Rupee hits record closing low at 94.85 as crude surge pressures currency

The rupee fell to a record closing low of 94.85 per dollar, pressured by rising crude prices, foreign outflows and a stronger US dollar

The rupee depreciated by 0.32 per cent on Wednesday to settle at a fresh closing low of 94.85 per dollar, tracking the rise in crude oil prices, and amid consistent foreign outflows. 

 

The Indian unit, which had appreciated in April following regulatory measures to curb speculation, gave up all its gains. Brent crude climbed over 3 per cent to approach $115 per barrel weighing on emerging market currencies. The Philippine peso and Indonesian rupiah also fell to record lows on Wednesday. 

 

Crude oil prices rose as stalled efforts to end the Iran conflict kept the Strait of Hormuz effectively closed, constraining West Asian supplies. Gains were partially capped after the UAE signalled its exit from Opec and Opec+, but prices continued to hover near a one-month high as markets weighed the implications of the Hormuz blockade alongside potential shifts in Opec dynamics. 

 

 

The rupee has depreciated by 5.24 per cent so far in the current calendar. It had settled at 94.55 per dollar on Tuesday “The Indian rupee hit a record low close as rising crude oil prices and a surging US dollar weighed on the currency. Also, the domestic liquidity remained tight as importer demand outpaced supply, while the central bank stayed on the sidelines. We see rupee trading between 94.10 per dollar to 95.15 per dollar with positive bias,” said Dilip Parmar, senior research analyst, HDFC Securities. 

 

The rupee erased its April gains as the impact of the Reserve Bank of India’s tightening of net open position (NOP) limits began to fade. 

 

The curbs had initially supported the currency by restraining speculative dollar positions and tightening onshore liquidity. According to dealers, sentiment shifted after RBI eased some curbs on banks’ arbitrage trades, partly rolling back measures introduced earlier in the month. It withdrew curbs on offering rupee-linked non-deliverable forwards and allowed certain related-party transactions, including cancellation and rollover of existing contracts as well as back-to-back deals.

 

As markets adjusted to the evolving framework, underlying pressures, including elevated crude oil prices and a stronger dollar, reasserted themselves, pushing the rupee back into a weakening trend. Banks are still barred from undertaking all forex derivative deals with related parties, and the $100 million cap on open positions imposed on March 27 continues.

 

“The weakening bias will continue because there is underlying pressure. The rupee was tracking crude in line with other Asian currencies,” said a dealer at a state-owned bank.