Rupee Hits Record Low as Oil Prices Reach 100 Dollars
The rupee hit a record low of 92.3575 on Thursday as Brent crude reached $100. Central bank intervention helped limit losses as domestic stocks and bonds declined.
Financial markets in India experienced a sharp downturn on Thursday as a renewed surge in global crude oil prices sent the national currency to a record low and pressured domestic equities. The sell-off was triggered by escalating geopolitical tensions that have raised fears of prolonged energy supply disruptions.
Brent crude oil prices reached the $100 per barrel threshold as Iran stepped up attacks on oil and transport facilities in the Middle East. Authorities in the region have warned that global oil prices could potentially double to $200 per barrel if the current volatility persists.
The Indian rupee fell 0.3% to a level of 92.3575 against the U.S. dollar, slightly exceeding its previous lifetime low of 92.3475 set earlier in the week. The benchmark Nifty 50 equity index shed approximately 1%, while the yield on the 10-year benchmark bond rose by 4 basis points. Traders indicated that the rupee's losses were somewhat limited by intervention from the central bank.
Broad-based weakness was observed across Asian markets, with most regional currencies losing ground. A gauge of regional stocks managed by MSCI Inc. declined by more than 1.5% during the session.
Abhishek Goenka, chief executive at FX advisory firm IFA Global, noted that while the Reserve Bank of India is expected to defend the currency at specific levels, its capacity to do so may depend on the duration of the oil price spike.
We expect the RBI to intervene in 92.30-92.35. However if Brent continues to remain elevated for a couple of sessions, the RBI may have to let the rupee go.
