Rupee Tumbles As Oil, Dollar Rally on Iran-Israel Tensions

Mumbai: The Indian rupee on Friday fell to a low of 86.22, a loss of 62 paise intraday before recovering to 85.9350, driven by a sudden surge in crude oil prices and heightened geopolitical tensions following Israel’s strikes on Iran’s nuclear facilities. Brent crude jumped over 11 per cent during the day, raising concerns over India’s import bill, inflation outlook and current account deficit. While the RBI was seen intervening in the forex market at 86.22 levels to curb volatility, it was not aggressive enough.

At the interbank foreign exchange, the rupee opened at 86.13 against the greenback and traded in the range of 85.92-86.25 before closing at 86.08 (provisional), down 48 paise from its previous close of 85.60.

Most Asian currencies slid sharply on Friday as the U.S. dollar surged amid a global shift toward safe-haven assets, triggered by Israel’s large-scale strikes on Iranian nuclear and military targets. In Asia, the South Korean won (KRW) led losses, with the USD-KRW pair jumping more than 0.99 per cent to 1369 as geopolitical risk dampened regional sentiment. The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.33 per cent to 98.24.

Says Anil Bhansali, head of treasury at Finrex Treasury Advisors, “Oil prices are a concern as an increase of $ 10 increases India’s trade deficit by $ 12 billion and CPI inflation by 50 bps. Rupee has been vulnerable to all major currencies, making new lows against the Euro, British Pound falling against the others, despite being up by almost Rs 2 against the dollar. FPIs continued to remain sellers of equity and buyers of dollars while oil companies bought dollars on rising oil prices.”

“If tensions come down, we can see the rupee back to 85.58-85.60, but if tensions rise, then we could see the rupee weakening further. RBI will continue to protect but not let the direction go away,” added Bhansali.