Rupee at all-time low, breaches 95 USD mark; Crude oil prices surge to 125 USD per barrel
The continued confrontation is causing severe problems to the economy globally
New Delhi, Apr 30: In worsening developments related to the economic situation, the Indian Rupee today fell below 95 dollars, hitting the all-time low, and the price of international crude surged past 125 dollars per barrel.
The Indian Rupee (INR) opened almost 17 paise weaker today at 95.01 per US dollar and is currently trading at an all-time low of 95.2475.
State Bank of India’s economic research department has cautioned that inflationary expectations could become unanchored amid persistent rupee weakness and volatile capital flows without timely balance of payments (BoP) support measures, including a scheme soliciting funds from the diaspora, better tax treatment for investments in G-Secs, restricting remittances for deposits abroad and reducing the annual LRS (liberalised remittance scheme) limit temporarily in FY27.
“The current rupee depreciation is not in line with India’s macro fundamentals. It is therefore imperative to control the second-round effects. Exchange rate depreciation leads to higher imported inflation.
“Hence, ensuring that inflationary expectations do not get unanchored, we need a structural solution to India’s BOP (balance of payments) deficit,” said Soumya Ghosh, Group Chief Economic Advisor, SBI in a note.
SBI’s ERD economists observed that the exchange rate cannot be construed as a shock absorbing mechanism in perpetuity, as increased levels of uncertainties and volatilities will transform it into a pass-through mechanism of imported inflation seeping through multiple channels, unanchoring inflationary expectations and defeating at times the very purpose of prudent and agile monetary policy making.
It is thus imperative that a comprehensive set of measures are required given that BoP could be negative for the third consecutive year.
Meanwhile, the price of Brent crude oil surged past $125 a barrel early Thursday as confrontation between the US and Iran continued and the Strait of Hormuz remained blockaded.
Brent crude to be delivered in June jumped 6.2 per cent to $125.36 early Wednesday. Brent to be delivered in July rose 3.1 per cent to $113.85.
Before the start of the war in late February, Brent crude was trading around $70 per barrel.
The US has continued its blockade of Iranian ports while the Strait of Hormuz, is closed, pushing oil prices higher. (BVI)
