The Indian rupee staggered to its weakest-ever closing level, bowing to relentless dollar demand fueled by importers, with signs pointing to intervention by the Reserve Bank of India to mitigate the currency’s slide.
Closing at 83.4375 against the U.S. dollar, the rupee showed a marginal dip compared to the previous session’s close of 83.4350. In a tumultuous trading day, it plunged to an unprecedented low of 83.4550, likely prompting swift action from the RBI.
In a bid to stabilize the currency, state-run banks reportedly intervened by offloading dollars, presumably acting at the behest of the RBI, as the rupee breached its prior historical low of 83.45, as indicated by insights shared by five traders.
Further exacerbating the rupee’s woes were soaring crude oil prices, exacerbating concerns about potential disruptions in global supply chains due to geopolitical tensions. Brent crude oil futures surged by 2% since the start of April, peaking at $89.99 per barrel on Wednesday before experiencing a modest decline.
According to Gaurang Somaiya, a foreign exchange research analyst at Motilal Oswal Financial Services, the outlook for the rupee leans towards a mild depreciation, casting doubts on the likelihood of a surge beyond 83.20 in the foreseeable future.
Meanwhile, the dollar index displayed a 0.1% decline to 104.1, extending losses observed from the previous day. Concurrently, most Asian currencies experienced gains, with the Malaysian ringgit leading the charge with a 0.3% increase.
In an April 4 note, ING Bank highlighted that a scenario where U.S. data proves benign enough to facilitate rate cuts by the Federal Reserve could trigger a sell-off in the dollar.
Investor attention now shifts towards forthcoming initial jobless claims data from the U.S. and anticipated remarks from Federal Reserve officials scheduled later in the day.
Federal Reserve policymakers, including Fed chief Jerome Powell, have consistently underscored the necessity for thorough deliberation and data scrutiny before considering any adjustments to interest rates, reaffirming sentiments conveyed in their statements on Wednesday.
According to CME’s FedWatch tool, the likelihood of the Fed maintaining rates at their current level in June has crept up to 41.5%, marking a slight uptick from approximately 38% recorded a day earlier.
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