Rupee Plummets to All-Time Closing Low as Global Turmoil Intensifies
The Indian rupee experienced a sharp decline on Monday, settling at a record closing low of 92.35 (provisional) against the US dollar, marking a significant drop of 53 paise during the trading session. This downturn was primarily driven by a combination of escalating geopolitical tensions in the Middle East, a surge in global crude oil prices, and a strengthening US currency, as reported by news agency PTI.
Key Factors Behind the Rupee's Decline
Forex traders highlighted that heavy foreign fund outflows and intense selling in domestic equity markets exerted additional pressure on the Indian currency. The rupee opened at 92.22 in the interbank foreign exchange market, briefly strengthening to 92.15 before weakening steadily throughout the session. This culminated in its settlement at the all-time closing low, down from its previous close of 91.82 on Friday, when it had depreciated by 18 paise.
Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, commented, "The rupee opened sharply lower, hitting a fresh record low of 92.35 on weak global markets and an overnight surge in crude oil prices. Oil prices surged around 25 per cent in the Asian session. Strong dollar and FII outflows also pressured the rupee." He further noted that the rupee is expected to trade with a negative bias due to weak global market sentiments and a robust dollar amid ongoing geopolitical tensions. However, potential intervention by the central bank could provide support at lower levels, with the USD-INR spot price projected to range between 92 and 92.80.
Global and Domestic Market Impacts
Meanwhile, Brent crude, the global oil benchmark, witnessed a dramatic increase of 15.18 per cent, trading at $106.8 per barrel in futures trade. This spike was fueled by the intensifying conflict involving the US, Israel, and Iran. Concurrently, the dollar index, which measures the greenback against a basket of six major currencies, rose by 0.35 per cent to 99.33.
In the domestic equity market, the Sensex plummeted by 1,352.74 points to close at 77,566.16, while the Nifty tumbled 422.40 points to 24,028.05. Foreign institutional investors (FIIs) were net sellers of equities worth Rs 6,030.38 crore on Friday, according to exchange data, contributing to the market volatility.
Reserve Bank of India's Forex Reserves Update
Separately, the Reserve Bank of India announced that India’s forex reserves increased by $4.885 billion to a record $728.494 billion during the week ended February 27. This rise in reserves highlights the central bank's efforts to bolster economic stability amidst global uncertainties.
The combination of these factors underscores the vulnerability of the rupee to external shocks, particularly in times of heightened geopolitical risks and fluctuating commodity prices. Investors and analysts will be closely monitoring further developments in the Middle East and global oil markets for potential impacts on currency and equity performances.
