Rupee plunges to 5-mth low of 65.31 on crude price surge
The rupee today nosedived 32 paise to hit a fresh five-month low of 65.31 against the US dollar as surging crude oil prices and growing geopolitical uncertainties rattled forex market sentiment.
This is the lowest closing for the home currency since November 14, 2017, when it had ended at 65.42 against the greenback.
Brent crude, an international benchmark, is trading near a four-year peak of USD 71.70 a barrel in early Asian trade.
A sense of volatility prevailed in the domestic currency market after a rapid surge in global crude prices driven by prospects of geopolitical uncertainty in the Middle East following US President Donald Trump's promise to respond forcefully to the suspected chemical attack in Syria.
Heavy dollar demand from state-owned banks, likely on behalf of oil marketing companies and corporates, along with broad-based dollar strength against some currencies overseas largely pressurised the Indian currency.
Persistent capital outflows too kept the local unit under pressure.
Moreover, currency traders preferred to stay on the sidelines and avoided taking any long positions ahead of key macroeconomic data release -- industrial production and inflation -- tomorrow.
The intense volatility pulled the rupee to hit a fresh low of 65.32 intra-day during mid-afternoon after a sense of panic rippled through currency trading floors.
In contrast, domestic bourses maintained their upbeat trend for the five straight sessions.
As India being the world's third-biggest oil importer, a relentless surge in crude prices could pose challenges for policymakers and far-reaching implications on economic growth and current account deficit despite relatively strong macroeconomic fundamentals, a forex dealer commented.
In the latest monetary policy review of the Reserve Bank of India (RBI) outlined for the new fiscal a higher growth rate of 7.4 per cent and lowered inflationary forecast at 4.7-5.1 per cent.
At the inter-bank foreign exchange (forex) market, the rupee resumed on a steady note at 64.99, tracking global currency volatility coupled with steady capital outflows.
After trading in a narrow range during the early part of the day, the local unit tumbled down to hit a low of 65.32 in late afternoon deals before ending at 65.31, revealing a sharp loss of 32 paise, or 0.49 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 65.1272 and for the euro at 80.5884.
Globally, the US dollar fell to a two-week low against a basket of rival currencies as trade war fears receded but uncertainty over possible Western military action against Syria bred risk aversion among some investors.
The dollar index, which measures the greenback's value against a basket of six major currencies, was down at 89.11.
In the cross currency trade, the home unit remained under pressure against the pound sterling to end at 92.59 from 92.14 and dropped further against the euro to finish at 80.85 from 80.41 earlier.
It also drifted sharply against the Japanese yen to settle at 61.16 per yens from 60.76 yesterday.
Elsewhere, the pound sterling and euro traded modestly higher against the US currency after US inflation figures came out out as expected amid worries about military action in Syria.
In forward market today, premium for dollar showed a steady to weak trend due to lack of market moving factors.
The benchmark six-month forward premium payable in August settled unchanged at 101-102 paise, while the far-forward February 2019 contract softened to 221.50-222.50 paise from 222-223 paise previously.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.