Dubai: Indian rupee hit the lowest level of 2022 at 20.66 against dirham on Wednesday.


The rupee tumbled to 75.88, tracking surge in crude prices amid escalating tensions between Russia and Ukraine.

Any decline in rupee’s value against the US dollar is automatically reflected in its exchange rate against the UAE currency because of the dirham’s peg to the US currency.

At the interbank forex market, the Indian currency is trading in a range of 75.78 and 75.90 against the greenback. The Indian unit had hit a one-year low of 76.23 a dollar on December 16, 2021.

Impact of oil price

Global oil benchmark Brent oil extended its relentless rally above $110 a barrel before an OPEC+ meeting as the International Energy Agency warned that global energy security is under threat following Russia’s invasion of Ukraine.

Futures in London and New York both soared more than 5 per cent. The situation in energy markets is very serious, IEA Executive Director Fatih Birol said Tuesday after the U.S. and other major economies agreed to a release of oil reserves. Investors will be watching for a response from OPEC+ when the cartel meets Wednesday to discuss April supply, but only a modest increase is expected despite the turmoil rippling through the sector.

India is facing rising inflationary pressure. The fallout from the Russia – Ukraine war are expected to drive up energy, metals and grains prices higher.

Russia’s invasion is entering a deadly new phase, which could result in more sanctions and further spike in energy prices leading to further pressure on Indian rupee.

Market dynamics

Selling pressure on domestic equity markets and capital flight resulting from foreign institutional investors turning net sellers also could add to the downward pressure on the rupee in the coming days.

Foreign inflows have helped boost the Indian Rupee at the start of 2022. However, as they decline in the coming months, ICICI Bank’s US dollar to INR forecast for 2022 is for the rupee to weaken against the greenback. The inflows are from foreign investors purchasing Indian equities and the Indian firms issuing dollar bonds. In addition, higher crude oil prices and a strong US dollar are also bearish factors for the US dollar to INR forecast 2022.

Similar to other currencies, central bank’s policy is one of the key drivers of dollar -rupee exchange rates. 

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