Oil pangs, FX swap window closure drags Indian rupee to two-week low
MUMBAI: The Indian rupee fell to its weakest level in two weeks on Monday as oil prices drifted higher and sentiment was bogged down after the central bank brought forward the end date for its discounted forex swap facility for overseas deposits by a month. The rupee declined 0.2% to end at 95.6025 per dollar, but managed to avoid steeper losses on the back of likely intervention by the Reserve…
Mumbai witnessed the Indian rupee reaching its weakest level in two weeks on Monday, as oil prices rose and central bank sentiment was affected by a shortened forex swap facility for overseas deposits. The rupee dropped 0.2% to trade at 95.6025 per dollar, but a potential Reserve Bank of India intervention prevented more significant losses.
A weaker dollar offered limited relief, as importers continued to buy it, coupled with typical market flows. Brent crude oil futures increased by 1% to $89.2 per barrel, with ongoing Middle East tensions preventing further gains. Although robust dollar inflows from policy measures bolstered India’s balance of payments, totaling nearly $57 billion and pushing FX reserves to their highest in four months, oil price volatility continues to negatively impact the rupee.
Analysts anticipate further depreciation, with the rupee potentially reaching 97 by the end of March 2027 and 99 by the end of March 2028. The RBI is expected to refrain from actively intervening in the foreign exchange market to appreciate the INR, focusing instead on curbing excessive volatility. Global stock markets rose, and the dollar index fell towards two-month lows following weak U.S. economic data, such as an unexpected decline in retail sales, which reduced expectations of an imminent U.S. interest rate hike.
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