The Rupee opened markedly weaker and has hit its all-time low as crude oil prices rose to the highest level since 2008 in early trade, due to the risk of US and European bans on imports of Russian oil and delays in the potential return of Iranian crude oil to global markets.
Talks to revive Iran’s 2015 nuclear deal with world powers were mired in uncertainty on Sunday due to Russia’s demands for a US guarantee that the sanctions it faces over the Ukraine conflict will not affect its trade with Tehran. In response to Russia’s demands, US Secretary of State Antony Blinken said that the sanctions imposed on Russia over its Ukraine invasion have nothing to do with a potential nuclear deal with Iran.
The US and European allies are exploring a possible ban on imports of Russian oil, Blinken said on Sunday. Sharply high crude oil prices may prompt banks to persistently purchase dollars on behalf of oil marketing companies, which may dampen sentiment for the Indian Rupee.
Moreover, the dollar index rose to its highest levels since May 2020 as investors continued to flock to safe-haven assets after Russia-Ukraine tensions continued to intensify. This is expected to further weigh on the local rupee.
In addition to the Ukraine-linked market fears, the greenback gauged benefits also from the recently released US jobs report for February, which showed that headline nonfarm payrolls rose by 678,000, well above the median forecast of 423,000. Domestic and Asian share indices declined sharply in early trade today due to the surge in oil prices and as the Russia-Ukraine crisis continued to weigh on investor sentiment. All eyes remain on RBI intervention to stem the devaluation of the rupee.