Rupee plunges 42 paise to one-and-a-half-month low of 71.80 against US Dollar
Mumbai: The rupee plunged by 42 paise to settle at a one-and-a-half-month low of 71.80 against the US currency on Friday due to a spike in crude oil prices after US President Donald Trump ordered the killing of a top Iranian general.
Brent crude surged 4.5 per cent to $69.23 per barrel and WTI rose 4.1 per cent to $63.71 per barrel after worries over an escalation in tensions.
"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 US dollar 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 American currency.
The unit finally settled at 71.80 against the US dollar, 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 US dollar.
On a weekly basis, the domestic unit lost 45 paise.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.21 per cent to 97.04.
The 10-year government bond yield was at 6.52 per cent.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar 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 Stock Brokers 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.