Indian rupee on brink of record low after crude storms past $100; RBI watched
- The Indian rupee is expected to open in the 96.85 to 96.90 range, traders said, after settling at 96.5725 per U.S. dollar on Thursday
MUMBAI: The Indian rupee faces fresh pressure at Friday’s open and risks slipping past its record low after Brent crude surged above $100 a barrel, amplifying concerns over the economic fallout for the oil-importing Asian nation.
The Indian rupee is expected to open in the 96.85 to 96.90 range, traders said, after settling at 96.5725 per U.S. dollar on Thursday.
That brings the 96.96 all-time low in sight, hit in May.
Brent crude jumped 7% on Thursday to top $100 a barrel for the first time in two months after developments pointed to worsening supply disruptions.
Yemen’s Houthis said they had attacked two Saudi oil tankers in the Red Sea, adding to concerns over supplies that were already strained by a near-halt in trade through the Strait of Hormuz.
The fortunes of both oil and the rupee have reversed in a matter of weeks. Brent was hovering near $70 a barrel about three weeks back, helping the rupee recover toward the 94-per-dollar level and fostering optimism over the currency’s near-term outlook.
That optimism now looks misplaced with the positive sentiment sparked by the Reserve Bank of India’s recent measures to attract capital inflows overshadowed by oil.
India is the world’s third-largest oil importer and remains highly exposed to swings in crude prices.
The slide in oil prices toward $70 a barrel, coupled with the RBI’s steps to attract capital inflows, helped revive debt inflows and slow the pace of foreign selling in equities. The renewed rally in crude threatens to reverse that trend and weigh on the rupee.
RBI support
The RBI has been intervening regularly in the foreign exchange market to cushion the currency against oil-driven pressures. Bankers say those interventions have helped moderate the pace of the rupee’s decline and prevent deeper losses.
The central bank is likely to remain active in Friday’s session, with markets on watch for possible intervention before or shortly after the local market opens to prevent the rupee from sliding to fresh record lows, a currency trader at a private bank said.