On Tuesday, the rupee fell 35 paise to close at an all-time low of 95.63 (provisional). The fall was caused by renewed tensions between the US and Iran, which has sparked concern in global markets. Forex traders said the market mood was dampened by fears that the 10-week-long conflict could further disrupt global supply. These fears were further heightened after President Donald Trump rejected Tehran’s latest response to the US-backed peace proposal, calling it “completely unacceptable”.
Additionally, market analysts saw Prime Minister Narendra Modi’s comments over the weekend – in which he stressed the need to save fuel and reduce imports – as a tacit admission that India’s trade deficit and balance of payments situation could worsen if crude prices remain high for long. Let’s take a closer look at the key data being seen in the currency markets at this time.
At the interbank forex market, the rupee opened at 95.57 and then fell further to an all-time intraday low of 95.74 against the American currency. Against the dollar, the rupee finally closed at a record low of 95.63 (provisional), 35 paise lower than its previous close. On Monday, the rupee had fallen 79 paise to close at a record low of 95.28 against the US dollar.
Anuj Chaudhary, Research Analyst, Mir Asset Sharekhan said the rupee is expected to trade with a negative bias amid uncertainty over peace talks between the US and Iran, and after Iran rejected the US-Iran peace proposal. He further said that rising crude oil prices and strengthening dollar could drag the rupee further. However, any intervention by RBI could support the rupee at lower levels. The spot price of rupee against the dollar is expected to be in the range of 95.30 to 96.
Dollar and stock market conditions
Meanwhile, the dollar index – which measures the dollar’s strength against a basket of six currencies – was trading 0.33 per cent higher at 98.28. Global oil benchmark Brent crude futures were trading sharply higher on fears of supply disruptions and rising energy costs, rising 3.09 per cent to US$107.43 a barrel.
Talking about the domestic stock market, the Sensex fell by 1,456.04 points and closed at 74,559.24, while the Nifty fell by 436.30 points at 23,379.55.
According to exchange data, foreign institutional investors (FIIs) sold shares worth Rs 8,437.56 crore on Monday.
**PM Modi’s appeal**
In a research note, IFA Global said markets were shaken by a growing realization of the severity of the energy crisis, especially after PM Modi’s advice on Sunday to use fuel wisely and reduce foreign currency outflows. On Sunday, as part of a broader set of measures to boost the economy, PM Modi called for using fuel wisely as well as avoiding gold purchases and foreign travel.
Addressing a rally organized by Telangana BJP in Hyderabad, he suggested reducing consumption of petrol and diesel to save foreign exchange amid the ongoing crisis in West Asia. He recommended increasing the use of metro rail services in cities, carpooling, use of electric vehicles (EVs), using railway services for parcel transportation and working from home. Emphasizing the need to save foreign exchange during this crisis, Modi urged citizens to postpone gold purchases and foreign travel for a year. Trump’s statement
US President Donald Trump said on Monday that the ceasefire with Iran was at its “worst” state and on “large scale life support” – comments that came a day after he described Tehran’s proposal to end the months-long conflict as “completely unacceptable”. Asked about the ceasefire with Iran after rejecting the peace proposal, Trump told reporters in the Oval Office, “It’s at its weakest … After reading the nonsense they sent us … it’s on life support—on massive life support.” Trump added, “They think I’ll get tired of it, or bored, or put under some pressure; but there’s no pressure — no pressure at all. We’re going to absolutely win.”