Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai, India.(. Photographer: Dhiraj Singh/Bloomberg)

Rupee Closes At A New Low Despite RBI Intervention

The rupee weakened further by 15 paise to close at a fresh low of 70.74 to the dollar due to strong demand for the greenback from oil importers and surging crude oil prices stoking inflation fears.

The local unit depreciated to hit an intra-day low of 70.90 in early trading. Sporadic intervention by the RBI at various levels limited further losses, leading to some recovery towards the close.

Strong month-end demand for the U.S. currency, mainly from oil importers along with currency futures expiry-related purchases, weighed heavily on the forex market and investor sentiment. The rupee has fallen over 10 percent so far this year against the U.S. dollar.

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Growing fears about rising inflation in the midst of high global crude oil prices and consistent outflow of foreign funds from the domestic equity market also hurt the Indian currency. Foreign portfolio investors sold shares worth Rs 1,415.87 crore on net basis yesterday, according to exchanges data.

Crude prices firmed on growing evidence of disruptions to supply from Iran and Venezuela and after a fall in U.S. crude inventories. Benchmark Brent crude was at 77.65 dollar a barrel in early Asian trade.

The forex market was nervous after reports highlighted risks of India breaching the 3.3 percent fiscal deficit target for 2018-19. Also, the benchmark bond yield rose to 7.93 percent amid fears of worsening inflation, adding pressure on the rupee.

The domestic currency opened weak at 70.64 against Wednesday’s close of 70.59 at the inter-bank foreign exchange market. Reeling under heavy dollar pressure, it extended the drop to an all-time low of 70.90 in mid-morning deals before recouping some losses to end at 70.74, weakening 15 paise, or 0.21 percent, for the day.

Also read: Exporters Facing Uncertainty Due To Rupee Depreciation, Says Industry Body