The Indian rupee edged towards a historic low in Wednesday’s trading session, influenced by a surge in dollar demand from local oil companies and the broader weakness observed in Asian currencies.
Closing at 83.4350 against the U.S. dollar, the rupee exhibited a slight decline of 0.06% compared to its previous session’s close at 83.3850, falling just short of its recent historical low of 83.45.
Across Asia, most currencies experienced a downturn, with the Thai baht leading the losses with a 0.3% decline, while the offshore Chinese yuan weakened by 0.1% to 7.26.
During the trading day, importers, particularly local oil companies, significantly increased their demand for dollars, placing pressure on the domestic unit, according to a forex trader at a foreign bank. However, foreign banks intervened by offering dollars in the latter part of the session, helping to curtail the rupee’s losses.
Adding to the turmoil, exchange-traded options of the Indian rupee faced disruptions as brokers requested clients to provide proof of underlying exposure on their derivative contracts or unwind existing positions.
Arnob Biswas, head of foreign exchange research at SMC Global Securities, expressed concerns about the rupee’s near-term outlook, attributing the pressure to the ongoing strength of the dollar and elevated crude oil prices.
The dollar index, reflecting the dollar’s performance against a basket of major currencies, has surged by 3.3% in 2024, currently standing at 104.8. Supported by robust U.S. economic data, including factory orders released on Tuesday, U.S. bond yields have risen, further bolstering the dollar.
Meanwhile, Brent crude oil futures remained close to their highest levels since October, hovering around $89.21 per barrel, fueled by escalating geopolitical tensions that raised apprehensions about oil supply disruptions.
Market participants eagerly anticipate speeches from several U.S. Federal Reserve officials later in the day, including Chair Jerome Powell. These remarks are anticipated to provide insights into the potential timing of interest rate adjustments by the Fed, ahead of the highly anticipated non-farm payrolls report scheduled for release on Friday.
