MUMBAI: The rupee cratered to an all-time closing low of 92.35 against the greenback Monday, shedding 53 paise or almost 0.70%, as crude global prices skyrocketed 28% earlier in the day to sniff at $120 a barrel, coupled with a strengthening dollar amidst the worsening conflict in the Middle East. Though crude retreated later in the day on talk of G7 countries planning to release reserve oils to global market to ease supply curbs, it left no breather for the harried currency.
For the rupee, the previous worst was on March 4 when it had for the first time plumbed below the 92-level, touching 92.32 intra-day. The rupee had lost 18 paise on Friday to close at 91.82.
The latest loss leaves the rupee down by 3.2% this year on the back of the 4.9% shave-off last year and it remains the worst Asian unit for the second year in a row.
Another pain for the rupee was the continuing rip-off of the domestic market by foreign investors, which led to the market losing 1.8% today on top of the 4.5% it lost since the Iran war began 10 days ago.
At the interbank foreign exchange, the rupee opened at 92.32 and rose briefly to 92.15 but kept losing ground through the session before eventually settling at its all-time low of 92.35 (provisional), down 53 paise from its previous close.
Rising crude prices are the biggest risk for the domestic economy as it can lead to higher inflation, lower growth and higher current account deficit, say analysts. Being a net importer of oil -- shipping in as much as 85% of the fuel demand from outside -- the ongoing spike is a big threat to fiscal stability for the country.
Crude prices, which had risen 25% between February 27 when the war began and last Saturday, jumped as much as 28% earlier in the day—marking the biggest single-day rally in 40 years and crossed $119 a barrel. This is the first time since the Russian invasion of Ukraine that oil prices have crossed the $100 a barrel mark and the spike since the Iran war began to total over 53%. But later in the day, the G7 talk of releasing reserve oil led to a 10 percentage fall in the rally though it is still trading over $106 a barrel.
This massive risk aversion had foreign investors dumping domestic equities like hot coal, adding to the pain of the bleeding rupee, which has already lost 3% YTD on the back of a 4.9% plunge in 2025.
Foreign investors have been ripping off the markets since last year when they pulled out $18.9 billion from the secondary markets and continued to do so this year pulling out close to $6 billion YTD, which is adding to the pressure on the rupee.
Brent crude, the global oil benchmark, which had a premium of $4-5 over the US crude (West Texas Intermediate) has been mildly lower that the WTI—another first in recent history.
A weekend note by DSP Mutual Fund warned that if crude goes past $120 a barrel and if our imports are priced at that level through FY27, oil trade deficit could climb to $220 billion, pushing the current account deficit above 3.1% of GDP.
Current account deficit of this kind can lead to significant currency depreciation, heightened inflation and a liquidity crunch, the fund house warned.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.66% higher at 99.64.
Foreign institutional investors sold equities worth Rs 6,030.38 crore on a net basis on Friday, according to exchange data.
Foreigners had pulled out a whopping Rs 21,000 crore (around $2.3 billion) from equities over the past four trading sessions alone. The latest sell-off comes after they infused Rs 22,615 crore into equities in February, the highest monthly inflow in 17 months. Prior to that, they had been net sellers for three consecutive months. They withdrew Rs 35,962 crore in January, Rs 22,611 crore in December, and Rs 3,765 crore in November, according to data from the depositories. The latest outflows occurred during March 2-6, when they sold equities worth about Rs 21,000 crore in the cash market.