RBI Steps In As Rupee Weakens
The Indian rupee came under sharp pressure on Monday as rising crude oil prices, the US-Iran deadlock and Prime Minister Narendra Modi’s fuel conservation appeal triggered fresh concerns among traders about India’s external finances.
Rupee Weakens Against US Dollar
The rupee weakened sharply against the US dollar, crossing the 95 mark in early trade before recovering slightly after suspected intervention by state-run banks. Traders said the dollar sales were likely carried out on behalf of the Reserve Bank of India to limit the currency’s fall.
The pressure came as investors reacted to a jump in crude oil prices and concerns that India’s import bill could rise further if global energy markets remain volatile.
Crude Oil Surge Hits Indian Markets
Brent crude prices rose after US President Donald Trump rejected Iran’s latest peace response, reducing hopes of a quick resolution to the West Asia crisis. Since India imports a large share of its crude oil requirement, higher oil prices can widen the current account deficit, increase inflation risks and weaken the rupee.
The currency pressure also spilled into Indian financial markets, with equities declining and bond yields rising as traders reassessed the impact of expensive oil on growth.
Modi Fuel Conservation Appeal Spooks Traders
Modi’s appeal to citizens and businesses to conserve fuel, reduce travel and avoid unnecessary imports added to market anxiety. While the message was aimed at protecting foreign exchange reserves, traders interpreted it as a sign that the government was concerned about the scale of the external pressure.
RBI Intervention Limits Rupee Fall
The RBI is widely expected to use its foreign exchange reserves to smooth excessive currency volatility. However, analysts said the rupee may remain under pressure if crude prices continue to rise and the US-Iran crisis remains unresolved.
