The rupee recovered 58 paise on Thursday as the Reserve Bank of India (RBI) stepped in to support the currency after it hit a record low in the previous session.
The currency gained as much as 0.7 per cent, stabilising at 91.5112 per dollar after the Reserve Bank of India sold dollars in both offshore and onshore markets, according to people familiar with the development.
On Wednesday, the rupee had slipped 67 paise to close at an all-time low of 92.16 against the US dollar amid rising global crude oil prices and the intensification of the crisis in the Middle East.
The rupee witnessed one of its steepest single-day declines after the Iranian government decided to shut down the Strait of Hormuz, the critical chokepoint responsible for transporting more than 20 per cent of global oil supply and trade.
Around 60 per cent of India’s crude oil imports pass through the Strait of Hormuz. Once Iran announced the closure, crude oil prices surged sharply, triggering a widespread sell-off among investors in the Indian market.
However, late on Wednesday, US President Donald Trump stated that, due to the ongoing war with Iran, India could fulfil its oil requirements from Russia until the situation stabilises in the Middle East.
Besides, the majority of Asian markets witnessed massive declines owing to the widening crisis in West Asia. The rupee has also faced pressure because the US dollar has strengthened worldwide.
During periods of uncertainty, investors often shift funds into safe-haven assets such as gold, silver, the US dollar, and US government bonds.
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