Rupee touches new intra-day low of 84.88 due to rise in crude prices

The local currency settled at 84.87 against the dollar on Wednesday

The Indian rupee depreciated to a new low of Rs 84.88 per dollar on Thursday due to selling in domestic equities and a rise in crude oil prices, according to dealers.

 

Increased demand for the US dollar in the non-deliverable forwards (NDF) market weighed on the local currency. However, the Reserve Bank of India (RBI) intervened in the foreign exchange market via dollar sales which avoided further depreciation, they said.

 

The rupee settled at Rs 84.87 per dollar on Thursday, compared to Rs 84.84 per dollar on Wednesday.

 

Brent crude oil prices rose by 0.35 per cent to $73.78 per barrel. 

 

 

“Indian rupee made a fresh low, though it closed almost flat at 84.8675. Demand from the importers continued to keep the rupee weak as inflows were all getting absorbed. The RBI was seen protecting levels of 84.87/88 but will not change the direction of the pair. The range for tomorrow is expected between 84.70/95,” said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP.

 

Meanwhile, the dollar index was trading marginally lower by 0.1 per cent at 106.22. It measures the strength of the greenback against a basket of six major currencies. Market participants said that the local currency is likely to touch 85 per dollar, a psychologically crucial mark, by the end of the current month.

 

The market expectation is also that RBI’s monetary policy committee is expected to start cutting the repo rate from February, which is expected to weigh on the Indian unit.

 

“Mounting forex pressures and increasing cost of forex intervention will need to be weighed before cutting rates deeply ahead. We do not, for now, rule out a cut in Feb-25, but would be more comfortable taking a firm call closer to the policy window, especially with new MPC in order,” said Madhavi Arora, Chief Economist, Emkay Global Financial Services.

 

“We also keep a watch on unconventional easing measures, specifically the gradual easing of regulatory lending norms ahead, to re-spur the waning credit offtake,” Arora said.

 

The Consumer Price Index (CPI) inflation stood at 5.48 per cent in November, in line with market expectations, reflecting some easing of price pressures.

 

A notable factor contributing to this moderation was the decline in food inflation, primarily driven by a sequential reduction in vegetable prices. However, despite this moderation, food inflation remained at elevated levels due to persistently high prices of edible oils.

 

At the same time, core inflation, which excludes the volatile food and energy components, recorded an increase, signaling underlying price pressures in other segments of the economy.

 

This uptick in core inflation is a matter of concern, as it indicates more entrenched inflationary trends that may require closer scrutiny and potential policy intervention to ensure price stability over the medium term.