Rupee falls to new low against US dollar as oil prices rise

The Indian rupee today fell to a new low of 77.73 against the US dollar as oil prices hit their highest level in nearly eight weeks, according to Reuters. The rupiah finished at 77.45/dollar on Friday. Currency and debt markets closed Monday for a local holiday.

Brent crude futures were trading above $114 a barrel today after rising sharply in the past few days. The benchmark crude oil index gained more than 2% on Monday, after jumping 4% on Friday. Oil has risen more than 50% this year in extremely volatile trade as war in Europe has tightened supplies, while demand outside virus-hit China has increased.

India imports most of its oil needs.

Indian stock markets were trading slightly higher, with all eyes on the listing of state-owned Life Insurance Corp, the country’s largest IPO, due later in the session.

Traders will also be watching for central bank intervention if the currency accumulates larger losses during the session.

FIIs continue to be net sellers for the 8th consecutive month since October 2021, according to Mehta Equities. The FII camp sold shares worth Rs. 32,701 crore mark in the month of May. Also in yesterday’s trading, FII sold shares worth Rs. 1788.90 crore while DII bought shares worth Rs. 1428.40 crore.

“The rupiah could remain under pressure, depending on the strength of crude oil prices. Brent tested $115/barrel on Tuesday morning, its highest since the last week of March. Expected Fed rate hikes, foreign equity outflows and India’s lower GDP projections amid soaring inflation could also weigh on sentiment. However, a slight improvement in risk appetite and a slight recovery in the Chinese yuan could limit the weakness,” said Sriram Iyer, senior research analyst at Reliance Securities.

However, persistent dollar selling by public banks, suspected on behalf of the Reserve Bank of India, capped some of its losses, he added.

Fed Chairman Jerome Powell’s comments later today will be carefully watched to assess any new outlook on the direction of interest rates. (With contributions from the agency)

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Steve R. Hansen