The Indian rupee depreciated 28 paise to close at 96.03 (provisional) against the US dollar on Monday, pressured by risk-off sentiment in global markets, rising crude oil prices and continued geopolitical uncertainty surrounding the US-Iran standoff.
The rupee opened at 95.89 against the US dollar at the interbank foreign exchange market and weakened further during the session. It had closed at 95.75 on Friday, after gaining 24 paise.
Forex traders said sentiment deteriorated after the US rejected a deal proposal by Iran, reducing hopes of an early reopening of the Strait of Hormuz. The continued uncertainty has weighed on global risk assets and pushed crude oil prices higher, adding pressure on the Indian currency.
“Brent crude oil breached the USD 108 per barrel mark while global equities tanked. The US dollar and US Treasury yields also strengthened,” said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.
Choudhary said the rupee could continue to trade with a negative bias as geopolitical tensions persist. However, he noted that possible intervention by the Reserve Bank of India could provide support to the currency at lower levels.
The dollar index, which measures the US currency against a basket of six major currencies, was trading 0.16 per cent higher at 101.12. Meanwhile, Brent crude futures rose 3.57 per cent to USD 108.04 per barrel.
Domestic equities also witnessed heavy selling pressure. The Sensex plunged 1,124.02 points to settle at 72,771.72, while the Nifty declined 360.25 points to close at 22,780.25.
Foreign Institutional Investors (FIIs) also remained sellers, offloading Indian equities worth Rs 3,693.93 crore on a net basis on Friday, according to exchange data.
India’s foreign exchange reserves also declined by USD 14.881 billion to USD 765.901 billion during the week ended September 18, primarily due to a fall in foreign currency assets, according to data released by the Reserve Bank of India.
Market participants are expected to closely monitor developments in the US-Iran situation, crude oil prices, movements in the dollar and signals from US Federal Reserve officials for further direction in the currency market.