Despite the initial boost from the steep import duty hike on gold and silver to 15% from 6%, the rupee continued to bleed for the fourth consecutive day and hit a new low of 95.80 before settling at 95.68, marginally lower than the record closing low of 95.63 on Tuesday. Rising crude prices and continuing fund outflows continue to put pressure on the local currency.
Forex traders said possible RBI intervention and duty-led compression of gold imports might have helped moderate further weakness, but the rupee is still pressured by the trajectory of crude and the West Asia situation. Many analysts are seeing the unit testing 96 sooner than later.
The rupee opened marginally stronger at 95.52 compared to Tuesday’s close of 95.63, while gold and silver prices surged over 6% each on the MCX amid continued demand for safe-haven assets after the government hiked the import duty.
The rupee is the worst-performing Asian currency for the year, losing over 6% so far this year, which is on the back of a 9.9% cut last fiscal, as elevated crude prices, a strong dollar and Iran war weigh on investor sentiments. Brent crude continues to hover near $107 a barrel, while WTI crude traded above $101 a barrel, keeping concerns around inflation and the rising fuel import bill.
Dilip Parmar, senior research analyst at HDFC Securities told TNIE that “the rupee weakened for the fourth consecutive session as the dollar continues its steady ascent. Despite the duty hike on gold and silver imports to deter higher purchases, underlying weakness persists amid ongoing foreign capital outflows. In the near term, spot the rupee faces resistance at the 96-mark, with immediate support at 95.30.”
Anil Kumar Bhansali of Finrex Treasury Advisors said the duty hike will help in curbing the CAD directly which in turn can help the rupee to some extent.
