New Delhi: The Indian rupee dropped to a record low on Wednesday as a sharp rise in global crude oil prices heaped more pressure on the currency, prompting the central bank to quickly intervene to slow its fall. At the Interbank Foreign Exchange (forex) market, the domestic currency dropped 43 paise to 73.34 against the US dollar in the early trade.
The rupee opened lower at 73.26 and weakened further to quote at 73.34 a dollar against its previous closing of 72.91 on Monday.
“The pace of fall in the rupee starts to accelerate as the depreciation matures,” said Anindya Banerjee, deputy vice president, currency derivatives at Kotak Securities. “The RBI is intervening more in the currency derivatives market through forwards and futures than in the spot market.”
Foreign institutional investors (FIIs) sold shares net worth a net of Rs 1,842 crore on Monday, provisional data showed.
Concerns over foreign outflows, oil prices
- Investors remained concerned over sustained foreign capital outflows and soaring crude oil prices that crossed the USD 85 per barrel.
- The rupee Monday tumbled 43 paise to end at a two-week low of 72.91 against the US dollar on steady capital outflows.
- Forex dealers said besides strong demand for the American currency from importers, concerns of fears of rising fiscal deficit and capital outflows mainly weighed on the domestic currency.
- Forex market remained closed on Tuesday on account of Gandhi Jayanti.
- Meanwhile, the BSE benchmark Sensex dropped by 137.62 points, or 0.38 per cent, to 36,388.52 in opening trade Wednesday.
Oil prices have firmed on expectations of tighter supply once US sanctions start targeting Iran’s petroleum industry from next month. Though a strong dollar and rising US crude supply are curbing gains, prices are hovering at the highest levels since November 2014.
In India, the world’s third-largest oil importer, its currency plunge has meant oil prices have risen nearly 50 per cent in rupee terms this year.
Other emerging currencies also weakened while the dollar index was at 95.334 after scaling 95.744 overnight, its highest since September 4.
India’s central bank is widely expected to raise its policy repo rate at a review on Friday in a bid to slow the rupee’s decline and rein in inflationary pressures.
(With agency inputs)