Rupee weakens to 2-month low as crude surges on West Asia tensions

Rupee falls sharply to ₹86.09 per dollar amid rising crude prices due to Israel-Iran conflict; RBI intervenes as Brent jumps 11%, FX reserves touch $697 billion

The rupee depreciated sharply against the US dollar on Friday to settle below the 86 per dollar mark, a two-month low since April 9, on the back of a surge in crude oil prices driven by escalating tensions in West Asia.

 

The local currency weakened by 49 paise to settle at 86.09, against the previous close of 85.60. 

 

Rupee was one of the worst performing Asian currencies and dropped 0.57 per cent against the dollar. During the day, the rupee fell as much as 0.65 per cent to touch 86.20.

 

The Reserve Bank of India (RBI) likely intervened in the foreign exchange market via dollar sales which capped further losses, dealers said.

 

“The opening was expected to be weak due to geopolitical tensions,” a treasury head at a private bank said. “As a result of RBI intervention, it briefly touched 85.95 level. There was some mild inflow too,” he added.

 

Israel launched ‘Operation Rising Lion’ on Friday morning, targeting Iran’s nuclear facilities amid rising tensions between the two West Asian nations. Israeli Prime Minister Benjamin Netanyahu claimed the operation struck at the core of Iran’s nuclear enrichment program, as well as key figures in its nuclear and ballistic missile initiatives. 

 

“The Indian rupee weakened sharply today, breaching the ₹86/$ mark, driven by a sudden surge in crude oil prices and heightened geopolitical tensions following Israel’s strikes on Iran. Brent crude jumped over 11 per cent intraday, raising concerns over India’s import bill, inflation outlook, and current account deficit,” IFA Global said in a note. 

 

Brent crude prices rose by over 11 per cent to $78.50 per barrel, hitting the highest in over four months.

 

“Near-term market attention will be directed towards geopolitical developments over the weekend and the impending monetary policy decisions by three major central banks next week,” Dilip Parmar, senior research analyst, HDFC Securities, said. 

 

In the current month, the rupee is one of the worst performing Asian currencies with 0.6 per cent depreciation witnessed so far. In the current calendar year so far, the domestic currency has depreciated by 0.5 per cent against the greenback, while it has depreciated by 0.7 per cent in the current financial year. 

 

Meanwhile, India’s foreign exchange reserve increased by $5.1 billion in the week ending June 6 on the back of the rise in foreign currency assets which increased by $3.4 billion in the reported week, according to latest RBI data.

 

The total reserves stood at $697 billion, highest since the week ended October 4, 2024 when the reserves were at $701 billion. The reserves had hit a record high of $705 billion in the last week of September 2024.