The Indian 50 rupee and 2,000 rupee banknotes are arranged for a photograph in Bangkok, Thailand. (Photographer: Brent Lewin/Bloomberg)

Rupee Closes Below 73/$ Mark For The First Time

The Indian rupee fell past the 73-mark against the U.S. dollar for the first time as surging oil prices and widening current account deficit continued to weigh on sentiment.

The domestic currency fell 0.7 percent to 73.4150 against the dollar in early Wednesday trade, surpassing its previous low of 72.9575.

The rupee dropped more than 0.5 percent today to close at its lifetime low of 73.34 a dollar.

Rupee Closes Below 73/$ Mark For The First Time

Tracking the currency’s weakness, bond yields rose 6 basis points to 8.06 percent from its previous close of 7.99 percent.

Rupee Closes Below 73/$ Mark For The First Time

The currency and bond markets were shut on Tuesday.

The rupee hit a series of record lows against the dollar in the past two months. It depreciated more than 13 percent so far this year—becoming the worst-performing Asian currency, besides Indonesian rupiah and Philippine peso.

“A rally in crude oil prices is expected to put more pressure on the rupee and it may depreciate towards 74 against the dollar gradually,” said Bhaskar Panda, senior regional head-treasury advisory group at HDFC Bank. “However, if oil comes down to $75 a barrel, then the rupee is expected to retract significantly against the greenback.”

Oil prices firmed near the highest level in almost four years on expectations of a tighter market once U.S. sanctions on Iran are effective next month. Concerns over tariff war and an emerging market sell-off in Turkey and Argentina also weighed on investor sentiment.

Traders remained cautious ahead of the Reserve Bank of India’s policy meet scheduled later this week. The Monetary policy committee may raise rates by 25 basis points on Friday, the third time this year, amid a higher crude and the weakening rupee, according to a Bloomberg survey.

The central bank on Monday said it will infuse Rs 36,000 crore via bond purchases this month to meet the festive season demand for funds. The auctions to purchase government bonds as part of the open market operations will be conducted in the second, third and fourth week of October.

“The market has not reacted positively to the steps taken by the government for stability in the rupee as they were perhaps not strong enough to address the key issue of short-term demand,” said Sajal Gupta, head, Edelweiss FX & Rates. Most of the Asian and emerging currencies, Gupta said, are calmer in the past one month. “The market is reacting strongly to Brent crude movements and with the current pace, 75 can likely be seen if crude touches 88-90 levels.”

Also read: RBI MPC Meet: Does India Need Its Own Version Of ‘Operation Twist’ To Protect The Rupee?