Rupee plunges to fresh record low of 70.74 despite RBI intervention

MUMBAI: The rupee slid further by 15 paise to close at a fresh lifetime low of 70.74 to the dollar due to strong demand for the greenback from oil importers and surging crude oil prices stoking inflation fears.

The local unit dwindled down to hit a historic intra-day low of 70.90 in early trading—a level that was unthinkable only a few weeks ago. However, sporadic intervention by the RBI at various levels limited further losses and triggered some recovery towards the close. At the same time, the bond yield curve also rose dramatically to 7.93%.

Strong month-end demand for the US currency mainly from oil importers along with currency futures expiry related purchases predominantly weighed heavily on the forex market and haunted investor sentiment. Growing fears about rising inflation in the midst of high global crude oil prices and consistent outflow of foreign funds from the domestic equity market also weighed down on the domestic currency.

Crude prices firmed up further on growing evidence of disruptions to supply from Iran and Venezuela and after a fall in US crude inventories. Benchmark Brent crude oil was at $77.65 a barrel in early Asian trade. Foreign portfolio investors (FPIS) sold shares worth ₹1,415.87 crore on net basis on Wednesday, according to exchanges data.

The forex market was nervous after reports highlighted risks of India breaching the 3.3% fiscal deficit target for 2018/19. The rupee has fallen over 10% so far this year against the US dollar, a dealer commented. High Indian bond yields due to worsening inflation outlook also added some amount of pressure.