Rupee weakens to 2-month intraday low on crude rally; RBI likely intervenes | Finance News

The rupee weakened to a two-month intraday low on Monday as elevated crude oil prices, driven by the ongoing conflict in West Asia, weighed on the domestic currency, prompting likely intervention by the Reserve Bank of India (RBI) to curb losses, dealers said.

The Indian unit which came under pressure in July, may see limited impact from the foreign exchange inflows data through the concessional swap scheme released by RBI post market hours. This is because RBI still have a large forward book, which will continue to exert pressure on the rupee.

Till July 17, total inflows stood at $20.72 billion, of which FCNR(B) deposit inflows were $17.41 billion.

The local currency settled at 96.45 per dollar, down 0.2 per cent from its previous close, after touching an intraday low of 96.53 per dollar, its weakest level since mid-May. Traders said the RBI likely sold dollars through state-owned banks to limit the currency’s decline.

The intervention, coupled with a pullback in crude oil prices later in the session, helped the rupee recover from its day’s low.

“The Indian rupee commenced the week under pressure, weighed down by escalating geopolitical tensions that catalysed a rally in crude oil prices and risk-averse sentiment. However, anticipated intervention by the central bank successfully capped the currency’s downside,” said Dilip Parmar, senior research analyst, HDFC Securities.

The Indian unit has come under renewed pressure this month following the resumption of tensions in West Asia. In July, the Indian unit fell 1.85 per cent against the dollar. The rupee has fallen 5.67 per cent since the start of the West Asia war in late February.

“The market was tracking crude as it has started inching up again,” said a dealer at a state-owned bank. “The nationalised banks were seen selling dollars,” the person added.

Brent crude briefly traded above $90 a barrel before easing after Iran’s foreign ministry indicated that negotiations with the United States could continue if they aligned with the country’s national interests. However, geopolitical tensions remained elevated after US forces struck Iran for a ninth straight day, while concerns over oil supplies through the Strait of Hormuz persisted following reports that two oil tankers had exploded and become immobilised.