Rupee falls 20 paise to Rs.96.73 against US dollar as crude prices surge on West Asia conflict

The Indian rupee fell 20 paise to settle at 96.73 against the US dollar on Thursday. Escalating West Asia tensions pushed Brent crude to $96.15 per barrel, while heavy foreign equity outflows continued to pressure the local currency

Mumbai: The rupee ended 20 paise weaker at 96.73 against the US dollar on Thursday, descending to almost its lowest level for the second time in two months, weighed down by surging crude oil prices amid worsening West Asia crisis.

Forex traders said that selling pressure in domestic equities prompted further withdrawal of foreign capital, putting more pressure on the local currency.

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At the interbank foreign exchange, the rupee opened at 96.53 and traded in a range of 96.45-96.73 during the day before settling at 96.73, down 20 paise from its previous close.

The rupee depreciated by 28 paise to close at 96.53 against the US dollar on Wednesday.

The Indian currency recorded its lowest-ever closing level at 96.86 against the greenback on May 20, when it also touched the lowest intra-day level of 96.95.

“The rupee traded with a negative bias on weak domestic markets and a surge in crude oil prices, which continued to rise as the US struck Iran for the 12th consecutive day while Iran continued to strike US facilities in the Gulf,” Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan, said.

“However, diplomatic talks between the two nations may prevent a sharp fall in the rupee. USD-INR spot price is expected to trade in a range of Rs 96.30 to Rs 96.85,” Choudhary said.

V K Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, said, “The negative factor impacting the rupee is the sharp spike in Brent crude following the escalation of the conflict in West Asia, particularly the attack on Saudi oil tankers by the Houthis.”

RBI’s intervention in the market will prevent sharp depreciation in the rupee, he added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading flat at 101.12.

Brent crude, the global oil benchmark, was trading 2.21 per cent higher at USD 96.15 per barrel in futures trade.

Analysts said crude oil prices stayed elevated after Yemen’s Iran-backed Houthi rebels attacked two Saudi oil tankers in the Red Sea on Thursday, potentially opening a new front as the US military conducted its 12th night of strikes against Iran.

US President Donald Trump has threatened “major military punishment” against the Iran-backed rebels if their attacks on ships continue.

“Escalating geopolitical tensions in the Middle East pushed oil prices higher, increasing concerns over India’s import bill and inflation. Higher oil prices typically increase demand for US dollars by Indian oil importers, putting downward pressure on the rupee. The rupee is expected to remain in the range of 96.25 to 97.00 tomorrow,” said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

On the domestic equity market front, Sensex extended losses on Thursday, declining 363.66 points to settle at 76,391.39, while the Nifty was down 126.65 points to 23,869.60.

Foreign Institutional Investors offloaded equities worth Rs 2,999.23 crore on a net basis on Thursday, according to exchange data.