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/$. The currency pared some of its losses in the final half-hour of trade, likely aided by intervention from the Reserve Bank of India, as the central bank is seen keen to prevent the rupee from closing beyond the psychologically important 95/$ mark, traders said. The rupee had previously closed at 94.85/$

The currency, in what was a very volatile session, traded in a range of nearly 50 paise, between 95.35/$ and 94.86/$, very different from its usual 20-25 paise range.

“The RBI stepped in as the rupee weakened, allowing the currency to trade in the 95.10/$ to 95.35/$ range for much of the session before coming in with heavy dollar sales in the final hour, helping it close at 94.90/$. The move suggests the central bank is keen to prevent the rupee from ending the day beyond the psychologically significant 95/$ mark,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

Elevated crude oil prices remain a key driver of weakness in the rupee, while persistent foreign portfolio outflows are adding to depreciation pressures. Two traders told ET that public sector oil companies do not appear to be fully utilising the line of credit extended by the RBI, resulting in continued dollar demand spilling into the spot market.

“I don’t think the line of credit is being used, because SBI is in the spot market to buy dollars nearly every day. I think it is because oil companies are finding it cheaper to avail dollars from the spot market,” a trader at a public sector bank said.

The RBI had extended an exclusive foreign exchange window for supplying dollars to state-run refiners, likely to offset pressure on the spot exchange rate, ET had 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 have been waiting on the sidelines. Anything below 94.50 would require a significant drop in oil prices, meaning a diplomatic breakthrough at Hormuz, which is not our base case today,” said Anindya Banerjee, head of currency research, Kotak Securities.