Rupee plunges and breaks 76 mark/dollar for the first time in 2022
The Indian rupee fell to 76 per dollar on Friday to hit its lowest level since mid-December, as the deepening crisis in Ukraine pushed Asian shares to 16-month lows. .
The continued outflow of foreign capital and a weakening trend in domestic equities have weighed on the Indian currency, with traders watching for possible central bank intervention.
The rupee fell 0.3% to 76.16 against the US dollar after touching 76.1750 – its lowest level since December 17. The currency closed at 75.91 on Thursday.
For the week, the coin has weakened more than 1%, marking the second consecutive week of losses.
“The recent market environment continues to favor a stronger dollar against the rupee as there is a greater chance the government will miss its fiscal target following a rise in crude oil prices and a delay in diversification. Higher inflation could translate into import inflation, and the central bank will be forced to change its stance in the coming months,” HDFC Securities Research Analyst Dilip Parmar told PTI.
Most emerging Asian currencies and stocks weakened on Friday amid heightened investor anxiety following reports that Russian forces attacked a nuclear plant in Ukraine.
Meanwhile, the US dollar index, which measures the greenback’s strength against a basket of six currencies, fell 0.27% to 98.05.
Brent crude oil futures, the global oil benchmark, fell 0.80% to $111.34 a barrel. International crude oil prices spiked to nearly $120 a barrel for the first time on Thursday before falling slightly to $111 on Friday.
However, the energy-sensitive rupee traded between a high of 75.99 and a low of 76.22 during the session.
“Markets will be volatile until the war is over. With oil prices holding back, expectations of higher inflation have increased. The rupee is likely to move in tandem with Asian currencies.” unless the RBI intervenes,” a senior forex trader at a private bank told Reuters.
The Russia-Ukraine crisis remains the most important issue for investors this week as they assess its global economic impact. Russia is one of the major oil producers and prices have risen as global supply remains threatened by the conflict.
India imports more than two-thirds of its oil needs, and a surge in crude threatens to push up its trade and current account deficits while putting pressure on the rupee.
Traders also said the RBI sold dollars through state banks to boost the rupee’s price.
On Friday, Indian stock markets tracked global equities and extended their third consecutive decline.
Investors’ assets fell more than Rs 5.59 lakh crore in three days of market declines as sentiment remained subdued amid the Russia-Ukraine conflict and its impact on the global economy.
