The Indian Rupee plummeted to an unprecedented low against the US dollar on Tuesday, closing at 95.25. This significant depreciation, which saw the currency fall 2 paise, is largely attributed to escalating geopolitical tensions in the Gulf region, particularly renewed clashes involving the US and Iran, alongside the targeting of infrastructure in the UAE.
Geopolitical Unrest Fuels Currency Decline
Forex traders indicate that the ongoing pressure on the Rupee stems from investors selling off riskier assets in response to the volatile situation in the Middle East. Concerns over potential disruptions to global supply chains have intensified, further impacting market sentiment. India, as a major oil-importing nation, is particularly vulnerable to such geopolitical shifts, especially as Brent crude oil prices hover near $110 per barrel.
Adding to the pressure are sustained foreign institutional investor (FII) outflows and elevated global crude oil prices, which worsen India’s import bill outlook. The absence of robust capital inflows is also hindering any potential recovery for the Indian currency.
Analyst Insights and Market Outlook
Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities, noted that the Rupee extended its weakness, trading near 95.30. Trivedi highlighted that the overall bias remains weak, with the Rupee consistently facing selling pressure on any rebounds. He identified 94.70 as a near-term resistance level and 95.50 as immediate support, with markets closely monitoring US non-farm payrolls and unemployment data for future direction.
Earlier in the day, the Rupee opened at 95.30 against the US dollar and touched an intra-day low of 95.44. On Monday, the currency had already fallen 39 paise, closing at 95.23.
Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, echoed a negative bias for the Rupee. He cited rising global crude oil prices, particularly with the Strait of Hormuz remaining closed, as a key factor. Choudhary also pointed to increased dollar demand from importers and the persistent US-Iran geopolitical tensions as contributors to the Rupee's woes. However, he suggested that intervention from the Reserve Bank of India (RBI) might offer some support at lower levels, projecting a USDINR spot price range of 95.10 to 95.55.
Broader Market Impact
The currency's depreciation coincided with a downturn in the equity markets. The Sensex fell by 251.61 points to close at 77,017.79, while the Nifty declined by 86.50 points, ending the day at 24,032.80. Brent crude, the global oil benchmark, was trading lower by 1.57 percent at $112.64 per barrel in futures trade.