The rupee slumped in early trade on Wednesday as demand for the safe haven dollar surged as geopolitical risks were again right at the forefront of investors' minds after reports of a blast in the eastern Polish village of Przewodow that killed two people was caused by Russian missiles crossing into Poland.
Bloomberg showed the rupee was last changing at 81.5163 per dollar, down 41.38 paise from Tuesday close of 81.1025.
"The US dollar index rose to 106.67 after hitting a low of 105.50 overnight as markets were rocked by missile blasts in Poland killing 2 people. Geopolitics and war dominated trades in the currency market," said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.
PTI reported that the rupee fells 46 paise to 81.37 against the US dollar in early trade.
Currency markets were on the edge in a volatile trading session on Wednesday, with the safe-haven US dollar strengthening as investors assessed geopolitical concerns in the wake of the news that a Russian-made missile had struck NATO member Poland.
"The market is trying to size up the risk and what that really means," Moh Siong Sim, Currency Strategist at Bank of Singapore, told Reuters. "Is that something that is going to lead to further tension or perhaps this is something that will deescalate over the next few days."
"Right now, it's a bit of a tussle in the market as to how to price this risk," he added.
The turbulent trading saw major currencies swing between gains and losses.
"The currency market is stabilising, toying with the notion that this was a stray missile or an intercepted missile and doesn't necessarily imply an escalation in the war, with NATO needing to get involved," Rodrigo Catril, a Senior Currency Strategist at National Australia Bank, told Reuters.
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