Bond Yield Spikes Boiling Crude Rattles Currency Market; Rupee Nosedive 1.41 Per Cent

Forex: The rupee witnessed a free fall - crashing below the significant 66-mark to end at more than one-year low of 66.12 against the US currency after a sudden crisis of confidence rippled through the currency market in mysterious ways.

Surging global crude prices - the big storm against the grim backdrop of geopolitical flare-ups in the Middle East literally battered the forex sentiment over the weekend.

The Indian unit took a hit of 92 paise, or 1.41 per cent against the resurgent dollar - the biggest loser among Asian currencies. Overall forex mood turned fragile on increasing market conviction of the RBI raising interest rates as early as June despite easing inflation.

Headwinds in the form of widening in trade deficit due to surging crude prices accompanied by portfolio outflows and a more hawkish tone of the Reserve Bank amid unsupportive global factors largely weighed on the rupee front.

Capital outflows too added pressure even as importers rushed to cover their unhedged positions.

The decline in exports and the increased pressure from capital flight all took a toll on the forex stability, fearing a full-blown currency crisis. Country's trade deficit hitting USD 13.69 billion and exports dipping after a gap of four months in March.

The US Treasury Department added India to its watch list of countries with potentially questionable foreign exchange policies, joining China and four others which impacted overall forex trading mood, traders said.

The bond market also witnessed meltdown, steepening the benchmark 10-year yield curve to 7.72 per cent from 7.43 per cent last weekend. Global crude prices hit more than three-year high, as falling U.S. crude stockpiles, geopolitical tension and concerns about supply disruptions in key oil-producing nations supported the energy market despite a brief fall after President Donald Trump suggested in a tweet that OPEC is keeping oil prices artificially high.

Brent crude, an international benchmark, was sharply higher at USD 74.06 a barrel after it met resistance at USD 74.15. Extending its extreme bearish market stance, the rupee opened lower at 65.30 from last weekend's close of 65.20 at the inter-bank foreign exchange (forex) market.

But later succumbing to immense dollar pressure, the domestic currency accelerated its downside momentum to breach the psychologically important support 66-mark and ended at a fresh 13-week low of 66.12 - a level not seen since March 10, 2017.

Stamping its second-straight weekly fall, the rupee depreciated sharply by 115 paise against the USD. The RBI, meanwhile, fixed the reference rate for the dollar at 66.0167 and for the euro at 81.4580.

On the global front, the US dollar rebounded from a mid-week crash to finish the week on a firm note after Fed speakers reiterated they were more confident for a faster rate hike for US interest rates amid easing geopolitical tensions.

The dollar index, which measures the greenback's value against a basket of six major currencies rose to a two-week high of 90.08 against 89.51. Elsewhere, The pound"s rally came to an abrupt halt as economic data from the UK disappointed expectations and after the Bank of England Governor Mark Carney warned that a rate rise in May was not a forgone conclusion. Euro ended lower after a long consolidation phase ahead of next week"s European Central Bank"s monetary policy announcement.