Mumbai, March 2 The rupee saw a steep loss of 42 paise to settle at 91.50 (provisional) against the US dollar on Monday after intensified US and Israeli attacks on Iran worldwide increased risk aversion, driving up crude oil prices and increasing demand for the American currency.
Massive selling in domestic equity markets and the withdrawal of foreign funds further dragged down the Indian currency, forex traders said.
At the interbank foreign exchange, the rupee opened at 91.23 and touched the intraday low of 91.65 against the greenback. The currency ended the session at 91.50 (provisional) against the dollar, registering a steep loss of 42 paise from the previous closing level.
On Friday, the rupee lost 17 paise to settle at 91.08 against the dollar.
Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan, said the rupee declined by nearly half a percent due to risk aversion in global markets after the US and Israel attacked Iran over the weekend.
He said that outflows from FIIs and overnight gains in crude oil prices further put pressure on the rupee, which is expected to trade with a negative bias amid heightened geopolitical tensions in global markets.
"However, any diplomatic talks between the US and Iran or any restraint and RBI intervention may support the rupee at lower levels. Traders may also take cues from the ISM manufacturing PMI data from the US. The USD-INR spot price is expected to trade in a range of 91.10 to 91.80," Choudhary added.
According to Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, the Reserve Bank of India (RBI) was at 91.46/47 levels against the greenback, which kept the rupee protected at the 91.50 level against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.67 per cent higher at 98.22.
Brent crude, the global oil benchmark, was up 8.01 per cent at $78.71 per barrel in futures trade.
Analysts said that crude prices soared after the US and Israel launched military strikes against Iran over the weekend.
In the latest strike, US and Israeli forces pounded targets across Iran on Sunday, dropping massive bombs on the country's ballistic missile sites and destroying warships. The attack was intensified after the killing of Iran's Supreme Leader Ayatollah Ali Khamenei.
Experts say that India faces the risk of a sharp increase in its import bill with rising crude prices in the international market, as the country's 85 per cent fuel requirement is met through imports.
On the domestic equity market front, the Sensex tumbled 1,048.34 points or 1.29 per cent to settle at 80,238.85, while Nifty tanked 312.95 points or 1.24 per cent to 24,865.70 in early trade.
On Friday, foreign institutional investors offloaded equities worth Rs 7,536.36 crore, according to exchange data.
