The Indian rupee has finally broken the deadlock, breaching the 96-mark against the US dollar. This is a fresh low for the local currency, which has been in under pressure since the Iran war and has been one of the worst-performing currencies in Asia.
Rupee is currently trading at 96.14 against the greenback.
Rupee's fresh low of 96 is a signal that India's macro risk premium is being repriced, with the pressure coming in from various sources including firm crude prices, a strong dollar, elevated US yields and weaker foreign flows, according to Harshal Dasani, Business Head at INVAsset PMS.
"This matters because currency weakness quickly feeds into imported inflation, corporate margins and market sentiment," he said.
"Equity markets may not react uniformly. Export-oriented sectors can get some translation benefit, but oil-linked, logistics-heavy and discretionary businesses could face margin pressure if the rupee stays weak. Banks may see some treasury volatility, though stronger lenders with stable deposits and better pricing power remain better placed," he added.
Dasani expects RBI can soften the blow but it cannot fully offset global strength and crude pressure at the same time. Therefore, unless the global scenario cools off, the rupee's weakness warrants caution.
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