The rupee on Thursday pared losses after falling past 69 per dollar for the first time as state-run banks sold the greenback on behalf of the Reserve Bank of India, according to traders. “State-owned lenders sold dollars, probably on behalf of the central bank,” said Mumbai based currency dealer on a condition of anonymity. Rupee ended at 68.79, down 0.23% from previous close of 68.63. This was the fourth consecutive sessions when the currency closed lower.
During the day, it hit an all time low of 69.09 a dollar due to further surge in crude oil and sell-off in emerging currencies market amid escalation of trade war between US and China.
India is the world’s third largest oil importer and any spike in crude inflates import bill and disrupts fiscal position. This also accelerates inflation and gives less room to Reserve Bank of India to cut interest rates.
According to Dushyant Padmanabhan currency analyst at Nomura in Singapore, every rise in $10 a barrel in the prices of oil widens the fiscal deficit by 0.1% of gross domestic product and consumer price inflation by 0.6-0.7 percentage point.
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