The Indian Rupee posted sharp declines, sliding further into the 95 to the dollar levels, weighed by renewed geopolitical tensions, which led to a surge in oil prices. The currency ended Monday’s trade at 95.70 per dollar, down 0.8% from its previous close, marking one of its biggest single-day falls in nearly four weeks.
Despite the spate of measures announced by the RBI on Friday to attract foreign capital, the currency opened on a weak note at 95.32 per dollar, and traders reported that the central bank stepped in to help curb its fall.
“RBI was not in the market to protect the rupee until it fell to 95.70,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP.
Oil prices add to rupee depreciation
Oil prices rose over 4% in early Asian trade on Monday after increased hostilities were reported between Israel and Iran, as both countries fired missiles at each other, weakening market sentiment over the re-opening of the Strait of Hormuz and adding to concerns over supply disruptions.
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Brent crude futures were last quoted around the $94 per barrel mark, while the US contract, West Texas Intermediate, was trading near the $91 per barrel level. The rise in oil prices weighs negatively on emerging market currencies like the Rupee, as oil is predominantly traded in dollars.
“Brent crude surged more than 4%–5% towards the $97 zone, reviving concerns over India’s import bill and inflation outlook,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
FPI outflow and dollar index weigh on rupee
FPI outflow still proves to be a major factor adding to the downside for the currency, as so far this year, foreign investors have pulled out Rs 2.8 lakh crore worth of equities from domestic markets, surpassing the previous year’s record outflow of Rs 1.66 lakh crore.
Last month, foreign investors sold equities worth Rs 32,963 crore, and the sustained selling seems to be continuing this month as well, with FPIs being net sellers of Rs 42,926 crore worth of equities as of June 6.
“These are massive, unprecedented sales by FPIs,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments, in a separate note.
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Uncertainties in the Middle East also boosted the safe-haven demand for the greenback, which was trading near the 100 mark, diverting investors away from emerging market currencies.
Additionally, stronger-than-forecast US employment data pushed the 10-year US Treasury note to its two-week high, limiting the scope for the Indian rupee. Expectations of a rate hike by the US Federal Reserve later in the year have also increased investor caution towards the local currency.
Outlook for Rupee
“The rupee is expected in the range of 95 to 96.00 tomorrow,” added Bhansali.
TOPICSBrent crudecrudeCrude oilFalling Rupee ValueIndian rupeeRBIRupee vs us dollarStrait of HormuzWest Texas Intermediate (WTI) + 0 MoreThis article was first uploaded on June eight, twenty twenty-six, at forty-four minutes past six in the evening. © IE Online Media Services (P) Ltd