U.S. President Barack Obama authorized air strikes in Iraq, while Russian President Vladimir Putin this week countered U.S. and European sanctions over a pro-Russian insurgency in Ukraine with a ban on the import of a range of food products. Brent crude prices are up 1.6 percent this week, the most in two months, as the violence in Iraq fans concern that supplies will be disrupted.
“There’s risk aversion being seen on account of the escalating geopolitical tensions,” Paresh Nayar, head of currency and money markets at FirstRand Ltd. in Mumbai, said by phone. “Indian assets could witness some selling pressure in the short-term.”
The rupee dropped 0.7 percent to 61.6850 per dollar as of 9:46 a.m. in Mumbai, prices from local banks compiled by Bloomberg show. It touched 61.7388 earlier, the weakest level since
March 5. The currency fell 0.8 percent this week.
The yield on government bonds due 2024 rose 15 basis points from Aug. 1 and four basis points today to 8.67 percent in Mumbai, according to the RBI’s trading system. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, climbed 38 basis points, or 0.38 percentage point, to 8.14 percent today.
Three-month offshore non-deliverable forwards fell 0.7 percent to 62.75 per dollar today, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
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