Rupee sinks to record low of 92.15

“THE RUPEE’S WEAKENING trajectory stems directly from its correlation with rising crude oil prices.

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If oil prices continue to rise, it will lead to further depreciation,” said Ritesh Bhansali, deputy CEO, Mecklai Financial Services.Bhansali added that though the RBI is intervening, it is not aggressive to that extent. He also does not see much point in depleting reserves at a time when overall sentiment remains negative.

Guara Sengupta, chief economist at IDFC FIRST Bank, attributed the RBI’s calibrated intervention to liquidity management. “When they sell dollars in the FX market, they buy G-secs to manage liquidity. They are not trying to change the direction of the currency but to moderate the pace.”

According to Anindya Banerjee, head of commodity and currency research at Kotak Securities, the key variable to watch is the status of the Strait of Hormuz, a critical artery for global oil shipments. “The longer disruptions persist, the higher oil prices are likely to move, which in turn could push USD/INR further upward”

In the near term, economists expect the rupee to trade in a broad range of 91-93.