After hitting a two-month low on Thursday, the rupee stayed below the $84 mark on Friday as the Reserve Bank of India (RBI) stepped up its intervention in the foreign exchange market to stem the downward slide. The rupee closed almost flat at 83.9688 against dollar, compared with 83.9750 on Thursday.
Market participants believe that the escalation in the Iran-Israel tensions leading to a rise in crude oil prices could put further pressure on the rupee, requiring more frequent interventions from the RBI to stop any big depreciation.
“There will be further risk from hereon (at least, temporarily) because the pressure on the rupee is inevitable given outflows in equities amid global turmoil. The surge in crude oil prices will put pressure on OMCs (oil marketing companies),” a dealer with a state-owned bank said.
Since India imports 80% of its oil requirement, the spike in crude prices will put an inevitable pressure on the rupee. “The RBI will stick to its stand of ensuring that the rupee does not fall very sharply. So, one can expect more interventions from the RBI till things settle down,” said Alok Sing, group head – treasury, CSB Bank.
With adequate forex reserves, the central bank is well placed to sell dollars to curb volatility in the domestic currency market. “The RBI will make sure that it (rupee) doesn’t cross 84/$. It has more than adequate forex reserves. We have imports cover for around 12 months,” said Gaura Sengupta, chief economist, IDFC First Bank.