The rupee fell to 96.3875 per dollar, eclipsing its previous all-time low of 96.1350. It ended the session at 96.3450, down 0.4% from its closing level on Friday.
The currency has lost 2% in the last seven trading sessions. Traders said that had the Reserve Bank of India not intervened in the market, the losses would have been higher.
Elevated energy prices and weak capital inflows have pointed India to a deficit in its balance of payments (BoP) for the third consecutive fiscal year, straining the rupee. Economists at HSBC forecast a BoP deficit of around $65 billion in the fiscal year ending April 2027.
“The steady distribution of exchange market pressures between currency weakness and FX reserve use should likely continue. Currency weakness, in particular, could help narrow the trade deficit by making exports more competitive and discouraging imports by making them more expensive,” they said in a note on Monday.
Foreign investors have sold more than $23 billion of domestic stocks and bonds on a net basis since March, hurting the capital account at a time when the current account is strained by elevated import prices.
Global selloff
Rising energy prices since the Iran war have fueled inflation fears and prompted a bid by global central banks to raise rates, sending bonds from Tokyo to New York down.
The yield on US 10-year notes hit a 15-month high of 4.631%, Japan’s 10-year yield hit its highest level since 1996, and its Indian counterpart climbed 6 bps. Efforts to end the Iran war appear to have stalled after a drone attack on a nuclear power plant in the United Arab Emirates.
Brent futures are around $110 per barrel.
According to analysts at ING, “Higher oil prices and now a selloff at the long end of the bond market is a double whammy for EMFX and risk assets in general.”
(Reporting by Jaspreet Kalra; Editing by Sherry Jacob-Phillips, Mrigank Dhaniwala and Janan Venkataraman)
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