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The Indian rupee breached the 96 mark against the dollar for the first time in nearly eight weeks as the currency hit an intraday low of 96.10 per dollar in Thursday’s intraday trade. The domestic unit came under pressure as the US Federal Reserve raised key interest rates by 25 basis points, which further pushed the dollar index to its one-month high.
However, the currency recovered from its lows to close at 95.93 per dollar, nearly flat from its previous close. Traders said that state-run banks likely sold dollars on the Reserve Bank of India’s behalf, which helped cushion the rupee’s fall.
“Indian rupee fell to 96.10 per dollar after the Fed hiked rates and became hawkish with expectations of more rate hikes in the current year; however, RBI intervention, NSE IPO inflows and FTSE rebalancing fund inflows took it higher to 95.78,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors.
RBI not comfortable at 96/$
The domestic unit breached the 96 mark for the first time since July 24, after the Fed raised interest rates for the first time in three years. The US central bank also signalled another rate hike before year-end, which lifted the dollar index and weighed on Asian currencies. A firm dollar makes emerging market currencies like the rupee less appealing for foreign investors.
“Price action signals that the central bank is not comfortable with the rupee falling past 96, so that could remain a key support level in the near term,” Reuters quoted an FX salesperson at a foreign bank as saying.
Additionally. RBI conducted open market operation (OMO) sales worth Rs 50,000 crore in a bid to absorb excess rupee liquidity from the banking system. This further helped the currency rise above the crucial 96 per dollar mark. The central bank had announced OMO sales worth Rs 1 lakh crore in three tranches to manage the surplus liquidity in the system.
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Crude oil witnesses sharp correction
Crude oil futures fell more than 3%, with Brent crude futures quoted around the $102/bbl mark. Oil prices retreated from their four-month high levels as reports emerged that Saudi Arabia may reroute additional oil shipments through Oman. Also, the US signalled that the East-West pipeline may resume operations.
This helped cap additional declines for the domestic currency as India is a net oil importer. A fall in oil prices helps ease pressure on the country’s import bill and narrows its current account deficit.
Outlook uncertain on geopolitical uncertainties
Currency market experts note that the Indian rupee is likely to trade in negative territory, driven by geopolitical uncertainties, as the US House of Representatives passed a bill authorising US President Donald Trump to impose 100% tariffs on India and other countries purchasing oil and gas from Russia.
“The range for tomorrow is expected to continue between 95.75 to 96.25. The premiums were paid today as RBI did sell/buy swaps to absorb liquidity,” Pabari added.
As per NSE data, foreign investors were net sellers of domestic equities worth Rs 11,363 crore as of September 17.
TOPICSFalling Rupee ValueIndian rupeeRBIReserve Bank of IndiarupeeRupee vs us dollarUS Federal Reserve + 0 MoreThis article was first uploaded on September seventeen, twenty twenty-six, at thirty-nine minutes past six in the evening. © IE Online Media Services (P) Ltd