On October 11, worries over the recent spike in oil prices and the withdrawal of foreign capital from the country’s equities markets caused the Indian rupee to fall to a record low vs the US dollar.
At the latest quote, the rupee was trading at 84.05. It had fallen as low as 84.0525 against the US dollar. The Reserve Bank of India (RBI) has been defending the 84 handle, thus the currency’s drop past it is noteworthy. Just over two weeks ago, the rupee bounced back to close to 83.50. Concerns about a bigger battle in the Middle East have kept oil prices high; thus far in October, they have increased by more than 10%.
Thursday saw a 3.5% increase in the price of Brent crude oil, which was last reported at $79.1 per barrel. In the fiscal year 2023–2024, India purchased crude oil valued at $139 billion, indicating a significant reliance on imports for the country’s crude oil needs.
As of September 27, RBI data shows that India’s foreign exchange reserves reached a record high of $704.9 billion. The RBI recently gave banks informal advice to refrain from placing large bets against the rupee.
It is highly unlikely that the Federal Reserve will lower the benchmark interest rate by 50 basis points in November. The US Federal Reserve may decide not to lower rates at all. That represents a significant shift from a month prior when investors were speculating about whether the decrease would be 25 basis points or 50 basis points.
