Indian rupee treads water as outflows blunt relief from gold import duty hike

MUMBAI: The Indian rupee was drifting sideways on Wednesday, comforted by a hike in import duties on precious metals even as debt repayment and portfolio outflows continue to trouble the currency.

The Indian rupee was at 95.69 per dollar, modestly weaker from its close at 95.6275 in the previous session.

It had hit a record low of 95.7325 in the previous session, as fading hopes of peace between the U.S. and Iran sparked a fresh leg of gains for oil prices.

While the currency experienced a quick bout of weakness in early trading, the fall was curtailed by dollar sales from state-run banks around the 95.70 mark, two traders said.

On Wednesday, Brent crude was down over 1% at $106.3 per barrel, as investors awaited developments around the fragile Middle East ceasefire and braced for a high-stakes summit in China between U.S. President Donald Trump and President Xi Jinping.

India’s heavy reliance on oil imports leaves the currency particularly vulnerable among emerging markets if the Iran crisis drags on. The country imports about 90% of its oil needs and about 50% of its gas requirements.

Looking to manage the strain, policymakers have turned their attention to crisis-era measures, including exhorting citizens to cut down on consumption that uses up foreign exchange and raising tariffs on imports of gold and silver.

“In an economy heavily dependent on imported commodities, every ounce of gold and every barrel of oil has now become part of the currency story. Technically, the 94.50–94.80 zone is expected to act as a strong support area for USDINR, while 95.70–95.80 remains a crucial resistance,” said Amit Pabari, managing director at FX advisory firm CR Forex.

Elsewhere, Asian currencies were mostly rangebound while regional equities rose.