Rupee crashes past 92 per dollar for first time as war fears roil markets

Mumbai: The Indian rupee breached the 92/$1 mark for the first time on Wednesday to a record low, mirroring the steepest weekly climb in the fear gauge for equity assets since the initial Covid shutdowns six years ago, as the West Asian war disrupted supplies of oil and industrial gases and compelled investors to buy safe-haven dollar assets.

The rupee fell 69 paise from Monday's closing level of 91.47 to a dollar-at 92.16-and its losses would have been even steeper in the absence of evident, late-afternoon interventions from the central bank, traders said.

"Selling of dollars by the central bank arrested the slide of rupee as the pair traded at a high of 92.31, where we saw slightly aggressive offers," said Sudarshan Nambiar, head of trading, Yes Bank.


RBI Intervention Stems Slide
"The rupee will continue to trade with a depreciation bias amidst the worsened geopolitical scene. Importer hedging will likely add to the pressure on the pair."

Traders said the central bank sold dollars, slowing the pace of depreciation for the local unit, as energy shares bled on Dalal Street on mounting concerns of protracted supply disruptions for both crude oil and natural gas, which fire several smokestack industries along India's west coast.

The rupee had hit its previous record low of 91.98/$1 on January 31, but then managed to defend the 91/$1 mark for most of February after the US-India trade deal announcement.

The rupee was also the worst-performing Asian currency on Wednesday, and has declined over 2% since the start of this calendar year. Traders expect the rupee to trade between 92.00 and 92.50 on Thursday.

Traders said central bank interventions were more frequent near 92.27/$1 to 92.30/$1, just as the spot market was about to close. That helped the rupee erase some losses for the day.

Choke point Hormuz
"As long as crude oil prices remain elevated, the rupee could continue to face depreciation pressures. The key variable to monitor now is the status of the Strait of Hormuz, a critical artery for global oil shipments," said Anindya Banerjee, head of currency and commodity research at Kotak Securities. "The longer disruptions persist, the higher oil prices are likely to move, which in turn could push USDINR further upward."

A Reuters report citing data from the US Energy Information Administration showed that the Strait of Hormuz had a minimum 27% share in the global maritime oil trade for the five years between 2020 and 2024.

Brent crude oil prices were trading at $83 per barrel, according to Reuters, having climbed from around $70 a barrel before the weekend attacks that felled the Iranian leadership.

A rise in crude oil prices is detrimental to inflation in India as imports make up nearly four-fifths of the country's oil consumption.

Meanwhile, yields of the 10-year benchmark bond, which opened at 6.72%, later softened to close at 6.67%, unchanged from its previous close.