Amidst escalating Gulf tensions and rising oil prices, the Indian rupee has plummeted to a record low against the US dollar, sparking concerns for the Indian economy.
Key Points
- The Indian rupee fell to a record low of 95.25 against the US dollar due to investor concerns.
- Geopolitical tensions in the Gulf, particularly attacks on UAE infrastructure, have reignited supply chain fears and impacted the rupee.
- High Brent crude oil prices, hovering near USD 110 per barrel, are putting pressure on oil-importing economies like India.
- Unabated foreign capital outflows and geopolitical uncertainties are further denting investor sentiment and weakening the rupee.
The rupee fell 2 paise to close at an all-time low of 95.25 (provisional) against the US dollar on Tuesday, as investors are retreating from riskier assets amid renewed clashes in the Gulf and targeting of UAE infrastructure, which have reignited supply chain fears.
Forex traders said Brent oil, hovering near USD 110 per barrel, is maintaining pressure on oil-importing economies like India. Moreover, factors such as unabated foreign capital outflows amid rising geopolitical uncertainties dented investor sentiments further.
Impact Of Gulf Tensions On Indian Rupee
At the interbank foreign exchange market, the rupee opened at 95.30 against the US dollar, then lost ground and touched an all-time low of 95.44 in intra-day trade. The rupee finally settled for the day at a fresh record low of 95.25 (provisional), registering a fall of 2 paise over its previous close.
On Monday, the rupee fell 39 paise to close at an all-time low of 95.23 against the US dollar.
Expert Analysis On Rupee's Performance
"We expect the rupee to trade with a negative bias on rising global crude oil prices as the Strait of Hormuz continues to remain closed. Dollar demand from importers and ongoing geopolitical tensions between the US and Iran may also pressure the rupee.
"However, RBI intervention may support the rupee at lower levels. USDINR spot price is expected to trade in a range of 95.10 to 95.55," said Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan.
Global Economic Factors Affecting Rupee
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 98.47, up 0.10 per cent.
Brent crude, the global oil benchmark, was trading lower by 1.57 per cent at USD 112.64 per barrel in futures trade.
Domestic Market Performance
On the domestic equity market front, Sensex declined 251.61 points to settle at 77,017.79, while the Nifty fell 86.50 points to 24,032.80.
Foreign Institutional Investors purchased equities worth Rs 2,835.62 crore on Monday, according to exchange data.
India's Response To Gulf Attacks
Prime Minister Narendra Modi on Tuesday strongly condemned the attacks on the United Arab Emirates' port city of Fujairah that resulted in injuries to three Indian nationals.
Modi's sharp denunciation of the attacks came a day after the Indians were injured after drone strikes caused a fire at a major oil industry zone in Fujairah. The UAE had accused Iran of carrying out the strike.
The attack on Fujairah city came as the ceasefire between the US and Iran came under strain in the Strait of Hormuz.
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