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Mumbai, May 17
The rupee closed at a record low on Tuesday, but managed to pull back from an all-time intraday low on RBI intervention.
The Indian unit, which closed 12 paise weaker at 77.57 per dollar, weakened as the greenback continued to exhibit strength on expectation that the US Fed will up the interest rates further with crude oil prices trending higher.
Opening gap down at 77.67 against previous close of 77.45, the rupee tested an all-time intraday low of 77.7875. However, RBI pressed dollar sales, ensuring that the rupee does not breach the 77.80 level.
Unsettling financial markets
In the latest monthly bulletin, senior RBI officials noted that clouds of geopolitical conflict in Europe shroud global economic prospects, with risks slanted down.
“Commodity prices remain volatile at elevated levels, and supply chain disruptions got worsened. Inflation pressures have heightened across geographies, and central banks are aggressively tightening monetary policy and liquidity conditions,” they said.
As financial conditions become adverse in response, financial markets are unsettled and volatile, with emerging market economies (EMEs) facing the brunt of a surge in risk averse sentiments among global investors.
The officials emphasised that this is triggering capital outflows and currency depreciation amidst losses of reserves.
IFA Global, in a report, said: “Global crude prices rose on optimism that China would see significant demand recovery after positive signs that the country’s pandemic was receding in the hardest-hit areas.
“The dollar index shed some ground for the third consecutive session, however, continued to trade above the 103 mark.”
The RBI was reportedly on the receiving side. They seem to have sold in spot market and cut long forward positions, the report said.
G-Secs yields rise
Meanwhile, yields of Government Securities (G-Secs) rose due to possible inflationary effects of higher global crude oil prices.
Yields of the 10-year benchmark G-Sec was up about 5 basis points, closing at 7.3656 per cent (previous close: 7.3184 per cent). Price of this security fell 31 paise to close at ₹94.35 ( ₹94.66).
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