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Rupee slides to fresh low despite cheaper oil, RBI support
Brent crude below $70 and RBI dollar sales fail to stem the rupee's decline as importers and foreign investors drive demand. The next test is the Fed's rate decision.
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The rupee slipped to a fresh low against the dollar on Wednesday, failing to hold gains even as Brent crude fell below $70 a barrel and the Reserve Bank of India sold dollars in the spot market.
Dollar demand from importers hedging payables and from foreign portfolio outflows kept the currency under pressure. The rupee touched its weakest level in months, extending a slide that began earlier in the month.
The RBI has been selling dollars in the spot market and using sell-buy swaps to drain rupee liquidity, traders said. The strategy manages the pace of depreciation rather than defending a specific level. It avoids a sharp drawdown in foreign-exchange reserves.
Cheaper oil typically supports the rupee by reducing India's import bill. Every $5 drop in crude prices saves the country roughly $1 billion in import costs, according to oil ministry estimates. That benefit has been offset by stronger dollar demand from companies and foreign investors pulling money out of Indian equities.