Currency experts observed that apprehensions rising crude oil prices could push up the import bill, and narrow the current account surplus, are leading to the rupee’s weakness.
With crude oil prices inching closer to the $85 mark and the greenback strengthening, the rupee on Monday depreciated sharply against the dollar, losing 37 paise to close at a 15-month low of 75.36. This is the first time the Indian currency has closed below the 75 level this year. Bonds sold off for the second straight session on Monday, driving up the yield on the benchmark to 6.345%, up 3 bps over Friday’s close and to the highest levels since April 17 2020.
Currency experts observed that apprehensions rising crude oil prices could push up the import bill, and narrow the current account surplus, are leading to the rupee’s weakness. Last Friday, the rupee had fallen by 20 paise to end at 74.99. Moreover, uncertainty surrounding the impact of the taper by the US Fed on capital flows, is adding to the nervousness. The Fed is expected to start normalising policy, by stopping purchases ofbonds, in November.
Back home, although Reserve Bank of India (RBI) left key rates and its accommodative stance unchanged on Friday, it signalled the start of policy normalization, calling off the G-SAP. Critically, the cut-off rate of 3.99% for the Variable Reverse Repo Rate (VRRR) auction on Friday was higher than expected.
Experts expect the yield on the benchmark to move up to 6.4-6.5% by the end of the year.
The stock markets, however, rallied on; both benchmarks scaled new peaks. The Sensex hit an intra-day high of 60,476.13 and closed 76.72 points or 0.13 per cent higher at 60,135.78 – a new closing high. The Nifty breached 18,000 intra-day and closed at an all-time of 17,945.95.