NEW DELHI: The Indian rupee hit record lows against the US currency on Tuesday after higher oil prices raised concerns of sustained inflation, although intermittent dollar selling by the central bank helped limit losses.
The rupee dropped as much as 0.6 per cent to 78.775 versus the dollar, surpassing a previous all-time low of 78.39 hit last week. Its key equities index, the Nifty 50, also fell 0.4pc.
India imports more than two-thirds of its oil requirements, and higher crude prices add to the country’s trade and current account deficits (CAD) and hurt the rupee by pushing up imported inflation.
“With crude rising yet again, we could see rupee head towards 79-79.50 levels in the next week or so depending on what the central bank does,” a senior trader at a private bank said.
Oil prices rallied for a third day as major producers Saudi Arabia and the United Arab Emirates looked unlikely to be able to boost output significantly, while political unrest in Libya and Ecuador added to supply concerns.
Dealers said the Reserve Bank of India has been intermittently selling dollars via state-run banks to prevent runaway losses in the rupee, but dollar demand in the system was far stronger. Global dollar funding stress is evident through the widening LIBOR-OIS spread, and in the domestic market, RBI’s heavy forwards market intervention has compounded the problem of cash dollar shortage, analysts said. –Agencies
