Rupee Drops Against US Dollar Due to Global Tensions

Understanding the Recent Market Changes

The rupee dropped significantly by 55 paise. It closed at 86.07 against the US dollar on Friday. This was the biggest drop in over three months. The fall happened because of rising global crude oil prices and increased geopolitical tensions.

How the Market Reacted

The rupee started weak at 86.25 but briefly recovered to 85.92. It ended the day at 86.07. This was 55 paise down from Thursday’s close of 85.52. Traders said this volatility was due to several factors. These included:

• Risk aversion from Israel’s military strikes on Iranian nuclear facilities.
• A sharp rise in global oil prices.

Effect of Oil Prices

Brent crude futures jumped 7.27% to $74.40 per barrel. This raised concerns about India’s trade and inflation outlook. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, explained the impact:

• Every $10 increase in crude adds $12 billion to India’s trade deficit.
• It also adds 50 basis points to the Consumer Price Index (CPI) inflation.

Bhansali noted that the rupee briefly stabilized due to Reserve Bank of India (RBI) intervention. However, he stressed that underlying pressure remains. He added, “It has taken one country’s military strike on another to show the fragility of markets.”

Stock Market and Foreign Investments

India’s stock markets also reacted to the crisis. The benchmark BSE Sensex fell 573.38 points. It closed at 81,118.60. The NSE Nifty dropped 169.60 points to 24,718.60. Foreign institutional investors (FIIs) sold shares worth Rs 3,831.42 crore on Thursday. This further weakened the rupee.

Dollar Strength and Future Outlook

The US dollar strengthened globally. The dollar index rose 0.33% to 98.24. Bhansali said, “FPIs continued to sell equity and buy the US dollar. Oil companies also bought dollars due to the jump in crude.”

He added that the rupee’s near-term outlook remains under pressure. There are expectations of further volatility when trade deficit data is released next week. “For Monday, we expect the rupee to trade in the 85.75–86.50 band.”

New Challenges for Airlines

Meanwhile, airlines are facing new operational challenges. Iran closed its airspace. This impacts routes already rerouted due to Pakistani airspace restrictions.