Fresh American strikes on Iran after attacks on ships in the Strait of Hormuz send crude oil soaring and strengthen the dollar
The rupee tanked 59 paise to settle at 95.55 (provisional) against the US dollar on Wednesday, as the U.S. launched fresh strikes on Iran after Tehran struck three ships in the Strait of Hormuz, pushing up crude oil prices and strengthening the dollar.
The U.S. military attacked Iran early on Wednesday, after it said Tehran struck three ships in the Strait of Hormuz, part of an American effort that also revoked the Islamic Republic’s ability to openly sell crude oil in the world market. Iran retaliated with strikes targeting Bahrain and Kuwait.
Following the strikes, global crude oil prices rose exponentially. Brent crude, the global oil benchmark, was trading higher by 6.16% at $78.73 per barrel in futures trade.
Market Impact
Weak domestic equity markets further weighed on the local unit, according to forex traders. The Sensex crashed 1,677.12 points, or 2.15%, to 76,503.60, while Nifty plummeted 516.65 points, or 2.12%, to 23,882.05.
At the interbank foreign exchange market, the rupee opened at 95.15 against the U.S. dollar and traded in the range of 94.98-95.61 during the day. It eventually settled at 95.55 (provisional), down 59 paise from its previous close.
On Tuesday, the rupee had appreciated 47 paise to close at 94.96 against the U.S. dollar.
Expert View
“The rupee opened weaker against the dollar and continued to remain volatile intra-day. Overall, today’s rupee weakness was externally driven, mainly by higher crude oil prices, stronger U.S. dollar, and geopolitical uncertainty,” said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.
The rupee is expected to remain in the range of 95.25 to 96.00 on Thursday, he added.
Global and Domestic Indicators
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 101.13, up 0.11%.
Foreign institutional investors purchased equities worth ₹393.19 crore on a net basis on Tuesday, according to exchange data.
