Rupee skids 48 paise as corporates, oil firms rush to buy dollars

Domestic unit has shed over 9% versus the greenback so far in 2022; latest weakness came despite softer dollar index and strength in Asian currencies, led by a firm Chinese yuan

The rupee weakened sharply against the dollar on Monday as purchases of the greenback by corporations and by nationalised banks on behalf of oil importers dragged the domestic currency lower, dealers said.

The rupee settled at 81.80 per dollar on Monday versus 81.32 on Friday, Bloomberg data showed. So far in 2022, the domestic currency has shed 9.1 per cent against the greenback.

The weakness in the rupee on Monday came despite a softer dollar index and strength in Asian currencies across the board, led by a firm Chinese yuan. The dollar index was at 104.47 at 3:30 pm IST as against 104.55 at previous close, Bloomberg data showed.

Dealers said that corporate outflows related to Vedanta’s recent dividend payout and a possible outflow from MSCI (Morgan Stanley Capital International) index stocks had accelerated the rupee’s weakness on Monday, despite the decline in the dollar index.

“We are hearing some flows on account of MSCI-related outflows and some (dollar) demand from oilers (oil companies). Broad dollar and Indian equities were flat. Selling may again come from around 82 per dollar levels,” IFA Global’s CEO Abhishek Goenka said to Business Standard.

On November 30, the rupee had notched up hefty gains versus the dollar as the semi-annual rebalancing of the MSCI India index propelled significant inflows into the currency market, following the inclusion of certain stocks on the index.

With the corporate and importer-related outflows on Monday causing the rupee to weaken past successive technical levels, the losses were aggravated for the domestic currency, traders said.

“Corporate outflows, oil bids, along with several stop losses getting triggered around 81.60 levels pushed the USD/INR pair higher. Irrespective of lower DXY (dollar index) and USD/CNH (dollar-yuan) levels, it did not help rupee as flows continued to dominate the trading session throughout the day,” Kunal Sodhani, vice-president, Shinhan Bank (Global Trading Centre) said.

Crude oil prices rose early Monday as the Organization of the Petroleum Exporting Countries and some other oil producers maintained output aims before a ban on Russian oil by the European Union kicks in later this month. Easing COVID-19 restrictions in China also buoyed oil prices.

Brent crude futures climbed 39 cents, or 0.5%, to $85.96 a barrel early on Monday, Reuters reported. Higher crude oil prices pose an upside risk to India’s current account deficit as the country is a major importer of the commodity.