Rupee Falls 17 Paise Against Dollar As Oil Prices Surge, West Asia Tensions Weigh

The Indian rupee weakened by 17 paise to 95.35 against the US dollar in early trade on Monday, pressured by a stronger greenback and rising crude oil prices amid escalating tensions in West Asia.

Forex market participants said robust US economic data boosted the dollar in overseas markets, while a sharp rise in Brent crude oil prices dampened investor sentiment. Oil prices jumped after Iran launched multiple rounds of missiles at Israel, heightening concerns over regional stability and raising fears of disruptions to global energy supplies.

At the interbank foreign exchange market, the rupee opened at 95.35 per dollar, compared with its previous close of 95.18. On Friday, the domestic currency had gained 56 paise, its strongest single-day rise

in nearly two months, after the Reserve Bank of India announced measures aimed at boosting foreign capital inflows and improving forex market liquidity.

The US dollar index, which tracks the American currency against a basket of six major peers, rose 0.42 per cent to 95.33. Meanwhile, Brent crude climbed 3.43 per cent to USD 96.28 per barrel in futures trading following the latest developments in the Iran-Israel conflict.

Amit Pabari, managing director of CR Forex Advisors, said the missile exchange served as a reminder that geopolitical risks remain elevated despite ongoing diplomatic efforts. He noted that while Israel reportedly intercepted all incoming missiles and no casualties were reported, market caution continues to weigh on the rupee.

According to Pabari, the medium-term outlook for the USD/INR pair remains favourable, with the exchange rate likely to move below 94.50 and gradually head towards the 94.00-93.80 range. However, he cautioned that any escalation in tensions between the US and Iran, resulting in higher oil prices or a stronger dollar, could push the pair back towards the 95.30-95.50 zone.

Domestic equities also came under pressure, with the Sensex falling 724.95 points to 73,518.39 and the Nifty declining 222.45 points to 23,138.60 in early trade. Foreign institutional investors remained net sellers, offloading equities worth Rs 8,776.25 crore on Friday.

In a positive development, India’s foreign exchange reserves increased by $938 million to $682.32 billion during the week ended May 28, according to data released by the RBI. The increase follows a decline of $7.51 billion in the previous week.

Investors are now closely watching developments in West Asia and upcoming US economic data releases, which could provide further clues on the US Federal Reserve’s interest rate trajectory and influence currency market movements.