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Rupee Drops 15 Paise to Fresh 15-month Low on Rising Crude, Capital Flight

This is the lowest closing for the rupee since February 7, 2017 when it had settled at 67.41 against the dollar.

PTI

Updated:May 9, 2018, 7:39 PM IST
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Rupee Drops 15 Paise to Fresh 15-month Low on Rising Crude, Capital Flight
Indian Paise. Image for representation only. (Reuters)
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Mumbai: The rupee on Wednesday tumbled to a low of 67.48 before closing at fresh 15-month low of 67.27, down by 19 paise against the US currency, due to growing concerns over surging crude prices and foreign capital outflows.

This is the lowest closing for the rupee since February 7, 2017 when it had settled at 67.41 against the dollar.

Panic dollar demand from importers and traders sent the Indian unit tumbling by a sharp 40 paise to 67.48 in early trade, triggering the central bank's intervention to defend the sinking currency, a currency dealer said.

Some state-owned banks were seen selling dollars aggressively possibly on behalf of the Reserve Bank of India (RBI) which prevented the rupee from falling sharply, the dealer said.

Forex market sentiment wobbled after crude prices surged more than 3 per cent to hit three-and-a-half-year high following the US President Trump's decision to withdraw the US from the Iranian nuclear deal and extend sanctions on the oil producer country.

The Brent North Sea crude touched USD 77.20 dollars — the highest level since November 2014. The West Texas Intermediate hit USD 71.17 which was the highest in more than three years.

Sanctions, if imposed, would take out around one million barrels of crude supply from the market, according to analysts. Some analysts projected crude to touch USD 80 a barrel level due to uncertainty in Venezuela, production cut by Russia-OPEC and drop in US stockpiles.

Later the Brent North Sea was trading up USD 2.10 at USD 76.95 per barrel while the West Texas Intermediate was USD 1.98 at USD 71.04. Adding to pain, a lot of global funds, which had overweight positions on India, are trimming their exposure as sentiment has turned negative amid lofty valuations.

After a brief overnight recovery, the rupee opened with a gap-down at 67.45 against previous close of 67.08 at the Interbank Foreign Exchange (Forex) market. It spiralled down to hit a fresh intra-day low of 67.48 in mid-afternoon deals before regaining some lost ground to end at 67.27, showing a loss of 19 paise, or 0.28 per cent.

The RBI, meanwhile, fixed the reference rate for the dollar at 67.3815 and for the euro at 79.7460.

The yield on the benchmark debt maturing in 2028 shot-up 13 basis points to 7.71 per cent from 7.58 per cent.

Meanwhile, domestic bourses extended their rally for the third straight session with technology stocks leading the charge bolstered by falling rupee value also supported by strong earnings outcome.

The dollar index, which measures the greenback's value against a basket of six major currencies was down at 92.79.

In the cross currency trade, the rupee retreated against the pound sterling to end at 91.41 from 90.58 and also fell back against the euro to finish at 79.93 from 79.60 earlier. The home unit, however recovered against the Japanese Yen to close at 61.33 per 100 yens as compared to 61.55 on Tuesday.

In forward market on Wednesday, premium for dollar edged up due to mild paying pressure from corporates.

The benchmark six-month forward premium payable in September inched up to 101.50-103.50 paise from 101-103 paise and the far-forward February 2019 contract moved up to 233-235 paise from 231.50-233.50 previously.
| Edited by: Ahona Sengupta
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