The local currency closed at 92.46 against the dollar after hitting 92.49 intraday-both all-time lows -mirroring the trend across Asian currency markets. The previous record low was 92.36 hit on Thursday.
For the week, the rupee closed 0.7% lower. It weakened for the second consecutive week as geopolitical worries weighed.
“The rupee will remain under pressure till we see any real sign of de-escalation in the Middle East crisis,” said KN Dey, a currency risk management advisor.
The local currency opened the day at 92.34/35 but immediately came under pressure as the dollar index sustained above 100 levels and Brent crude rose to a 20-month high of $102.73 due to supply disruptions. Iran said the Strait of Hormuz, one of the world’s most important oil chokepoints, would remain closed for ships and tankers.
Crude oil remaining above $100/bbl clouds sentiment l Rising offshore dollar bids stoke inflation concerns l Local unit to face stress until de-escalation signs emerge
“Sustained foreign fund outflows amid heightened risk aversion have kept the rupee under significant pressure,” HDFC Securities senior research analyst Dilip Parmar said.
Foreign portfolio investors sold about $6.55 billion in March alone.The Reserve Bank of India was said to be intervening in the market at the 92.48 level.
The RBI has been intervening and will continue to slow down the fall of the rupee and avoid any undue volatility, but there is a limit to how much it can do, a forex dealer said.
India’s foreign currency reserves fell by $11.7 billion in the week ended March 6 to $716.8 billion, as the central bank likely sold dollars to support the rupee.
“The intervention acts only as a speed breaker. Dollar demand may also arise on account of balance sheet management ahead of the fiscal end,” Dey said.
Dollar demand also increased from importers and traders as the currency fell to a record low, Parmar said. He predicts immediate resistance between 92.50 and 92.70, and support at 92.05.
One-month forwards premium rose to 3.94% while the one-year premium was 2.86%. Traders expect the local currency to breach a fresh low next week if there are no signs of de-escalation of the crisis.
