Mumbai: The Indian rupee weakened sharply on Monday and closed 56 paise lower at 95.74 against the US dollar.
The domestic currency erased all the gains recorded in the previous session as investors turned cautious amid growing geopolitical tensions and rising crude oil prices.
At the interbank foreign exchange market, the rupee opened at 95.35 against the dollar. During the day, it touched a high of 95.15 before losing momentum and ending at 95.74 on a provisional basis.
On Friday, the rupee had gained 56 paise to settle at 95.18 after the Reserve Bank of India announced measures aimed at supporting foreign capital inflows and improving liquidity in the foreign exchange market.
Crude Oil Rally Adds Pressure
Forex market experts said the biggest concern for the rupee was the sharp rise in global crude oil prices.
Brent crude futures climbed nearly 4% to around $96.76 per barrel after Iran launched multiple rounds of missiles towards Israel, raising fears of further instability in the Middle East.
Since India imports a large portion of its crude oil requirements, higher oil prices generally increase demand for dollars and put pressure on the rupee.
Strong Dollar Hurts Emerging Market Currencies
The US dollar also remained firm in global markets.
The dollar index, which measures the greenback against six major currencies, was trading above the 100 mark, reflecting continued demand for the US currency amid global uncertainty.
Market participants said investors preferred safe-haven assets as geopolitical risks increased, supporting the dollar and weighing on emerging market currencies, including the rupee.
Weak Equities And FII Selling Impact Sentiment
Domestic stock markets also witnessed heavy selling pressure.
The Sensex plunged 719 points to close at 73,524.26, while the Nifty fell 243.70 points to settle at 23,123.
Foreign institutional investors remained net sellers and offloaded equities worth Rs 8,776.25 crore on Friday, adding further pressure on market sentiment.
Outlook For Rupee
According to analysts, the rupee may continue to trade with a negative bias if crude oil prices remain elevated and geopolitical tensions persist.
However, support from RBI intervention and India’s strong forex reserves, which recently rose to USD 682.32 billion, could help limit further weakness.
Experts expect the USD-INR pair to trade in the 95.40–96.10 range in the near term.
