India’s rupee has gone from being the best-performing Asian currency last quarter to the worst this year as rising crude prices and tensions over Kashmir weigh on sentiment. The currency has slumped 2.4 percent since the end of December, missing the rally in its regional peers on optimism over US-China trade talks. It slid to 71.515 per dollar Monday, from as strong as 69.23 in early January, and traded at 71.4450 at 3:15 pm in Mumbai. The S&P BSE Sensex index of stocks extended its biggest weekly loss in four months.
“The risk for the India story, which is keeping the dollar well bid vis-a-vis rupee, is higher oil, followed by Kashmir tensions and the political uncertainty,” said Ashish Vaidya, head of trading at DBS Bank Ltd. in Mumbai. “If the negative factors are sustained, for instance, if the Kashmir situation worsens, the rupee could soon touch 73.”
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Losses in Indian assets have deepened since Thursday when a suicide bomber rammed his explosive-laden vehicle into a bus ferrying security forces — the worst attack in Kashmir in decades. Jaish-e-Mohammad, a Pakistan-based terror group, claimed responsibility for the assault. Pakistan’s foreign ministry denied any role and said it always condemned acts of violence.
Crude oil has surged more than 20 percent this year as Saudi Arabia and Russia pledged to expand their output cuts and on concern US sanctions against Venezuela and Iran will exacerbate a tightening of supply.