By Christina Titus
The Indian rupee continued to fall for the second consecutive session on Wednesday to close at 86.47, down 23 paise from the previous close. The elevated crude oil prices due to geopolitical tensions, along with risk-off sentiment and FPI outflows, pushed the rupee down to a two-month low, said dealers. The rupee was the second-worst performer among other Asian currencies on Wednesday.
So far in the month, the domestic currency depreciated 1.04% or 89 paise against the greenback. In the last days, the rupee depreciated 0.48% or 41 paise. Crude oil prices were up 0.52% to $76.85 per barrel, according to Bloomberg.
“Iran-Israel conflict and Trump’s threat to Iran to surrender led to negative sentiment in the market. There was buying pressure from oil companies and FPIs, which further weighed on the domestic currency,” said Anil Bhansali, head of treasury, Finrex Treasury Advisors LLP.
“There is currently a risk-off sentiment in the market, as a result, investors moved towards the safe havens. As rupee opened on the upper side, there was a fear among the importers, which led to some sort of panic buying,” said a dealer with a state-owned bank.
Despite the rupee being under pressure, RBI intervention was mild and it allowed rupee to depreciate, said dealers. “There was some RBI intervention at 35-36 level. It has not been to change the direction of the rupee, but to curb the volatility,” said Bhansali.
The market participants expect the domestic currency to weaken further considering the escalation of Israel-Iran conflict and high FPI outflows.