The rupee slumped 22 paise to close at 76.16 (provisional) against the US dollar on Friday as investors assessed the global economic impact of the Russia-Ukraine conflict amid rising crude oil prices.
Persistent foreign fund outflows and a weak trend in domestic equities too weighed on the local unit, forex traders said.
At the interbank foreign exchange market, the rupee opened weak at 76.06 against the American dollar and fell further during the session as investors moved away from riskier assets. The domestic unit oscillated between a high of 75.99 and a low of 76.22 during the session.
The rupee finally settled at 76.16 against the dollar, down 22 paise from the previous close.
Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd, said:
" It is rare to see geopolitics drive financial markets but that is exactly what is happening over the past 2 weeks. Russia-Ukraine conflict is hurting Indian Rupee, Indian bonds, and Indian equities via three channels: oil prices, US Dollar Index, and global equity prices. Brent crude has touched a high of $120, the highest level since 2012. The US Dollar Index has rallied to the highest level since June 2020 and the Nifty is at the lowest level since August of last year. USDINR has inched closer towards the last December highs. The extent of appreciation has been muted due to RBI intervention."
Next week will be relatively quiet on the data front. Therefore, it will be the trio: oil prices, equity, and US Dollar Index which will drive USDINR.
Oil prices are showing signs of fatigue and have pulled back to $110 from $120. If oil continues to fall it will be positive for the Rupee but barring a fall below $100, any pullback can be seen as consolidation within the large uptrend. USDINR remains in an uptrend as long as price nos sustain above 75.50 on spot. The target remains 77.00 levels, all-time highs, added Banerjee.
Meanwhile, the US dollar index, which measures the greenback's strength against the basket of six currencies, fell 0.27 per cent to 98.05. Brent crude futures, the global oil benchmark, fell 0.80 per cent to $111.34 per barrel.
The Russia-Ukraine crisis has remained the most crucial issue for investors this week as they look to assess its global economic impact. Russia is one of the key oil producers, and prices have been rising as global supplies remain threatened by the conflict.
International crude oil prices shot above $120 a barrel for the first time in nine years on Thursday before retreating a little to $111 on Friday.
On the domestic equity market front, the BSE Sensex ended 768.87 points or 1.40 per cent lower at 54,333.81, while the broader NSE Nifty declined 252.70 points or 1.53 per cent to 16,245.35.
FIIs net sellers
Foreign institutional investors remained net sellers in the capital market on Thursday as they offloaded shares worth Rs 6,644.65 crore, according to stock exchange data.