With the domestic currency in sight of another significant level of 82 per dollar at the beginning of the final quarter, the rupee crashed as crude prices jumped due to expectations that oil producers would cut production. This raised concerns about even higher inflation and prompted the central bank to adopt more aggressive policy measures.
Oil prices rose by more than 4% after the Organization of the Petroleum Exporting Countries and its partners, sometimes known as OPEC+, said that they would be thinking about reducing supply.
Since India imports more than three-quarters of the oil it needs, the rise in crude oil prices hurt the country’s currency and made people worried that the already tight balance of payments could get much worse.
According to PTI, the local currency fell 49 paisas against the US dollar to close tentatively at 81.89.
According to Bloomberg, the rupee recently traded at 81.89 to the dollar, which is much weaker than Friday’s finish of 81.35 and not too far off its record low of 81.95.
India’s manufacturing growth hitting a three-month low and the domestic bourses collapsing on Monday at the start of October, following a 10% increase in the previous quarter, did not help the rupee.
Reuters says that the Reserve Bank of India probably sold dollars through state-run banks on Monday, when the rupee was getting close to a record low because of rising oil prices and a lack of willingness to take risks.
Two bankers and two brokerage firms confirmed the RBI’s action to Reuters.
One of the bankers told Reuters that the RBI’s intervention on Monday was similar to recent sessions where it has been working to prevent the rupee from falling below 82.
Even the British government’s tax U-turn, which shook the British markets and helped the pound recover all of its losses, didn’t appear to lift people’s spirits.
The battered pound of Great Britain was up around 0.5% at $1.1200 following the UK policy move, and its government bond yields decreased, increasing the price of those bonds.
“It is a positive move from the standpoint of the market. “Markets will need some time to accept the message, but it should lessen the pressure,” Reuters was informed by Jan Von Gerich, Chief Analyst at Nordea. Sterling will probably continue to be under pressure, and questions still exist. The yen briefly fell as low as 145.4 to the dollar, despite Japan’s finance minister, Shunichi Suzuki, promising that the nation would make “decisive efforts” to prevent abrupt swings in the currency.
The price of the yen fell below 145 on Monday for the first time since Japan intervened to defend its currency on September 22 for the first time since 1998.
“People become enthusiastic whenever (dollar/yen) reaches 145. However, sometimes it’s the size of the shift that counts, “OCBC currency strategist Christopher Wong told Reuters. Despite this, he continued, “we remain vigilant and won’t rule out stealth yen intervention if the extent of the yen’s slide grows again, possibly when it breaks 146, using present levels as a benchmark.”
Monday’s Asian trading was light due to holidays in China, South Korea, and certain Australian states.