Rupee slides to eight-week low as Middle East tensions, surging oil weigh on sentiment

Mumbai: The Indian rupee slumped to an eight-week low as risk rebounded to the top of the pile of obstacles for bullishness amid continued hostilities between Washington and Tehran.

The currency traded at an intraday low of 96.23, and closed at 96.20 per dollar, its weakest closing level since May 21. It closed Monday at 95.62.

High crude oil prices, safe-haven dollar demand and a resumption of local asset sales by overseas investors Indian assets pressured the currency, while intervention from the Reserve Bank of India (RBI) helped contain further losses, traders said.


The rupee had traded at a record low of 96.96 on May 20.

It opened at 95.95 on Tuesday and gradually weakened throughout the day, with the RBI intervening around 96.20 levels. Brent crude oil futures climbed over 4% during the day to $87 per barrel, according to Reuters.

It is expected to trade between 95.75 and 96.50 on Wednesday.

"There was continuous safe-haven dollar demand in the market, with oil companies and importers buying. There is also a feeling among traders that actual inflows from FCNR(B) and ECB measures would not be as healthy as estimated," said a trader at a public sector bank.

The weakness comes despite RBIs special forex swap window for fresh FCNR(B) and ECB to boost foreign currency inflows are valid for funds mobilised until September 30. Economists have esitmated total flows to be between $30 billion to $70 billion.

The currency has now depreciated 1.4% in the fiscal year so far.