MUMBAI: The rupee weakened to its lowest level in a month on Monday, breaching the 91 mark again, amid escalating tensions in Iran that spurred a sell-off in risk assets and pushed oil prices up by over 6%. Domestic equities fell more than 1%, compounding concerns for India, which imports roughly half of its energy from the Middle East. The currency closed at 91.235, its weakest since early February.
Over the weekend, the US and Israel launched strikes on Iran, targeting the country’s top leadership, including Supreme Leader Ayatollah Ali Khamenei and senior military officials. In retaliation, Tehran fired missiles at Gulf nations hosting US assets, raising fears of a prolonged regional conflict that could disrupt shipping and aviation.
Government bonds also came under pressure, with the yield on the 10-year benchmark rising 3 basis points to 6.6901%.
Traders noted that the Reserve Bank of India intervened as the rupee breached the 91 level, offering support in the non-deliverable forwards market, while foreign banks continued to sell spot dollars.
Brent crude futures jumped nearly 6% during the day, hitting an intraday high of $82 per barrel. Precious metals, however, saw more muted gains: gold on the CME rose 2.5%, while silver gained 1.5%. On the domestic front, April gold futures traded 3.14% higher at Rs 1,67,198 per 10 grams, silver March futures rose 3.27% to Rs 2,84,000 per kg, and March crude on MCX surged 7.7% to Rs 6,564 per barrel.
“Higher oil prices present a compounded risk on top of weak capital flows, which have already been weighing on the rupee,” said Dhiraj Nim, economist and forex strategist at ANZ.