Indian rupee plunges on surging dollar demand

The Indian rupee plunged by 24 paise to close at 75.60 against the US currency on Monday as geopolitical tensions pushed investors to the safe-haven appeal of the greenback.

Forex traders said muted Indian equities and elevated crude oil prices weighed on the rupee on the back of a widening trade deficit.

The country’s trade deficit is expected to widen to $190 billion in the current fiscal year 2021-22, and further to $200 billion in the next fiscal year 2022-23, according to Kotak securities.

At the Indian interbank foreign exchange, the rupee opened at 75.53 against the dollar on Monday, then slipped further to 75.56, registering a decline of 20 paise from the last close.

The BSE benchmark Sensex plunged 1,747 points on Monday while the Nifty crashed below the 17,000-level on Monday as escalating Russia-Ukraine tensions sparked a retreat from riskier assets globally. A depreciating rupee and foreign fund outflows added to the gloom, traders said.

On Friday, the rupee had plunged by 21 paise to a nearly seven-week low of 75.36 against the US currency on forex outflows and a strong dollar after a spike in inflation in the US boosted expectations of an aggressive rate hike by the Federal Reserve.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.03 per cent to 96.05. Global oil benchmark Brent crude futures rose by 1.09 per cent to $95.47 per barrel.

"The US and Britain advised their nationals to leave Ukraine as Russia has massed enough troops near Ukraine to launch a major invasion. This could push investors to the safe-haven appeal of the greenback," said Sriram Iyer, senior research analyst at Reliance Securities.

Additionally, crude oil prices moved higher, while all the Asian and emerging market peers have started weaker this Monday and could weigh on sentiments, Iyer said, adding that "the Reserve Bank of India could be present to curb volatility."

— issacjohn@khaleejtimes.com