Rupee tumbles 55 paise to 86.07 against US dollar on oil spike, Israel-Iran conflict jolts markets; foreign fund outflows deepen
The rupee plunged 55 paise to close at 86.07 against the US dollar on Friday, its sharpest single-day fall in over three months, as a surge in global crude oil prices and heightened geopolitical tensions rattled investor sentiment.
The currency, which opened weaker at 86.25, briefly recovered to an intraday high of 85.92 but ended the day down 55 paise from Thursday's close of 85.52. Traders attributed the volatility to a combination of factors, including risk aversion triggered by Israel's military strikes on Iranian nuclear facilities, which led to a sharp rebound in global oil benchmarks, PTI reported.
Brent crude futures soared 7.27% to $74.40 per barrel, adding to concerns over India's trade and inflation outlook.
'Every $10 increase in crude adds $12 billion to our trade deficit and 50 basis points to CPI inflation,' said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
Bhansali noted that the rupee briefly stabilized due to
Reserve Bank of India
(RBI) intervention but stressed that underlying pressure remains. 'It has taken one country's military strike on another to bring home the fragility of markets,' he added.
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India's stock markets also reacted to the escalating crisis. The benchmark BSE Sensex plunged 573.38 points to close at 81,118.60, while the NSE Nifty dropped 169.60 points to 24,718.60. Foreign institutional investors (FIIs) offloaded shares worth Rs 3,831.42 crore on Thursday, further weakening the rupee.
Adding to the negative cues, the US dollar strengthened globally, with the dollar index rising 0.33% to 98.24.
'FPIs continued to remain sellers of equity and buyers of US dollar, while oil companies also bought dollars due to the jump in crude,' Bhansali said.
He added that the rupee's near-term outlook remains under pressure, with 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.'
Meanwhile, airlines are facing fresh operational challenges as Iran closed its airspace, impacting routes already rerouted due to Pakistani airspace restrictions.
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