Forex: The rupee suffered a setback against the US counterpart after surging crude prices flagged risks from widening current account deficit and renewed inflation fears amid worsening geopolitical environment.
Reversing a brief recovery trend, the home currency closed the week lower by 23 paise at 65.20 against the USD.
The forex market witnessed extreme volatility against the backdrop of escalating geopolitical tensions with worries about Western military intervention in Syria alongside impending trade dispute between the US and China, despite bullish local equities.
Uneasiness roared back into domestic currency market as overall sentiment turned into dismay after a rapid surge in global crude prices rekindled fiscal slippage and inflation.
The rupee revisted a fresh one-month high of 64.85 at the start of this week, retreated sharply to a five-month low of 65.45 during the mid-week crisis, but eventually pulled back some losses. Steady stream of dollars from export receivables gave the home currency slight underlying support, cushioning the fall.
A number of favourable factors, including encouraging growth-inflation dynamics driven by high industial growth and lower inflation also weighed on the rupee front.
Reflecting improvement in the economic situation, industrial production grew by a healthy 7.1 per cent in February while the key retail inflation slipped to a five-month low of 4.28 per cent in March. At the Interbank Foreign Exchange (forex) market, the rupee opened higher at 64.85 from last Friday's close of 64.97 on sustained dollar unwinding by exporters and banks.
It later broke down its consolidation phase and tumbled to a fresh five-month low of 65.45 on panic dollar demand from state-run banks and importers.
However, some dollar demand towards the fag-end trade helped the rupee to recover some lost ground before settling at 64.20, revealing a loss of 23 paise, or 0.35 per cent. The Indian currency also experienced sharp volatility against British pound, euro and Japanese yen and ended with steep losses.
The RBI, meanwhile, fixed the reference rate for the dollar at 65.2226 and for the euro at 80.3412. In the meantime, country's foreign exchange reserves rose by USD 503.6 million to touch a life-time high of USD 424.864 billion in the week to April 6, aided by increase in foreign currency assets, the Reserve Bank said. Foreign investors and funds infused over Rs 3,700 crore in the Indian debt markets.
Besides, they infused Rs 94 crore in the stock markets during the period under review. In the international energy front, global crude prices skyrocketed, posting their largest weekly gain since July after U.S. President Donald Trump's comments about possible military action in Syria and reports of dwindling global oil stocks.
Rising geopolitical concerns alongwith declines in Venezuela's crude oil production also supported the rally. Benchmark Brent crude was up 58 cents at USD 72.60 a barrel and also set for a weekly gain of more than 8 percent going back to July.
On the global front, the US dollar was little changed against a basket of major currencies on Friday as traders waited for more clarity on a possible Western military intervention in Syria. The greenback rebound sharply after a wobble at the start of the week largely benefited from the release of the March FOMC meeting minutes, which suggested that policy officials see a greater risk of an inflation overshoot, meaning a faster rate hike path is possible.
The dollar index, which measures the greenback's value against a basket of six major currencies ended at 89.51.