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Rupee plunges amid tensions in Gulf
Down 42 paise to settle at one-and-half month low of 71.80 against the $
Mumbai: The rupee plunged by 42 paise to settle at a one-and-a-half-month low of 71.80 against the $ on Friday due to a spike in crude oil prices after US President Donald Trump ordered the killing of a top Iranian general.
General Soleimani, the head of Iran's elite al-Quds force and architect of its regional security apparatus, was killed following a US airstrike at Baghdad's international airport on Friday.
The Pentagon confirmed the death of Soleimani, 62, in Iraq, saying the strike was carried out at the direction of Trump.
"Rupee extended losses yet again on back of US-Iran tensions," Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities said adding that spike in crude prices is making importers buy $ to hedge net outflows for crude buying.
Traders said besides US-Iran tensions, weak domestic equity market also weighed on the local unit. At the interbank foreign exchange market, the rupee opened at 71.56, then lost further ground to touch a low of 71.81 against the $.
The unit finally settled at 71.80 against the $, logging its biggest single-day loss of 42 paise in more than one-and-a-half month.
The rupee had previously closed near this level on November 20. On Thursday, the domestic unit had dropped by 16 paise to end at 71.38 against the $. On a weekly basis, the domestic unit lost 45 paise.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/$ at 71.3429 and for rupee/euro at 79.9392. The reference rate for rupee/British pound was fixed at 94.2535 and for rupee/100 Japanese yen at 65.61.
Traders further said that the near-term outlook of the rupee depends upon the outcome of the trade talks between the US and China.
"As US continued to interfere in Hong Kong issue, there are concerns whether the deal will happen or not. If the trade talks fail then the US will go ahead with tariffs on Chinese goods from 15th December," said Rushabh Maru, Research Analyst - Currency and Commodity, Anand Rathi Shares and Stockbrokers on rupee performance.
Maru further noted that there is also a threat of Yuan devaluation if the trade talks fail. Hence the outcome of the trade talks will determine the direction of the rupee.
