Finance
The rupee opened weakly and fell to an all-time low of 96.25 in early trade on Monday, as rising crude oil prices, global uncertainty, and a stronger dollar remain key concerns to the domestic currency.
According to forex traders, increased crude oil prices, a stronger US dollar, and continuous geopolitical concerns have all contributed to a difficult environment for emerging market currencies, and the rupee is now plainly showing that stress.
At the interbank foreign exchange market, the rupee opened at 96.19, then plummeted to 96.25 against the US dollar, a 44-paise drop from its previous close.
On Friday, the Indian rupee crashed below the 96/$mark on Friday before closing at an all-time low of 95.81 against the US dollar.
“For now, elevated crude oil prices, global uncertainty, and a stronger dollar continue to remain key risks for the rupee. However, the encouraging sign for markets is that both the government and the RBI have already started taking proactive measures to manage the situation before it becomes more uncomfortable,” CR Forex Advisors MD Amit Pabari said.
Technically, 94.8095.10 is expected to act as an important support zone for USDINR, while 96.0096.50 remains a strong resistance area in the near term, Pabari added.
The dollar index, which measures the greenback’s strength against a basket of six currencies, was trading at 99.32, up 0.04 percent due to simmering Iran concerns.
Brent crude, the global oil benchmark, was trading 1.83 percent higher at $111.26 per barrel in futures trade.
“With the rise in oil prices to beyond $111.50 per barrel, rupee will be affected the most as rising oil prices increases the outflows of US dollar along with the outflows already happening due to FPIs,” said Anil Kumar Bhansali Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
Meanwhile, within days of levying high customs duties on precious metals, the government on Saturday imposed import curbs on silver by putting the metal under a licensed regime for inbound shipments.
On May 13, the government increased import duties on precious metals, including gold and silver, from 6% to 15%. The effective duty (including 3 percent IGST) exceeds 18 percent.
It was hiked to control the outflow of forex by curbing non-essential imports. “Only stoppage of war and reopening of the Strait of Hormuz can bring about a lower demand on the $/rupee pair, else 100 seems to be on the card if RBI does not announce any schemes to increase dollar inflow into the country,” Bhansali added.
On the domestic equity market front, Sensex tanked 833.20 points to 74,404.79 in early trade, while the Nifty was down 234 points to 23,401.70.
Foreign institutional investors were net purchasers for the second straight day on Friday, buying equities worth Rs 1,329.17 crore, according to exchange data.
Meanwhile, India’s currency reserves increased by $6.295 billion to $696.988 billion in the week ending May 8, the Reserve Bank reported on Friday. The total reserves fell by $7.794 billion to $690.693 billion in the preceding reporting week.
Source: BS
