On Wednesday, the rupee slipped 21 paise, closing at 95.28 per dollar. The move was a modest decline in a market that has been trading in a narrow band for weeks. The change reflects a confluence of global forces that have tightened the currency's footing.
The U.S. dollar index, a composite measure of the dollar against a basket of major currencies, has risen. A stronger dollar naturally raises the cost of imports for India, feeding pressure on the rupee.
#WATCH | Mumbai, Maharashtra | On Russian crude oil imports and Indian refiners, Anindya Banerjee, Head of Commodities Research, Kotak Neo, says, "...India has been saying it consistently since the start of this war in February that our imports will be totally driven by our energy diplomacy, needs, and interests, and that's what we have been doing. If you look at the import of Russian crude over the 7 months, it has been an interesting journey... Now the world is actually facing a shortage of barrels, and that's what is beginning to impact each and every crude grade. So even the grades which were at a discount are now at a premium to Brent... Wherever we get the cheapest crude, which is on a landed cost basis, that's exactly from where we are sourcing."
Brent crude, the benchmark for global oil, has increased. Rising oil prices increase import bills for India, a net oil importer, and create a demand for dollars to pay for fuel. Banerjee notes that 'elevated oil prices remain a source of underlying dollar demand, while foreign investment flows, the global dollar and the RBI's market operations will influence the pace and direction of currency moves.'
The central bank's market operations, if deployed, would likely involve buying rupees or selling dollars to stem the decline.
Foreign Institutional Investors added equities worth ₹4,240.39 crore on a net basis the previous day. The Reserve Bank of India keeps a close eye on such flows, ready to intervene if the currency slides too far.
RBI Opens Special Dollar Window For Oil PSUs As Rupee Comes Under Pressure Anindya Banerjee, Kotak Securities, To @CNBCTV18News -Rupee can appreciate to 94.50/$ or so in the near term -RBI measures typically have an impact lasting about a week @_prashantnair @Reematendulkar #RBI #Rupee #OilPrices #ForexMarket #BondYields #CNBCTV18Market Watch: https://t.co/IgCX7rd7KX
Traders have said that any intervention by the RBI could support the rupee at lower levels. The central bank's market operations, if deployed, would likely involve buying rupees or selling dollars to stem the decline. Analysts expect the rupee to trade with a slight negative bias in the coming days.
The rupee's path will hinge on the dollar's strength and oil price volatility. As long as the dollar remains firm and oil stays pricey, the rupee may continue to trade on a slight negative bias. Market watchers will keep a close eye on the next few days for any sign of central bank action.
How is the FCNR(B) impact weighing on earnings, and how is ICICI Bank navigating competitive pricing pressures? Shivam Khilar asks Sandeep Batra, Executive Director, ICICI Bank, and Anindya Banerjee, Group CFO, ICICI Bank, on the bank’s Q2 earnings call. #ShivamKhilar https://t.co/3T0VEZZTVi