On Monday, Indian rupee after opening at 69.75 per US dollar versus the last close of 69.35 was dragged to day's low of 69.88, the lowest level since March 11. The sharp fall in the domestic currency came on the back of surging oil prices And with rising oil prices, there loomed inflationary and fiscal slippages concerns in the Indian economy.
In line, the yield on 10-year government bond also increased due to rising oil prices and stood at 7.4830%.
Here are few facts to know about INR versus US dollar trade:
Global crude price spiked to nearly 6-month high:
Global crude price spiked to nearly 6-month high rate today after news reports, citing sources, suggested that Donald Trump, the US President may ask all importers of Iranian oil to end their purchases or be ready to face sanctions. The move could hit major importers including India and China. Current waivers extended to some of the countries such as India, China and some other nations will end on May 2.
Brent crude, the global oil benchmark, surged in price by more than 3% to over $74 per barrel, the highest intra-day rate in nearly six months.
Increased oil prices to weigh on current account deficit of India:
And as Iran happens to be the country's third largest supplier of crude, the development could hit rupee adversely and in turn weigh upon India's current account deficit situation and also pose a threat to inflation.
Other Asian currencies also trade lower against the US dollar:
Also, oil marketing companies trading weak during the day, with losses of close to 6% have dragged Indian indices lower. Sensex has been trading with losses of more than 250 points.
RBI to conduct dollar swap worth $5 billion tomorrow:
After the success of the first round of dollar swap, the apex bank will engage in another USD/INR buy/sell swap auction for tenure of three years. This will be done to infuse rupee liquidity for longer time. And the mobilized US dollar will get reflected in the RBI's forex reserves for the swap tenure while at the same time will show in forward liabilities of the apex bank.
IFA Global, forex advisory firm noted that "The reaction function of the Reserve Bank of India will be interesting as it has been protecting 70 levels".