Global markets fell this week when Russian President Vladimir Putin ordered an invasion of Ukraine early in the morning on Thursday. The SPOT USDINR pair climbed to a high of 75.82, a level seen in December 2021. Kiev reported columns of Russian troops crossing the borders with Russia and Belarus extending from the north and east, and landing on the Black Sea coasts to the southwest. US President Joe Biden called the Russian action an “unprovoked and unwarranted attack”. All major nations condemned Russia’s act and said it was a flagrant violation of international law.

The United States was quick to impose new sanctions on Russian banks and also cut off more than half of Russian high-tech imports. The European Commission bloc said it would impose a new round of sanctions that would severely hit the Russian economy. The UK has also been handed the largest sanctions ever imposed on Russia.

Markets managed to erase its losses after US President Joe Biden reaffirmed that US forces would not fight in Ukraine. Brent crude oil prices also climbed to multi-year highs. Prices reached $105.74 a barrel before pulling back. We expect SPOT USDINR to trade under pressure and test the 76-76.25 levels over the coming week. The levels around 75 are a crucial support which if broken will trigger a correction towards the 74.60 levels in the pair.

(The above is an outlook note on the rupee from Emkay Global Financial Services’ Currency Desk)

Article first published: Saturday, February 26, 2022, 9:17 a.m. [IST]