Rupee Plunges 56 Paise as Geopolitical Tensions and Oil Spike Pressurize Currency Markets
The Indian Rupee depreciated significantly, settling at 95.74 (provisional) against the US Dollar on Monday. This decline, amounting to 56 paise from its previous close, was primarily driven by heightened geopolitical tensions and a sharp surge in crude oil prices.Forex traders noted that the USD/INR pair nullified the gains seen during the previous trading session due to increased risk aversion across global markets. A combination of rising oil prices and strengthening dollar sentiment significantly dented investor confidence.
Foreign Exchange Market Dynamics and Analyst Views
At the interbank foreign exchange market, the rupee opened at 95.35 before touching an intraday high of 95.15. It eventually closed the session at 95.74 (provisional). The depreciation comes as a contrast to Friday when the rupee had appreciated 56 paise to close at 95.18, following measures announced by the Reserve Bank.Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, indicated that the rupee is likely to trade with a negative bias due to escalating geopolitical tensions involving the US, Israel, and Iran, alongside rising crude oil prices. He also cautioned that a strong dollar and increasing US treasury yields could further pressurize the currency.
Choudhary added that market intervention by the Reserve Bank could potentially stabilize the rupee at lower levels, projecting the USD-INR spot price to trade within the range of 95.40 to 96.10.
Crude Oil Surge Amid Regional Conflict
The global oil benchmark, Brent crude, saw a substantial rise in futures trading. It was quoted higher by 3.94 per cent at USD 96.76 per barrel after Iran conducted multiple missile launches targeting Israel.The geopolitical situation remains critical following the reports that US President Donald Trump urged Israeli Prime Minister Benjamin Netanyahu not to retaliate against Iran's latest missile barrage. This intervention aims to safeguard ongoing negotiations for a peace deal aimed at ending the three-month conflict, according to Axios.
Domestic Stock Market Activity and Reserves Update
The domestic equity market experienced significant turbulence on Friday before this reporting cycle began. The Sensex tanked by 719.08 points, concluding at 73,524.26. Concurrently, Nifty saw a decline of 243.70 points to settle at 23,123.On the international investment front, Foreign Institutional Investors (FIIs) offloaded equities worth Rs 8,776.25 crore in a net sale on Friday, as per exchange data.
The Reserve Bank of India provided an update on the country's foreign currency reserves. During the week ending May 28, India’s forex reserve increased by USD 938 million to reach USD 682.321 billion. This is a shift from the previous reporting week when the kitty had dipped USD 7.511 billion to settle at USD 681.384 billion.
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