The Indian rupee fell to a record all-time low of 96.90 against the US dollar in early trade today, extending a nine-session slide on increasing global and domestic pressure.
The domestic currency decreased 20 paise since the last close, hitting 96.89 on the interbank foreign exchange market, losing more ground. A strong US dollar, rising overseas crude oil prices and high foreign institutional investor (FII) outflows due to political crises in Iran are all weighing negatively on investor sentiment and markets.
Today, the rupee was down 50 paise on an all-time low at 96.70 versus the dollar, marking its eighth consecutive session of declines. Wednesday’s steady decline has been partly due to increased fears in global financial markets, and partly because of continued pressure in India’s external sector. Forex traders said the strong dollar was behind much of the rupee’s decline.
The dollar index, which measures the greenback currency against a basket of robust global currencies, traded at 99.262 on the market today. Another grave threat to the Indian economy has come from soaring crude oil prices. Brent crude futures traded 0.35% lower at around $110.59 per barrel. Higher oil prices usually hurt the rupee, because India relies on most of its crude oil, its import bill and its demand for dollars rise.
Market analysts said heightened hostilities between Iran and the United States have fueled fears about supply disruptions in global energy markets. But investors are cautious; there is still no firm settlement to the geopolitical standoff, which has pushed oil prices high and financial markets topsy-turvy.
Foreign Institutional investors are also net sellers, posting three straight sessions of selling for the first time in a row. According to data on exchange, all FIIs have sold equities in the stock market, amounting to ₹2,457.49 crore on Tuesday, putting further pressure on the rupee and domestic stock markets.
The stock market also registered weakness; most of the benchmark indices fell sharply on Wednesday. In the session trade, the BSE Sensex fell 517.11 points to 74,667.51, whereas the NIFTY 50 declined 152.45 points to 23,475.80. The wider ‘risk-off’ mood across markets prompts investors to favour safer currencies such as the US dollar, analysts say, while those of emerging economies — including the rupee, which remains under pressure are under continuing pressure.
Currency experts did not think crude oil prices would settle, and geopolitical tensions would calm down, saying the rupee would be volatile in the short-term. The market participants are also keeping an eye on the possible RBI intervention for curbs to currency rally-bust the excess swings.
Economists are saying, however, that India’s long-term macroeconomic fundamentals still sit solid, in spite of these near-term headaches given near-term woes. But some rupee and financial markets can feel the external pressure for a while in the coming weeks.
