Rupee falls steepest in 10 months on geopolitical tensions, higher oil

The Indian currency closed at Rs20.62 against the dirham, 42 paise weaker compared to Wednesday's closing of Rs20.20 or 75.65 against the dollar compared with its previous close of 74.56.



NA021018-DS-RUPEE- Indian expats sending money home as Rupee hits all time low since 2015 at the UAE Exchange Karama in  Dubai on Tuesday, October 02, 2018. Photo by Dhes Handumon.
NA021018-DS-RUPEE- Indian expats sending money home as Rupee hits all time low since 2015 at the UAE Exchange Karama in Dubai on Tuesday, October 02, 2018. Photo by Dhes Handumon.
by

Issac John

Published: Thu 24 Feb 2022, 5:00 PM

The Indian rupee plummeted against the dirham as oil prices surged in the wake of the Russian attack on Ukraine.

The Indian currency closed at Rs20.62 against the dirham, 42 paise weaker compared to Wednesday's closing of Rs20.20 or 75.65 against the dollar compared with its previous close of 74.56. The 1.5 per cent fall was the rupee’s steepest in 10 months.

“The war between Ukraine and Russia has hit the global markets, with panic trade pushing up the prices of gold and oil to record highs. The rupee has suffered on account of this, and although it is hard to predict how long this swing will sustain, we expect the Indian currency to touch 20.73 against the dirham or 76.10 against the dollar this week, ” said a spokesman of LuLu Exchange.

“Surging crude oil prices, persisting foreign portfolio outflows, and falling equity markets will continue to put pressure on the rupee. Strong RBI intervention is essential to prevent a deeper fall,” said Sajith Kumar PK, CEO and managing director of IBMC Financial Professionals Group.

Geopolitical tensions, higher crude prices, and a fall in equity markets will continue to hurt the rupee, according to Imran Kazi, vice-president at Mecklai Financial.

The Reserve Bank of India is seen to have sold dollars heavily at 75.20 on Thursday morning, said Kazi. This provided some support to the rupee but not for long. “It should keep going towards 76 against the dollar. At least for the next few days, all depends on the evolving geopolitical situation, with all other economic factors taking a backseat.”

While the RBI will continue to intervene, upward pressure is still likely to persist with traders short on the rupee, according to Anindya Banerjee, deputy vice-president for currency derivatives at Kotak Securities.

The RBI has been intervening over the last two months, helping stabilise the rupee amid foreign portfolio outflows of close to $13.5 billion, Banerjee said. Now, the RBI does not want the double impact of higher oil prices and a weaker rupee and will continue to intervene more actively.

While the panic moves in the currency might last for one or two days, Banerjee said elevated oil prices are likely to remain a concern for the currency.

— issacjohn@khaleejtimes.com


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