Russia-Ukraine war impact: Rupee slips a touch to 76.62 against US dollar

By Team Newsable | First Published Mar 14, 2022, 2:25 PM IST

The rupee slightly dropped against the dollar, extending its weakness from Friday, when it reversed to para gains earlier in the session.

The rupee slipped on early Monday to 76.62 against the dollar, extending its weakness from Friday, when it reversed course shed roughly 0.4 per cent of its value at 76.61.

Crude oil prices fell below $110 per barrel on chances for progress in Russian-Ukraine peace negotiations as the conflict continued.

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The rupee's fall is being driven primarily by the allure of the dollar, with the greenback expected to be well bid on expectations of aggressive Federal Reserve rate hikes as early as this week, after data showed US inflation spiked to its highest in 40 years.

The dollar rose to its highest since January 2017 against the yen, boosting gains from the previous week. The US presently also gained on the Swiss franc in early trade, hitting 0.9363, its highest since late November.

This is primarily due to expectations that the Fed will almost certainly begin raising interest rates from their post-pandemic lows at its meeting this week. Investors are also looking for projections for the frequency and size of future rate increases.

While discussing what has not helped, the rupee is sustained net capital outflows over the last few weeks. Amit Pabari, Managing Director at CR Forec Advisors, explained that after an indecisive week that kept investors on edge, we headed towards more challenges ruling geopolitical headlines and central bank actions this week. As inflation is advancing, the US Fed will also increase 25 basis points; apart from that, any hawkish commentary will lead to dollar strength and the dollar index going above 100 levels.

He added that all major DM and EM currencies would likely lose their ground against the US dollar as it gains two side support from Safe-haven demand in the current war scenario and rising US interest rates.

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