rupee: Flaring crude, US yields push rupee to lowest close of 83.44

Mumbai: The Indian rupee closed at a record low Wednesday as both crude oil prices and US bond yields climbed, exerting downward pressure on Asian currencies, while importers showed firm demand for the US dollar, currency traders said.

The domestic currency closed at 83.44 per US dollar on Wednesday, sliding from 83.38 Tuesday. So far in 2024, the Indian currency has depreciated 0.3% against the US dollar.

With oil prices on the rise, dollar demand from refiners intensified, exerting pressure on the rupee. Market interventions by the Reserve Bank of India (RBI) were intermittent, dealers said.

“A weakening Chinese Yuan, an excessive dollar shortage in the system, higher DXY and Brent crude prices and lower forward premiums that deter carry traders and exporters have all contributed to the rupee’s weakness. RBI’s intervention has been intermittent,” said Kunal Sodhani, vice-president, Shinhan Bank.

A break past the 83.48/$1 mark could trigger further depreciation in the rupee toward 83.75/$1 levels, traders said.

Brent crude futures for June gained 0.8% Wednesday, trading at over $90 per barrel, as attacks on Russian oil refineries posed global supply risks, Reuters reported. Higher crude oil prices could widen India’s trade deficit as the country is a large importer of the commodity.

Agencies

Exchange-Traded Derivatives
Following market speculation over the status of hedging norms for exchange traded currency derivatives, the platform for rupee exchange traded options witnessed volatility on Wednesday, with several players scrambling to unwind positions.

In January 2024, the RBI issued directions on hedging of foreign exchange risk effective April 5.

The RBI’s January circular said that authorised dealers shall permit users to take positions up to $100 million for hedging contracted exposure without the need to establish existence of underlying exposure. The central bank said that users must, however, ensure the existence of a valid underlying contracted exposure which has not been hedged using any other derivative contract and should be in a position to establish the same, if required.

Some traders said that previous norms had permitted users to take exchange traded rupee derivative positions of up to $100 million, without specifying the existence of a valid underlying contracted exposure.

Reuters reported on Wednesday that the RBI has not asked brokerages to provide underlying exposure documents for currency derivative contracts and that the requirement for having underlying exposure always existed for all currency derivative contracts.

On Wednesday, open interest for aggregate futures in the dollar-rupee pair for April declined 16.9% while that for the euro-rupee pair plunged 37%, NSE data showed.

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! Secular Times is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – seculartimes.com. The content will be deleted within 24 hours.

Leave a Comment