Rupee Falls Beyond 96 Against US Dollar for First Time Since May Amid Rising Oil Prices
Rupee weakened past the 96-mark against the US dollar for the first time since late May, closing at 96.16 in early trade on Tuesday. The domestic currency depreciated 48 paise from its opening value of 95.95 in the interbank foreign exchange market. On Monday, the rupee had settled 30 paise lower at 95.68 against the greenback.
Factors Pressuring the Rupee
Forex dealers attributed the rupee’s decline to rising geopolitical tensions in West Asia and surging crude oil prices. Investors shifted towards the US dollar, seeking safe-haven assets amid increasing uncertainty. The US dollar index, which measures the greenback against a basket of six major currencies, was trading at 101.17, down 0.06%.
Global crude oil prices continued to rise, driven by escalating conflict between the United States and Iran. Brent crude, the global benchmark, increased by 2.02% to $84.98 per barrel in futures trade. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted that higher crude prices negatively impact the rupee, raising concerns over India’s current account deficit and trade balance.
Market Reactions
Indian benchmark indices also faced declines in early trade, influenced by the spike in crude oil prices. The BSE Sensex fell 0.42% to 77,294.12, while the Nifty50 dropped 0.64% to 24,144.60. Asian equity markets mirrored this trend, reacting to the military escalation in the Middle East and weakness in technology stocks. Japan’s Nikkei 225 declined by 1%, and South Korea’s Kospi dropped 3.2%.
The renewed military actions, including US strikes on Iran and the announcement of a blockade in the Strait of Hormuz, have raised fears of supply disruptions. This situation is contributing to tighter global oil supplies and higher fuel prices.
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