Indian rupee retreats past 92, state-run banks’ dollar sales cushion fall

MUMBAI: The Indian rupee fell on Wednesday as oil prices remained volatile and local stocks slumped, although intermittent dollar sales by state-run banks cushioned the currency’s losses, traders said.

The Indian rupee closed down 0.2% at 92.04 against the U.S. dollar.

India’s benchmark equity indexes, the BSE Sensex and Nifty 50 fell over 1.5% each, leading losses among Asian equities. Oil prices firmed past the $90-per-barrel mark as U.S. and Israel exchanged missile strikes with Iran across the Middle East.

Three vessels have been hit by unknown projectiles in the Strait of Hormuz, disrupting traffic in the vital artery for global energy supplies.

The lingering uncertainty has kept global investors on edge, even as the sharp market swings seen earlier have eased after U.S. President Donald Trump indicated earlier this week that the war could end soon.

The International Energy Agency is also recommending a release of oil from strategic reserves that would exceed 100 million barrels over the first month, Reuters reported on Wednesday.

The volatility in global market, meanwhile, has rippled through Indian corporates’ foreign exchange hedges, prompting importers to step up protections while exporters endure mark-to-market losses on positions taken last month.

At the moment, importers should continue to buy on dips in the dollar-Indian rupee pair, while exporters can lock in partial hedges when the pair moves above 92, according to Finrex Treasury Advisors.

In global markets, the dollar index was a tad higher at 99, while Asian currencies were mixed, as investors closely monitored developments in the Middle East and awaited U.S. consumer price inflation data due later in the day.

“This remains a headline-to-headline trading environment with all focus on assessing the length of the Iran conflict. US CPI today may have a more limited impact than usual,” ING said in a note.