Rupee averts record low on state-run banks' dollar sales; oil worries persist

The Indian rupee was pinned near its all-time low on Monday, averting losses largely on the back of likely central bank intervention, via state-run banks, as hostilities in the Gulf kept oil prices elevated. The rupee closed at 92.42 per dollar, nearly flat on Monday,and in touching ‌distance of ⁠its all-time ⁠low of 92.4750 hit last week.

Brent crude oil futures rose over 1% to $104.5 per barrel, ​with the situation in the Strait of Hormuz remaining a major focus area for ​investors. U.S. President Donald Trump's demands for a coalition to help reopen the key energy artery appeared to have met little success, as allies Japan ​and Australia said they were not planning on ⁠sending naval ‌vessels.

"In FX, the reaction is largely being driven ​by moves ​in oil prices wherein traders are identifying which economies ⁠are more at risk and positioning accordingly," a trader at ​a Singapore-based hedge fund said. India's external balance and government ​finances could be hit if oil prices stay high for an extended period, economists have said. "The surge in oil prices since late February constitutes a significant terms-of-trade shock for the INR, especially at a time when its non-oil trade deficit is also large," analysts at HSBC said in ‌a Monday note. Oil prices have risen over 40% since the war broke out.


HSBC has revised its rupee forecast ​lower to ​92 by end-March compared ⁠with 88 earlier. India's merchandise trade deficit narrowed month-on-month in February, per data released on Monday, but officials have warned that the escalating crisis around the ​Strait of Hormuz could stall key shipments and raise costs for the energy-importing country. In global markets, the dollar index was a tad lower at 100.2 while Asian currencies traded mixed as investors also kept an eye on a string of central bank policy decisions due this week.