Rupee Hits Fresh All-Time Low: Rupee fell face down, price crossed 94, RBI is keeping a close eye…

Rupee Hits Fresh All-Time Low: The Indian rupee fell by 33 paise in early trade on Friday. Reached a new all-time low of 94.29 against the US dollar. In the previous session on Wednesday, the domestic currency had closed at 93.96 against the dollar.

On March 27, the rupee fell amid concerns that the energy supply crisis caused by the West Asian conflict could be prolonged, adding to the pressure on energy-importing economies. Earlier this week, the local currency had reached its previous record low of 93.98. It has declined by about 3.5% since the conflict began late last month. The threat of a prolonged energy crisis has kept oil prices above the $100 per barrel mark, putting pressure on global equities and pushing up bond yields.

Analysts have reduced their growth estimates for India. Some are even speculating that the fallout from the crisis may pose a risk of rising inflation, suggesting that the Reserve Bank of India may raise interest rates in the next 12 months.

Even if the protracted conflict is averted, Bernstein believes there is a strong possibility that the rupee could break the 98 per dollar level this year, with pressure mainly coming from India’s current account balance. Amit Pabari, Managing Director, CR Forex Advisory, said, “While the global fallout from the conflict suggests that pressure to ease tensions is increasing, the path to achieving that outcome is still unclear. If tensions ease substantially, the rupee may recover to around Rs 1 to Rs 1.5. However, until the situation becomes clearer, volatility is likely to persist.”

Traders will also keep a close eye on any possible action by the Reserve Bank of India (RBI), especially with regard to any intervention in the spot and non-deliverable forward (NDF) markets. The RBI has been active in recent sessions to prevent a sharp decline in the currency.