Mumbai: The rupee plunged to a fresh lifetime low on Wednesday to close at $92.63/$1 after data on Indian crude oil imports showed New Delhi’s latest energy purchases this month cost $111 a barrel on average, pushing refiners and corporates to buy US dollars to help metheir respective commercial commitments.
Traders said the Reserve Bank of India (RBI) was seen protecting the 92.50/$ level for the past three days, but mid-afternoon publication of the oil premium data tilted the scales heavily in favour of the greenback.
Once the rupee breached the 92.50 level around 2.45 pm, there was elevated demand for dollars, pushing the rupee to an intraday low of 92.64.
Brent rose over 6 per cent to touch $109.84 per barrel as of press time. The Indian currency was also tentative in anticipation of the US Federal Reserve’s decision on interest rates.
All eyes on 93 mark
Data published around noon by the Petroleum Planning and Analysis Cell (PPAC) showed that the Crude Oil Indian Basket for March 17 (Tuesday) was $146.09 per barrel. Brent crude oil prices were trading at about $105 per barrel, showed a Reuters report, implying India paid nearly a $40 premium per barrel Tuesday.
For March (until Tuesday), the PPAC data showed, the average price for the Indian crude oil basket was $111 per barrel. The data is published with a day’s lag and traders said the Tuesday premium and high monthly average prices prompted companies to head to the dollar counter.
“The next level to watch out for would be 93/$1. The RBI would be present to fight speculations. But apart from this, I don’t think the central bank would like to burn their reserves if oil prices stay where they currently are,” said Dhiraj Nim, economist and FX strategist at ANZ Bank.
Slippery slope
The local currency has declined nearly 1.7 per cent since the start of the war about three weeks ago. It traded in the range of 92.64/$ and 92.40/$ on Wednesday, and had closed at 92.37/$ on Tuesday, LSEG data showed.
Nim expects the rupee to weaken to 95/$ by May-June if the West Asia hostilities-and the concomitant supply disruptions-drags into the next financial year.
On Wednesday, the RBI supported the rupee during the first half of the trading session but subsequently allowed the currency to breach the 92.50 per dollar level it had defended over the previous four sessions, traders said. They expect the central bank to remain active in the market on Friday as well.
India’s currency and bond markets are closed for a local holiday on Thursday on account of Guddi Padwa.
“Everything now depends on the developments that take place at the Strait of Hormuz, and with the uncertainty, pricing further movements is getting difficult,” said Anindya Banerjee, head of commodity and currency at Kotak Securities. “If things continue as they are, I expect the rupee to be at 93/$1 by month end.”
