The rupee of India crashed 42 paise to close at 91.50 (provisional) against the U.S. dollar on Monday after increasing tensions in the Middle East led to a bout of worldwide risk aversion. The steep drop was after the U.S. and Israeli attacks on Iran that not only caused the prices of crude oil to go skyrocketing but it also boosted the demand of the already safe-haven American currency.
In interbank foreign exchange market, the rupee started at a weaker position of 91.23 and went further during the session to record an intraday low of 91.65. Forex traders blamed the fall on the soaring crude prices, mass selling in local stocks and continued outflows in foreign funds.
The dollar index, the gauge of how the greenback performs against a basket of six major currencies, increased 0.67% to 98.22, and it is a broad-based strength of the U.S. currency. Along the way, Brent crude futures surged 8.01 to $78.71 per barrel, as the issue of the import bill and inflationary pressures of India were exacerbated considering the fact the country relies heavily on oil imports.
The negative sentiment was reflected in the domestic stock markets. BSE Sensex dropped 1,048.34 points, or 1.29, to be at 80,238.85, and NSE Nifty fell 312.95 points or 1.24 to 24,865.70. Further sentiment pressure was the continued outflow of foreign institutional investors (FII) which saw overseas investors liquidating equities worth 7, 536.36 crore in the last session.
The participants of the market anticipate that currency volatility will be experienced in the nearest future provided that geopolitical tensions are high, and the upward trend of crude prices is maintained.
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