Mumbai, Mar 2 (PTI) The rupee saw a steep loss of 41 paise to settle at 91.49 against the US dollar on Monday after US and Israeli attacks on Iran intensified worldwide risk aversion, setting crude oil prices on fire and demand for the American currency soaring.
Massive selling in domestic equity markets and withdrawal of foreign funds further dragged the Indian currency down, forex traders said.
At the interbank foreign exchange, the rupee opened at 91.23 and touched the intraday low of 91.65 against the greenback. The currency ended the session at 91.49 against the dollar, registering a steep loss of 41 paise from the previous closing level.
On Friday, the rupee lost 17 paise to settle at 91.08 against the dollar.
“Triggered by spiking oil prices in the wake of the Iran crisis, the Indian rupee saw its sharpest one-day drop since late January. The currency remains under pressure as investors move toward safe-haven assets, foreign capital outflow from the equities, and fears grow that expensive imports will hurt the trade balance,” said Dilip Parmar, Senior Research Analyst, HDFC Securities.
Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said the rupee traded sharply weaker as escalating geopolitical tensions in the Middle East and direct US involvement triggered a spike in crude oil prices, putting pressure on emerging market currencies, particularly the rupee, as India is a major crude importer from the Gulf.
“Higher oil prices widen India’s import bill and current account concerns, leading to defensive positioning in the rupee. The positive momentum seen post-budget and after the US-India trade understanding has temporarily faded under global risk-off sentiment,” Trivedi said.
Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan, said the rupee declined nearly half a per cent on risk aversion in global markets after the US and Israel attacked Iran over the weekend.
He said the FII outflows and overnight gains in crude oil prices further pressurised the rupee, which is expected to trade with a negative bias on risk-off sentiments in global markets amid heightened geopolitical tensions.
According to Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, the Reserve Bank of India (RBI) was present at 91.46/47 levels against the greenback, which kept the rupee protected at the 91.50 levels against the US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.82 per cent higher at 98.41.
Brent crude, the global oil benchmark, was up 7.88 per cent at 78.61 per barrel in futures trade.
Analysts said that crude prices soared after the US and Israel launched military strikes against Iran over the weekend.
In the latest strike, the US and Israel forces pounded targets across Iran on Sunday, dropping massive bombs on the country’s ballistic missile sites and wiping out warships. The attack was intensified after the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei.
Experts say that India faces the risk of a sharp increase in its import bill with the rising crude prices in the international market, as the country’s 85 per cent fuel requirement is met through imports.
On the domestic equity market front, the Sensex tumbled 1,048.34 points or 1.29 per cent to settle at 80,238.85, while Nifty tanked 312.95 points or 1.24 per cent to 24,865.70 in early trade.
On Monday, foreign institutional investors offloaded equities worth Rs 3,295.64 crore, according to exchange data. PTI HVA MUS DRR
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