Indian rupee, bonds slide as oil surges by record

India’s rupee and sovereign bonds slid after a drone attack on Saudi Arabia’s oil facilities sent global crude prices soaring by the most on record.

The rupee fell 0.9% to 71.5625 per dollar and the benchmark 10-year bond yields climbed nine basis points to 6.73%. Nifty 50 Index futures fell 1% in Singapore.

India imports more than two-thirds of its fuel needs, mostly from the Middle East, making it one of the most vulnerable in the region to a surge in oil prices. The spike come even as benign inflation and a slowing economy has led traders to bet the central bank will add to four rate cuts this year at its meeting in October.

“Current-account deficit economies, which are oil importers, will fare worst,” said Khoon Goh, the Singapore-based head of Asia research at Australia & New Zealand Banking Group. “In this regard, INR, IDR and PHP are likely to underperform. USD/INR, after having fallen below 71 last week, is likely to test 72 again if oil prices stay elevated.”

The increased geopolitical risk concerns overshadows the measures Finance Minister Nirmala Sitharaman announced over the weekend to revive economic growth from a six-year low. The government’s third set of steps in four week include a tax refund program for exporters and a funding window for affordable housing to revive stalled projects.

Brent soared 10% and crude traded in New York added 9% after the world’s largest oil exporter lost about 5.7 million barrels per day of output Saturday following the attack. For oil markets, it’s the single worst sudden disruption ever, surpassing the loss of Kuwaiti and Iraqi petroleum supply in August 1990, when Saddam Hussein invaded his neighbor.

(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)

First Published: Sep 16, 2019 10:21 IST