The rupee has been repeatedly posting record lows in recent sessions on concerns over oil prices, rising Treasury yields, FII outflows and offshore demand for the U.S. currency. The Reserve Bank of India's interventions have not been able to arrest the slide in the rupee, unlike in prior occasions.
“The double whammy of higher US rates and higher crude prices is back to haunt the Rupee. While the RBI was able to defend the Rupee successfully through the last round of simultaneous stress on current and capital account by spending it's Reserves, this time around things are likely to be different. After having exhausted a significant portion of its Reserves, RBI seems concerned about the burn rate of Reserves and appears to be spending them very judiciously. This has resulted in Rupee adjusting and aligning itself with fundamentals and it's peer group currencies," IFA Global said in a note.
In the week through Sept. 30, India's forex reserves declined to $532.66 billion, the lowest since July 2020. Reserves were at $537.5 billion the week prior.
Oil prices eased today, after having extended their rally with a near 4% jump on Friday to five-week highs. An OPEC+ decision to make its largest supply cut since 2020, despite concern about a possible recession and rising interest rates, have boosted crude prices.
“US jobs report that came out on Friday was solid with headline NFP print coming in line with expectations (263k v/s 275k expected). Unemployment rate dipped to 3.5% from 3.7% in August. Wage growth too was healthy at 0.3% MoM and 5% YoY. This disappointed investors who were looking for some signs of weakness in labor markets that could cause the Fed to pivot from its current stance of aggressive monetary policy tightening. This week focus will be on the US September CPI print due on Thursday and FOMC minutes due on Wednesday," IFA Global added.
Indian stock market index Sensex was down about 700 points in early trade.
Data on India's retail inflation, which is expected on Wednesday, likely accelerated to a five month high of 7.30% in September due to surging food prices, a Reuters poll found. A Reuters poll of 47 economists suggested inflation - as measured by the Consumer Price Index - rose to an annual 7.30% in September from 7.00% the previous month. (With Agency Inputs)
