Rupee ‘absolutely fine’ says Sitharaman as currency grazes 95 amid war jitters

The rupee on Monday breached the 95-per-USD mark in intra-day trade before settling at Rs 94.78 (provisional) against the American currency, as the West Asia conflict entered its 31st day and global markets turned sharply risk-averse.

Union finance minister Nirmala Sitharaman, however, said the country’s economic fundamentals remain strong and insisted the Indian currency is “absolutely going fine” compared with other emerging market peers — a comforting assessment delivered at a moment when the rupee is hovering near historic lows and oil prices are climbing fast enough to keep import bills firmly stressed.

Forex traders said the USD/INR pair swung 165 paise during intra-day trade, reflecting heightened volatility triggered by geopolitical uncertainty and rising crude prices. Brent crude climbed to USD 114.97 per barrel, up 2.60 per cent, as fears of supply disruptions returned to the forefront of global markets.

At the interbank foreign exchange, the rupee opened stronger at 93.62 and rose further to 93.57, gaining 128 paise from its previous close after the Reserve Bank of India moved to tighten currency risk exposure for banks. In a circular dated 27 March, the RBI capped the Net Open Position (NOP-INR) that banks can hold overnight at USD 100 million, with compliance required by 10 April.

The early optimism proved fleeting. The rupee soon reversed course, falling to an all-time intra-day low of 95.22 against the US dollar before closing at Rs 94.78, just 7 paise stronger than Friday’s historic close of Rs 94.85. On Friday alone, the currency had slumped 89 paise.

CR Forex Advisors MD Amit Pabari said global risk aversion remains the key driver of weakness. “At the core of this weakness is the global backdrop. Hopes of de-escalation between the US and Iran faded, bringing back risk aversion. When uncertainty rises, markets shift towards safer assets, strengthening the dollar and weakening emerging market currencies like the rupee,” Pabari told PTI.

The dollar index, which measures the greenback against a basket of six major currencies, remained firm above the 100 mark despite easing marginally by 0.15 per cent to 100.30, indicating sustained global demand for dollar-denominated assets.

Foreign exchange dealers said elevated crude prices continue to exert structural pressure on the rupee, given India’s dependence on imported oil. Rising geopolitical tensions have quickly translated into higher energy costs, widening trade deficits and complicating inflation management — typically not the sort of backdrop associated with currencies that are, in policy phrasing, “absolutely going fine”.

On the domestic equity front, sentiment mirrored currency volatility. The Sensex fell 1,635.67 points to close at 71,947.55, while the Nifty dropped 488.20 points to settle at 22,331.40. Foreign institutional investors sold equities worth Rs 4,367.30 crore on a net basis on Friday, according to exchange data, signalling continued caution among global investors.

Since the start of the West Asia conflict on 28 February, the rupee has depreciated by 4.1 per cent, closing at Rs 94.82 per USD on 27 March. Over the current fiscal year, the currency has weakened by nearly 10 per cent against the US dollar.

Responding to questions in Parliament, minister of state for finance Pankaj Chaudhary reiterated the official line that the rupee is market-determined and influenced by multiple global and domestic factors, adding that both the government and the RBI are keeping a close watch on the currency’s movement — presumably with the same calm that accompanies reassurances that everything is under control.

With PTI inputs