 per cent,” said Anil Bhansali, head treasury at FinrexTrading Advisors.
At the interbank foreign exchange market, the rupee opened at 95.38 per dollar. It touched a high of 96.68 and a low of 95.33 before ending the session at 95.68 compared to its previous close of 95.23, a fall of 45 paise.
Meanwhile the Dollar Index, which gauges the greenback's strength against a basket of six currencies, was steady at 99.07 as markets traded cautious amid hawkish comments from European Central Bank and Bank of Japan officials.
BOJ Deputy Governor Shinichi Himino has stated that the Central Bank is moving towards tighter policy, even as the Middle East crisis complicates the outlook for inflation, bond markets and Japan’s economy. He noted that the BOJ will continue adjusting policy to achieve its inflation target, stably and sustainably.
Meanwhile, the Reserve Bank of India's three-year dollar/rupee buy-sell swap drew strong demand on Tuesday, with the auction receiving bids of nearly $10 billion, almost twice the size of theauction.
The central bank accepted 141 bids at the FX swap auction, with the premium cut-off set at Rs 9.10. It had received a total of 254 bids worth $9.8 billion.
Through the swap, the RBI will defend the rupee by selling dollars from forex reserves. Such a move can remove rupee liquidity from the country's banking system and can push up interest rates. Through the settlement of the initial leg of the swap, scheduled for Friday, theReserve Bank of India will inject rupee liquidity back into the banking system. The swap will be reversed three years later.
The Indian currency has fallen by 7 per cent to consecutive record lows, including an all-time low of 96.96 per dollar last week. FPI outflows stood at $ 23223 million for YTD 2026 and $ 2996 million in May alone.
