The rupee fell to an all-time low of 92.3475, with likely dollar-selling intervention by the Reserve Bank of India averting steeper losses. It closed down 0.6% at 92.3275.
Crude oil prices climbed above $100 per barrel, to levels not seen since mid-2022, heaping pressure on oil-importing Asian economies. The Indonesian rupiah and the Philippine peso also hit record lows.
Global equities and bonds also came under pressure, with MSCI’s gauge of Asia Pacific equities down nearly 4% and futures indicating a rough start for Wall Street shares.
India’s benchmark Nifty 50 fell 1.7%, its biggest single-day declinein a month, while the yield on the benchmark 10-year bond rose about 4 bps.
Bonds were down across markets from Tokyo to the UK as investors fretted over inflation risks triggered by elevated crude prices, as the U.S.-Israeli campaign against Iran rages on.
India, for its part, does not expect inflation to rise substantially from a jump in global crude oil prices triggered by the war, Finance Minister Nirmala Sitharaman said on Monday.India’s consumer price inflation stood at 2.75% in January, near the lower end of the central bank’s 2%-6% tolerance band. The rupee, however, is likely to rely on the central bank’s interventions to avoid steep falls.
“The RBI is likely to continue to support INR in the short run … to limit the compounding effects of further INR depreciation on oil import bill,” said Apoorva Javadekar, chief economist at Muthoot FinCorp.
The strain on the rupee was also visible in a jump in dollar-rupee forward premiums, which reflects the cost of hedging against further rupee weakness. The 1-year implied yield rose nearly 20 bps to 2.93%, its highest since December.
