Rupee slides past 86 to hit 2-month low as West Asia tensions flare

Indian Rupee today: The domestic currency fell 53 paise to open at 86.13 against the dollar, after closing at 85.60 on Thursday

The Indian Rupee slipped past the 86 mark to hit a two-month low, pressured by a more than 10 per cent surge in crude oil prices following Israel’s airstrikes on Iran’s nuclear facilities.

 

The domestic currency fell 53 paise to open at 86.13 against the dollar, after closing at 85.60 on Thursday, according to Bloomberg. The currency further fell by 0.71 per cent after opening to 86.20 against the greenback, the lowest level since April 11. 

 

The Israeli military has begun airstrikes against Iran, targeting nuclear locations to block Tehran from developing atomic weapons, in an operation dubbed 'Rising Lion'.

 

Israel’s Defence Minister, Israel Katz, declared a state of emergency shortly after the strikes. The head of the Islamic Revolutionary Guard Corps, Hossein Salami, was killed in the strikes, according to reports. 

 

The risk-off sentiment soared with oil prices spiking over 10 per cent, on course for the biggest weekly gain since 2022. Brent crude price was up 9.20 per cent to $75.74 per barrel, while WTI crude prices were higher by 9.45 per cent at 74.47, as of 9:15 AM IST. 

 

The Indian rupee was expected to open weaker, as escalating tensions in the Middle East dampened risk appetite, according to Anil Kumar Bhansali, head of treasury and executive director of Finrex Treasury Advisors LLP.  The rupee is likely to trade in the range of 85.70 to 86.25, he added. 

 

Exporters may consider using this opportunity to sell their receivables, as the Reserve Bank of India is expected to intervene to curb volatility, Bhansali said. "Importers, however, should adopt a wait-and-watch approach as the situation unfolds." 

 

Safe-haven demand lifted the Japanese yen and the Swiss franc and helped the dollar index recover to the 98 handle, according to Reuters. The dollar index, which measures the greenback against a basket of six major currencies, was down 0.33 per cent at 98.24. The 10-year U.S. yield dropped despite the jump in oil.

 

Back home, India’s retail inflation dropped to 2.82 per cent in May, down from 3.16 per cent in April, mainly due to a slower increase in food prices. Notably, prices of onions, tomatoes and potatoes registered strong deflation, which weighed heavily on the overall food basket.