Rupee hits fresh closing low of Rs 83.28 due to rise in crude oil prices

Brent crude oil prices crossed $90 per barrel on Monday, a 6 per cent increase from Friday, amid escalating geopolitical tensions in West Asia

The Indian rupee hit a fresh closing low of 83.28 against the US dollar on Monday due to the rise in crude oil prices, dealers said. The previous all-time closing low for the rupee was 83.27, on September 18. The Indian currency settled at 83.26 per cent on Friday.
 

Market participants speculated that the Reserve Bank of India (RBI) intervened in the foreign exchange market to protect the rupee from weakening further.
 

State-owned banks sold dollars on behalf of the central bank when the local currency touched 83.28 against the greenback, dealers said.
 

“The rupee is continuously trading in the range of 83.10-83.30 for last few days despite retreat of dollar index from a recent high of 107 to 105.30, as the rising crude prices amid the outbreak of armed conflict between Israel and Hamas group and the risk of escalation of this conflict, which is driving the crude prices higher, is pushing the dollar demand from OMCs and central Bank is containing the volatility through selling of dollars,” VRC Reddy, head of treasury at Karur Vysya Bank, said.
 

The local currency has depreciated by 0.3 per cent in October so far.
 

It depreciated by 1.2 per cent between July-September. On the other hand, it witnessed 0.2 per cent appreciation in the first quarter. Moreover, it appreciated by 0.16 per cent in the first six months of the current calendar year on the back of robust foreign inflows.

Brent crude oil prices traded above $90 per barrel on Monday, after rising 6 per cent on Friday amid rising geopolitical concerns in West Asia. If the crude oil prices near $100 per barrel, the rupee could breach 83.30 a dollar mark, dealers said. Dealers expect that the 83.60 a dollar mark will be the next stop, if the rupee breaches the 83.30 mark.
 

“The RBI could have sold $500 million today,” Anindya Banerjee, vice-president — Currency Derivatives and Interest Rate Derivatives at Kotak Securities, said.
 

“They are protecting 83.30 per dollar level,” Banerjee added.
 

Meanwhile, the higher-than-expected US inflation report spurred investors to anticipate a potential interest rate hike.
 

However, conflicting signals have emerged as some Federal Reserve officials adopt a dovish stance, creating uncertainty about the path of future rate increases. All eyes are now on Powell's upcoming speech this week for further clarity. The US CPI annually and monthly for September came in at 3.7 per cent and 0.4 per cent respectively.
 

According to the CME FedWatch tool, 32 per cent of traders expect the US rate setting panel to deliver a rate hike in December.