The rupee touched a record low of 96.14/$ during the session before recovering to close at 95.96/$, down 20 paise from its previous close of 95.76/$. Dealers attributed the recovery to interventions by the RBI in the final minutes of trading, with the currency managing to close just below the 96/$ level. “As the West Asia war prolongs, we need to acknowledge that it has evolved into a crisis, and that is increasingly being reflected in the rupee,” said Alok Singh, head of treasury, CSB Bank.
Taking Some Pace Off
“There are active discussions around measures to attract direct dollar inflows into the country. I expect these measures to be rolled out over the next 2-3 months. Although, it is difficult to predict which measure the authorities will move on first,” said Singh.
The rupee has weakened 3.08% so far in FY27, having depreciated more than 10% in FY26.
Among the first measures taken to undergird the rupee was the Centre’s decision earlier this week to raise import duties on gold and silver to make bullion costlier. Bullion is among the biggest items of import, after crude oil, for India.
“Every day, we see new lows and the trajectory fully depends on oil prices. At these levels, we are telling importers to hedge as soon as they get exposure,” said Sajal Gupta, head of forex and commodities, Nuvama. “For exporters, we are telling them to hedge near term.”
Gupta, however, expects the pace of the rupee’s decline would slow due to the anticipated, stage-gated measures by the Centre to support the currency.”I don’t think the rupee should weaken much from here and I do not see 97/$ being crossed as quickly as 96/$ was,” Gupta said.
ETMarkets.comThe Dollar Hunt
Indian policymakers are increasingly exploring measures aimed at attracting dollar inflows as pressure on the rupee intensifies. Dealers added that the urgency for such measures has risen substantially in recent weeks, although the authorities are expected to introduce them in a calibrated manner, rolling out one measure at a time, assessing its impact on markets and external flows, and implementing additional steps only if required.
One such step was an increase in the retail prices of motor fuels, announced after a prolonged status quo. However, the impact of these increases on the fiscal math might well be short-lived if the rupee doesn’t strengthen.
“Our calculations show that, even an additional depreciation of Rs 2 in the rupee (from FY27 current average at Rs 94) raises the effective crude oil price, pushing the landed import cost that fully offsets the gains from the current fuel price hike,” State Bank of India (SBI) said in a report Friday. “Thus, the rupee has already approached a critical depreciation threshold, beyond which further currency weakness could substantially erode the intended benefits of domestic fuel price revisions.”
