The Indian rupee weakened against the U.S. dollar after Russia ordered strikes on Ukraine and as crude surged.
The domestic currency closed at 75.65 against the greenback compared with its previous close of 74.56, according to Bloomberg data. The 1.5% fall was the steepest in 10 months.
Brent crude, according to Bloomberg data, has touched an intra-day high of $103.78.
Geopolitical tensions, higher crude prices, and a fall in equity markets will continue to hurt the rupee, said 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 couple of days, all depends on the evolving geopolitical situation, with all other economic factors taking a backseat.”
According to Anindya Banerjee, deputy vice-president for currency derivatives and interest rate derivatives at Kotak Securities, while the RBI will continue to intervene, upward pressure is still likely to persist with traders short on the rupee.
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.
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