Rupee breaks 94 as oil surge deepens sentiment hit from RBI FX curb relaxation

A renewed surge in oil prices sent the rupee down past the 94 per dollar mark to its weakest level in more than three weeks on Thursday, deepening the negative sentiment on the currency.

The rupee fell to 94.1525, its weakest level since March 30 in early trading, before paring ‌losses to ⁠94.04, ⁠down 0.26%.

Traders said likely market intervention by the Reserve Bank of India helped the rupee pare losses.


Brent crude futures rose to $106 per barrel on renewed shipping woes in the Gulf, underscoring fragile risk sentiment as a peace deal eludes the U.S. and Iran. [O/R]

The uncertainty has compounded the hit to the rupee following the partial rollback of central bank FX ⁠measures to ‌support the currency, traders said.

The RBI on Monday withdrew restrictions imposed on April 1 that barred banks from offering non‑deliverable ⁠forwards to clients. It also removed curbs on corporates rebooking cancelled foreign exchange contracts.

"Market participants are unsure of the signal from the relaxed regulations, even as fundamentally, the bias on the rupee remains lower," a senior trader at a foreign bank said.

The trader expects the rupee to continue drifting lower and flagged "a non-zero" chance of fresh RBI measures in case the rupee falls ‌past 95 again. The currency had hit a record low of 95.21 in late March.

Global markets, meanwhile, were gripped by the Iran war uncertainty as ⁠well. MSCI's gauge of Asian stocks fell 0.6% while oil-sensitive regional FX declined between 0.3% and 0.8%. [MKTS/GLOB]

"With no quick resolution in sight, risks of more persistent, oil‑driven inflation have risen," MUFG said in a note.

India's rate panel members characterised the Iran war-driven oil price spike as a supply shock and opted to remain on hold to avoid policy mistakes at the central bank's monetary policy meeting earlier this month.