As crude rose above $100 per barrel on March 9, the rupee fell to a new low, ending at 92.34 against the US dollar. As crude surged above $115, the Reserve Bank of India (RBI) probably intervened forcefully to stop the rupee’s decline, according to traders.
The currency closed the previous session at Rs 91.74 and finished at Rs 92.34. Throughout the day, it fluctuated by more than 50 paise. Since the beginning of the month, the benchmark Brent crude has increased by over 20%.
Even desalination and gasoline assets are being targeted in the US-Israel-Iran war, which is currently in its second week and shows no indications of ending. Fears of an oil shock have arisen as a result of the escalating conflict, which has shaken international corporations and caused energy prices to rise nearly daily.
The Brent was trading at about $103, down from its early-day peak of almost $120. Reports that the G7 nations were thinking of releasing 400 million barrels of oil reserves in reaction to a possible shock to the oil supply and price caused this crude to cool.
For India, which imports more than 85% of its energy needs, a higher Brent would be detrimental since it might increase the nation’s currency account deficit.
According to traders, the Reserve Bank of India aggressively defended the rupee last week by allocating an estimated $12 billion across spot and offshore non-deliverable futures (NDF) markets. To lessen the decline, the central bank probably intervened on March 9 as well.
If Brent continues to be under pressure, the rupee may soon drop to Rs 93, which might lead to additional RBI intervention, according to traders.
