Rupee hits record low of 95.33/$ as oil crosses $125/barrel

The Indian rupee closed at a record low of 94.90 against the dollar on Thursday after touching an all-time intraday low of 95.33/$ on Thursday. The currency pared some of its losses in the final half-hour of trade, likely helped by the Reserve Bank of India’s intervention, as the central bank is seen keen to prevent the rupee from closing beyond the psychologically important 95/$ mark, traders said. The rupee had earlier closed at 94.85/$

The currency, which had a very volatile session, traded in a range of around 50 paise, between 95.35/$ and 94.86/$, a sharp departure from its usual 20-25 paise range.

“The RBI stepped in as the rupee weakened, allowing the currency to trade in a range of 95.10/$ to 95.35/$ for most of the session before coming in with a heavy dollar sell-off in the final hour, helping it close at 94.90/$. The move suggests the central bank is keen to prevent the rupee from ending the day at a significant 9/$ psychological mark of 5/5 dollar.” Anil Bhansali, Head of Treasury, Finrex Treasury Advisors.

Elevated crude oil prices are the main driver of rupee weakness, while continued foreign portfolio outflows are adding to the depreciation pressure. Two traders told ET that public sector oil companies do not seem to be fully utilizing the credit lines extended by the RBI, resulting in continued demand for dollars in the spot market.

“I don’t think the credit line is being used, as SBI is in the spot market to buy dollars almost every day. I think oil companies find it cheaper to get dollars from the spot market,” said a trader at a public sector bank.

The RBI extended the exclusive foreign exchange window to supply dollars to government refiners, which is likely to offset pressure on the spot exchange rate, ET reported in its April 18 edition.

Global oil prices hit a four-year high of more than $126 a barrel on Thursday, according to Reuters.

“94.80/$ is now a meaningful support zone, and anything between 94.50 and 94.80 will see strong dollar buying interest from importers, who are waiting on the sidelines. Anything below 94.50 would require a significant drop in oil prices, implying a diplomatic breakthrough at Hormuz, which is not our base research case,” said Bagener, Head of Currency Coin Research, today. Securities.