Rupee plummets 56 paise to 86.08 against US dollar in early trade

Mumbai: Rupee declined 56 paise to 86.08 against the US dollar in early trade on Friday due to a spike in global oil prices and a firm dollar amid rising tensions in the Middle East following a fresh Israel attack on Iran's nuclear sites.

A weak opening in domestic equity markets and heavy FII outflows further contributed to the fall in the local unit, forex traders said.

At the interbank foreign exchange, the local unit opened at 86.25 against the greenback before inching up to 86.08, down 56 paise from its previous close. The rupee had settled at 85.52 on Thursday.

"The rupee opened weak as hostility in the Middle East kept tensions boiling and risk appetite taking a hit with Gift Nifty down 285 points," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.

"As Israel struck Iran, explosions were heard in Tehran with tensions mounting over US efforts to win Iran's agreement to halt production of material for Nuclear bombs," he added.

The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.31 per cent to 98.22.

Meanwhile, at least 265 people were killed on Thursday when a London-bound Air India plane carrying 242 passengers and crew crashed into a medical college complex in Ahmedabad less than a minute after takeoff. The dead in the country's worst air disaster in recent times included several people on the ground.

In the domestic equity market, the 30-share BSE Sensex tanked 1,337.39 points to 80,354.59 in early trade on Friday, while the Nifty tumbled 415.2 points to 24,473.

Brent crude, the global oil benchmark, rose sharply by 8.59 per cent to $75.32 per barrel in futures trade.

Foreign institutional investors (FIIs) offloaded equities worth Rs 3,831.42 crore on a net basis on Thursday, according to exchange data.

Further, retail inflation in the country dipped to an over six-year low of 2.82 per cent in May due to subdued food prices, remaining below the Reserve Bank of India (RBI's) median target of 4 per cent for the fourth consecutive month, according to government data released on Thursday.

"The range for the rupee is expected between 85.70 and 86.25 (for Friday), but it could be an opportunity for exporters to sell their receivables as the RBI will surely step in to curb the volatility. Importers need to wait and watch the situation as it develops," Bhansali added.