Mumbai: The rupee weakened to its lowest level in more than a month on Monday as surging crude oil prices threatened to push up domestic inflation pressures and aggravate the country’s current account deficit.
Alongside, data showed wholesale price inflation in India accelerated to a five-month high of 6.01 percent in May, which further hurt the rupee and pulled it down intraday to 60.23 per dollar, a level last seen on May 6.
India imports nearly two-thirds of its oil needs, leaving its currency especially vulnerable to price swings. Traders were also seen buying the greenback as they looked to square off their short dollar positions.
“As long as the Iraq crisis continues, this should be the trend for the time being. And, if RBI doesn’t intervene, and the Iraq crisis continues, it will definitely remain below 60 to the dollar,” said Ashtosh Raina, head of forex trading at HDFC Bank.
The central bank is expected to buy or sell dollars to prevent any excessive volatility in the currency.
In recent months, the central bank has been aggressively buying dollars to prevent sharp gains in the rupee from hurting export growth while also building up its foreign exchange reserves.
Traders will now focus on whether the dollar can gain more should the U.S. Federal Reserve provide new hints on the timing of interest rate hikes when it concludes its two-day policy meeting on Wednesday.
For the near-term, traders expect the rupee to trade in a 59.90/60.20 range. In the offshore non-deliverable forwards, the one-month contract was at 60.52, while the three-month was at 61.11.
Bureau Report
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