Rupee plunges to 5-month low of 65.31 on crude prices surge

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Mumbai: The rupee today nosedived 32 paise to hit a fresh five-month low of 65.31 against the US dollar as surging crude oil prices and growing geopolitical uncertainties rattled forex market sentiment.

This is the lowest closing for the home currency since November 14, 2017, when it had ended at 65.42 against the greenback.

Brent crude, an international benchmark, is trading near a four-year peak of USD 71.70 a barrel in early Asian trade.

A sense of volatility prevailed in the domestic currency market after a rapid surge in global crude prices driven by prospects of geopolitical uncertainty in the Middle East following US President Donald Trump’s promise to respond “forcefully” to the suspected chemical attack in Syria.

Heavy dollar demand from state-owned banks, likely on behalf of oil marketing companies and corporates, along with broad-based dollar strength against some currencies overseas largely pressurised the Indian currency.

Persistent capital outflows too kept the local unit under pressure.

Moreover, currency traders preferred to stay on the sidelines and avoided taking any long positions ahead of key macroeconomic data release — industrial production and inflation — tomorrow.

The intense volatility pulled the rupee to hit a fresh low of 65.32 intra-day during mid-afternoon after a sense of panic rippled through currency trading floors.

In contrast, domestic bourses maintained their upbeat trend for the five straight sessions.

As India being the world’s third-biggest oil importer, a relentless surge in crude prices could pose challenges for policymakers and far-reaching implications on economic growth and current account deficit despite relatively strong macroeconomic fundamentals, a forex dealer commented.

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