Stock indian rupee
Another tough day in the currency markets for the Indian rupee, now rated as highly likely to head closer to 83 levels against the dollar. Image Credit: Reuters

Dubai: The Indian rupee is staring at the possibility of dropping to another low of 83 to the dollar today - just days after slipping past 82. At the start of the new week, the INR is at 82.63, in what analysts say is a continuation of the 'free fall' that started on Friday last (October 7).

The rupee had closed Friday at 82.32, and there was no trading over the weekend. Currently, the INR seems to have stabilised slightly, to 82.35-82.40 levels. But the pressure continues, and that's why market watchers are thinking a further slip to 83 or thereabouts.

"It's unlikely that India's monetary policymakers will allow the rupee to keep falling further - the level of decline has been unprecedented," said an FX analyst in Dubai. "Yes, all global currencies are hurting against the dollar, but to slip to 82 and in another three days risk hitting 83 to the dollar requires the Reserve Bank of India to get in and stop this free fall."

Oil price reality

The ongoing rupee decline has much to do with the price of oil after OPEX+ decided to bring down production levels by up to 2 million barrels a day. "Oil's running at $97 a barrel, up more than $10 from the time India announced its latest interest rate hike on September 30," said Krishnan Ramachandran, CEO at Barjeel Geojit Financial Services. "It's oil prices more than anything that's squeezing the rupee at this stage."

On the space available to the RBI to stabilise the rupee, Ramachandran said, "It's not as if they haven't been trying in recent days, and it's clear they have not had much success doing so. What's spooking the markets is the higher oil import bills that India has to spend on - and the dominant share of that is settled in dollars. The Russian oil supply (which is settled in roubles) is only a much smaller component."

India's dollar reserves - which are what the RBI uses each time to intervene on the rupee - is around the $532 billion mark, dropping from the $550 billion plus range in September.