 "Rupee inches closer to 84 against dollar on high greenback demand")
The rupee hit a new record low of Rs 83.99 against the US dollar on Thursday as oil importers and foreign portfolio investors stocked up on the greenback. The Indian unit closed at 83.98 against the dollar on Wednesday.
However, the Reserve Bank of India (RBI) intervened in the foreign exchange market via dollar sales, which prevented the rupee from hitting the psychologically crucial mark of Rs 84 per dollar, said market participants.
“Rupee makes a new all-time low of Rs 83.99 per dollar as importers, FPIs and oil companies continue buying while RBI ensures that it does not cross Rs 84.00 per dollar, a psychological level,” said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP. “RBI has been intervening in the markets both from the buy side and sell side, thus increasing the reserves which are at a record $682 billion as on 23rd August and keeping the rupee stable at 83.97 for the past 2 months,” he added.
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The overnight fall in crude oil prices limited losses during the day, said dealers. Crude oil prices dropped below $73 per barrel, the lowest since December 2023, amid growing concerns over increasing supplies. A potential agreement to restore oil production could add over 500,000 barrels per day to the market. Additionally, OPEC's plan to increase output in the fourth quarter, coupled with ongoing demand uncertainties in key markets like the US and China, is contributing to the downward pressure on prices.
“The rupee’s decline has largely been driven by global risk aversion, exacerbated by weaker business activity in the US, and an increased demand for the US dollar from importers. Yet, a glimmer of relief arrived in the form of falling crude oil prices towards $72.20 per barrel levels,” said Amit Pabari, managing director at CR Forex.
The Indian rupee was the second-worst performing Asian currency in August, after the Bangladesh Taka, due to strong dollar demand and outflows from domestic equities. It depreciated by 0.2 per cent during August, with only these two currencies experiencing a decline against the US dollar over the month.