Indian rupee is breaching continuously this month makes it the worst month in three years in August. Accompanied by this rupee downfall India's crude oil import also drops as sanctions on Iran will shrink global supplies. The crude import bill for India which has emerged as the world’s fastest-growing oil user rose 76% in July within a year which was earlier amount to $10.2 billion. These circumstances lifted the trade deficit to $18 billion, highest in five years.
Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore regarding this deficit said," Dollar demand for crude heading into Iran sanctions is not helping with rupee pressures.” He further said that Demand for dollars is large, lumpy, and has been on an upward trend given the confluence of rising oil prices and actual demand pick-up for oil.
Indian rupee this year showed up as Asia’s worst-performing currency falling 11% and followed by a chain of record lows. Yesterday the currency slide past 72 against a dollar, after reaching a record 72.1050 a few days back.
Brent, which is the benchmark of many world's nations including India , has surged in excess of 70% from a low set in the middle of last year. It is now trading at $77.45 per barrel, a small amount bellow after it reached $80.50, a three-year high in May.
As stated by Australia and New Zealand Banking Group Ltd. rising oil prices will apparently cause India’s current-account deficit to widen to 2.6% of gross domestic product this financial year, from 1.5% a previous year.
Strategist Rini Sen and head of research Khoon Goh wrote on Wednesday," “With the rupee having reached our year-end forecast of 71.5, the question is how much lower it can go.” They opined that Rupee is still on the expensive side and its present fair value is around 73 per dollar, which suggests it will drop further.
According to many experts, Indian rupee’s recent slide may be attributed to month-end factors related to oil purchases, strong month-end dollar demand, etc.