Finance
The rupee fell the most in a single day since January 21, as crude oil prices rose in response to growing tensions in West Asia.
The local currency fell amid a broader flight to safe-haven assets and ongoing foreign withdrawals from domestic equities. It was also due to growing concerns that increasing import costs will worsen the trade deficit and put further pressure on the currency.
The rupee finished at 91.48 per dollar, down 0.54 percent from its previous closing of 90.99.
“Triggered by spiking oil prices in the wake of the Iran crisis, the rupee saw its sharpest one-day drop since late January. The currency remains under pressure as investors move towards safe-haven assets. There is foreign capital outflow from equities, and fears grow that costly import will hurt the trade balance,” said Dilip Parmar, senior research analyst, HDFC Securities.
“For now, the rupee-dollar pair maintains a bullish bias, facing a ceiling at ₹92 while expected to find floor around ₹91.10 per dollar,” he added.
So far this fiscal year, the domestic unit has lost 6.57 percent of its value. According to market participants, the RBI intervened in the foreign exchange market by dollar sales, limiting volatility and depreciation beyond ₹91.50 per dollar.
Government bond yields also rose during the day, reflecting foreign outflows and currency weakening.
The benchmark 10-year government bond yield finished at 6.68 percent, compared to the previous closing of 6.66 percent.
“The bond market tracked the crude price surge and weakness in rupee. There is support at 6.70 per cent,” said a dealer at a state-owned bank.
Brent crude oil prices increased to 78.81 per barrel from 72.87. Given Iran’s status as a significant worldwide supplier, markets are intently monitoring any potential supply interruptions. In the near term, this background is projected to put upward pressure on the rupee. However, if the increase is only temporary, conditions should return to normal. The basic case does not account for a substantial disruption in crude supplies or a prolonged conflict.
Source: BS
