MUMBAI: The rupee breached the 94 level for the first time to close at 94.81 per dollar after hitting a record low of 94.84, down about 4% since late February and 11% in the current fiscal year, recording its worst fiscal year performance in more than a decade.Many analysts expect oil prices to remain above $100 per barrel for several weeks, which will lead to higher import bills and inflation. Traders said pressure on the rupee was driven more by heavy selling by foreign investors than conflict in West Asia, where outflows exceeded $13 billion this month, an all-time high.
“More than the West Asia war, the pressure on the rupee is coming from heavy selling by institutional foreign investors, which has already exceeded more than $13 billion this month.
Which in itself is an all-time record. In case of calm, there will be a correction of at least 2%. Inflows of $4.4 billion are also expected from the financing deal between Mitsubishi and Shriram. “This will severely reinforce the rupee’s decline,” said KN Dey, a forex consultant.Local stock markets fell sharply, while benchmark bond yields rose to multi-month highs, reflecting tightening financial conditions.
Foreign investors accelerated the pace of outflows from local stocks and bonds amid growing concerns about inflation, currency weakness, and external imbalances.Growth expectations have been revised downward, while expectations for interest rate hikes over the next year have strengthened. The government has reduced customs duties to keep fuel prices under control, but this move is expected to put pressure on the fiscal deficit and increase borrowing.
reconnaissance
How concerned are you about the impact of rising inflation on the economy?
Despite some signs of de-escalation, the currency remains under pressure amid ongoing global uncertainty. “The rupee is expected to trade in a weak range between 93.25 and 94.25, with the bearish bias likely to continue until there is clear progress in the Iran peace talks,” said Jatin Trivedi, analyst at LKP Securities.