Rupee plunged to its weakest level in over a month to go past the 96 level on Tuesday, weighed down by soaring crude oil prices after renewed hostilities between the US and Iran, even as likely central bank intervention contained deeper losses.
The local currency touched a low of 96.24 to the dollar, its weakest level since May 22, before ending the session down 0.6% at 96.20. The unit opened weak with 33 paise down at 95.95 against the greenback.
Rupee had its worst day on May 20 when it plunged to 96.96 intra-day before settling the trade at 96.83, the worst closing low.
The pressure on rupee mounted after the US called off its truce with Iran over the weekend and said it would take over the oil chokepoint Strait of Hormuz and charge 20% toll from each ship transiting the strait. The move sent oil prices soaring over 10% since Monday and the Brent crude is trading above $87 a barrel on Tuesday. The global oil benchmark rose over 4% to $87 a barrel after the US reimposed a naval blockade on Iran, while renewed attacks between Washington and Tehran heightened concerns over energy flows.
This also had its impact on Dalal Street, which bled through the day, mounting more pressure on rupee, said traders who added that near-term, rupee is likely to remain highly sensitive to oil prices.
Currency traders also said the fall would have been deeper had it not been for the likely dollar sales by the Reserve Bank across the spot and non-deliverable forward markets.
“Rupee underperformed against its Asian peers once again, tumbling to its weakest level in over a month. Surging crude prices, driven by the escalating geopolitical tension, heavily weighed on rupee. Additionally, rising global bond yields may dampen expected inflows into the FCNR-B scheme (which has reportedly netted about $10 billion so far), which will pile further pressure on the rupee,” Dilip Parmar, senior research analyst at HDFC Securities, told TNIE.
In the near-term, he sees the spot-rupee-dollar pair is likely to head towards 96.50, with support shifting upward to 95.80.