Rupee depreciates to new low of 84.42 per dollar amid geopolitical tensions

The rupee depreciated to a new low of Rs 84.42 per dollar on Tuesday due to demand for the greenback among importers and escalating geopolitical tensions after Russian President Vladimir Putin approved an updated nuclear doctrine, dealers said. The dollar index rose by 0.2 per cent to 106.4 during the day after a marginal decline in the previous session. It measures the strength of the dollar against a basket of six major currencies.

 

The previous low of Rs 84.41 per dollar was hit last Thursday. The local currency had settled at Rs 84.40 per dollar on Monday.

 

Market participants said the Reserve Bank of India (RBI) intervened in the foreign exchange market through dollar sales, preventing further depreciation.

 

 

“There is constant pressure on the rupee, but the RBI has been keeping the rupee in a tight range. They are allowing very gradual depreciation,” said a dealer at a private bank. “The Ukraine-Russia conflict by the end of the day led to safe-haven demand and pushed the dollar index higher,” he added.

 

The Russian president said on Tuesday that Russia could consider using nuclear weapons if it were subject to a conventional missile assault supported by a nuclear power.

 

The rupee has hit fresh lows during most trading sessions in November. Market participants said that while the RBI’s interventions in the foreign exchange market have been more gradual than usual, the central bank is expected to continue supporting the rupee by selling dollars.

 

“Foreign banks were on the buying side, and we saw foreign outflows from the equities market as well,” said a dealer at a state-owned bank. “Given the rise in the dollar index, other currencies have depreciated by 1-2 per cent, while the rupee is artificially valued,” he added.

 

In the current financial year, the rupee has depreciated by 1.2 per cent, while in the current calendar year, it has depreciated by 1.4 per cent. In November so far, the rupee has depreciated by 0.4 per cent.