Russia-Ukraine crisis: Rupee rebounds as risk sentiments improve

The rupee revived on Friday after falling 1.4 per cent against the dollar a day before after risk sentiments improved as investors assessed economic fallout of the sanctions against Russia are much less severe than expected.

The rupee closed the day at 75.29 per $, up 26 paisa, or 0.48 per cent as sentiments improved and commodity retracted from Thursday’s levels. The rupee has been one of the worst performing Asian currencies in 2022.

On Thursday, financial markets across the globe turned volatile after Russia invaded Ukraine with crude oil surging over $100/bbl for the first time since 2014.

“With uncertainty around the future course of the war, rupee is likely to remain volatile. Hence, the Reserve Bank of India may announce more USD/INR buy/sell swap auction to manage volatility in the forex market,” said Madan Sabnavis, chief economist, Bank of Baroda.

Even if sentiments improved on Friday, the geopolitical situation remains uncertain and there could be pressure on the domestic unit which may again test 76/$ levels.

“The markets managed to erase its losses after US President Joe Biden reiterated that US forces will not fight in Ukraine. Brent Crude oil prices also shot up to hit multi-year highs before retracing,” the Currency Desk of Emkay Global Financial Services said in a note.

“We expect the SPOT USDINR pair to trade under pressure and test 76-76.25 levels during the coming week. Levels around 75 are crucial support which if broken will trigger a correction towards 74.60 levels in the pair,” the note said.