Nowhere to hide: Rupee breaches the 92 mark again

Mumbai: The Indian rupee weakened 24 paise Wednesday to breach the 92 mark to a dollar yet again at close, mirroring what has now become an all-too-familiar slide in equity assets, after reports emerged of a sustained Iranian blockading of a narrow and crucial waterway that evacuates nearly a fourth of the energy output sold via global shipping routes.

The rupee, which ended Wednesday at 92.04 to a dollar, also retreated due to what traders described as mild central bank interventions.

The rupee had previously closed at 91.80/$1, LSEG data showed.

“The market’s tone today was ‘dollar-bid on dips’, mainly due to the oil-linked dollar demand. Plus, there were foreign investor outflows from equities and geopolitical risk premium from West Asia tensions,” said Kunal Sodhani, head of treasury at Shinhan Bank India.

“Many corporates are seen advancing their hedges due to geopolitical uncertainty and oil volatility. Hedging bias seems to be tilted toward short-tenor forwards of 1-3 months, particularly from importers,” Sodhani said.

Indian equities, which began on a relatively firmer note in the morning, wilted toward the latter half of the day on across-the-board selling across most counters, except energy assets. The Nifty slumped below the 24,000 level yet again, losing nearly 400 points, or more than 1.6%, to 23,866 points.

Indian equities have demonstrated their vulnerability to the energy shortage spawned by the West Asian war, prompting sustained sales of local stock by overseas investors and a consequent slide in the rupee since hostilities began about two weeks ago. Uncertainty over oil shipments through the Strait of Hormuz, and the resulting volatility in crude oil prices, have kept traders on edge. Market participants have refrained from taking speculative positions at this stage, given the lack of clarity on the near-term direction of the currency, participants said.

The rupee is expected to trade between 91.50/$1 and 92.25/$1 on Thursday.

Brent crude oil prices were trading around $93 per barrel, up from $90 per barrel from yesterday. The dollar index too was slightly higher at 99. Foreign portfolio investors sold ₹6,267.3 crores on Wednesday, and ₹4,672.6 crore on Tuesday, BSE data showed.