Rupee falls the most in 10 months on geopolitical tensions, rising oil – Reuters

The Indian currency closed at Rs20.62 against the dirham, 42 paises weaker from Wednesday’s close of Rs20.20 or 75.65 against the dollar from its previous close of 74.56.



NA021018-DS-rupee- Indian expats send money home as the rupee hits its lowest since 2015 at the UAE Exchange Karama in Dubai on Tuesday October 02, 2018. Photo by Dhes Handumon.

Published: Thu 24 Feb 2022, 17:00

The Indian rupee fell against the dirham as oil prices surged following the Russian attack on Ukraine.

The Indian currency closed at Rs20.62 against the dirham, 42 paises weaker from Wednesday’s close of Rs20.20 or 75.65 against the dollar from its previous close of 74.56. The 1.5% drop was the rupiah’s biggest in 10 months.

“The war between Ukraine and Russia has hit global markets, with panic trading driving gold and oil prices to record highs. The rupee has suffered because of it, and although it is difficult to predict how long this swing will hold, we expect the Indian currency to touch 20.73 against the dirham or 76.10 against the dollar this week,” a LuLu Exchange spokesperson said.

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

Geopolitical tensions, rising crude prices and falling stock markets will continue to hurt the rupee, according to Imran Kazi, vice president of Mecklai Financial.

The Reserve Bank of India reportedly sold off dollars at 75.20 on Thursday morning, Kazi said. This provided some support for the rupee, but not for long. “It should continue towards 76 against the dollar. At least for the next few days, everything depends on the evolution of the geopolitical situation, with all other economic factors taking a back seat.

While the RBI will continue to intervene, upward pressure is likely to persist as traders run out of rupees, according to Anindya Banerjee, assistant vice president of FX derivatives at Kotak Securities.

The RBI has intervened over the past two months, helping stabilize the rupiah amid foreign portfolio outflows of nearly $13.5 billion, Banerjee said. Now, the RBI does not want the double impact of rising oil prices and a weak rupee and will continue to intervene more actively.

While the currency panics could last for a day or two, Banerjee said high oil prices are likely to remain a concern for the currency.

— issacjohn@khaleejtimes.com


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Felix J. Dixon