Rupee under pressure, slips past 95 per dollar on oil shock – Firstpost

The Indian rupee plunged to a record low against the US dollar on Monday, breaching the 95-mark for the first time as surging oil prices, escalating tensions in West Asia and Prime Minister Narendra Modi’s call for foreign exchange conservation unnerved financial markets.

The rupee weakened to an all-time low of 95.17 against the dollar during intraday trade before recovering slightly to trade around 95.01 by midday. The currency was down about 0.6 per cent on the day.

The sharp fall came after global crude oil prices jumped more than 4 per cent following a breakdown in US-Iran peace negotiations, intensifying fears of prolonged disruptions in energy markets.

Brent crude futures
surged to around $105.7 a barrel in Asian trading after US President Donald Trump rejected Iran’s response to a US peace proposal, calling Tehran’s demands “totally unacceptable”.

For India, which imports nearly 85 per cent of its crude oil requirements, the spike in oil prices immediately raised concerns over widening import bills, higher inflation and pressure on the country’s current account deficit.

The rupee’s slide accelerated after Prime Minister Narendra Modi over the weekend
urged citizens to conserve foreign exchange by cutting fuel consumption, avoiding non-essential imports and postponing discretionary foreign travel and gold purchases.

The remarks were widely interpreted by traders as a sign that the government was increasingly concerned about the strain on India’s foreign exchange reserves amid rising global energy costs.

Indian financial markets reacted sharply to the combination of geopolitical uncertainty and currency weakness.

The benchmark
BSE Sensex fell 1.39 per cent, while the Nifty 50 dropped 1.26 per cent as investors shifted towards safe-haven assets such as the US dollar.

Bond markets also came under pressure, with the yield on India’s benchmark 10-year government bond rising 5 basis points to 7.03 per cent, reflecting concerns over inflation and tighter financial conditions.

Traders said the Reserve Bank of India likely intervened in the foreign exchange market through state-run banks to slow the rupee’s decline.

Market participants pointed to intermittent dollar sales by public sector banks, widely viewed as acting on behalf of the central bank.

However, traders cautioned that the intervention did not appear aggressive enough to fully stem pressure on the currency, leaving room for further weakness if oil prices remain elevated.

Since the outbreak of the Iran conflict in late February, the rupee has weakened more than 4 per cent, while Indian equities and bonds have also seen sustained pressure.