The Indian rupee weakened by 30 paise against the US dollar on Monday, closing at 94.63 amid continued geopolitical uncertainty in the Middle East and sustained strength in the American currency.
The domestic currency experienced a volatile trading session, opening at 94.42 against the dollar compared to Friday’s closing level of 94.33. During the day, the rupee touched an intraday high of 94.24 and a low of 94.76 before settling at 94.63.
According to foreign exchange market participants, the rupee came under pressure despite supportive factors such as debt inflows, deposit inflows and a decline in global crude oil prices. The gains from these factors were largely offset by strong demand for dollars from importers and uncertainty surrounding the evolving geopolitical situation in the Middle East.
Strong Dollar Continues to Pressure Emerging Market Currencies
The US dollar remained firm in global markets, supported by the Federal Reserve’s hawkish policy outlook and lingering uncertainty over diplomatic efforts involving the United States and Iran.
The dollar index, which measures the greenback against a basket of six major currencies, was trading marginally higher at 100.88 during the session.
Market analysts noted that importer demand for dollars played a significant role in weakening the rupee despite otherwise favourable external conditions.
Dilip Parmar, Research Analyst at HDFC Securities, said that lower crude oil prices and a relatively stable global environment failed to provide adequate support to the Indian currency.
“Despite a favourable backdrop of lower crude oil prices, a stable greenback and positive risk-on sentiment, the rupee faced downward pressure as bargain hunting by traders and importers drove up USD demand,” he said.
Parmar added that the USD-INR pair is likely to find support around the 94.10 level, while immediate resistance is expected near 95.30.
Falling Crude Offers Limited Relief
Brent crude futures, the global benchmark for oil prices, declined 1.75 per cent to $79.16 per barrel. Typically, lower crude prices help support the rupee by reducing India’s import bill, but the benefit was overshadowed by broader market concerns.
Investors also continued to monitor developments related to the Strait of Hormuz and ongoing diplomatic efforts between the United States and Iran. While negotiations in Switzerland reportedly concluded with an agreement to pursue a 60-day diplomatic process aimed at reaching a long-term settlement, uncertainty remains regarding maritime security and energy supplies in the region.
Stock Market Gains Fail to Lift Rupee
Domestic equity markets ended the session in positive territory. The BSE Sensex rose 291.17 points to close at 77,094.07, while the NSE Nifty gained 89.80 points to settle at 24,102.90.
However, foreign institutional investors (FIIs) remained net sellers, offloading equities worth ₹635.91 crore during the trading session. The outflows added to pressure on the domestic currency.
On the economic front, recent government data showed that growth in India’s eight core infrastructure sectors slowed to 0.5 per cent in May, marking a seven-month low. The slowdown was attributed to weaker output in coal, crude oil and refinery products.
RBI Continues Forex Market Intervention
The Reserve Bank of India (RBI) has remained active in the foreign exchange market to manage currency volatility.
According to the RBI’s monthly bulletin, the central bank recorded net sales of $8.944 billion in the spot foreign exchange market during April, following net sales of $9.758 billion in March.
The bulletin noted that the rupee faced pressure during April and May due to geopolitical tensions and foreign portfolio outflows. However, it also highlighted that the currency recovered during June, aided by capital inflows, easing geopolitical concerns and lower crude oil prices.
Despite Monday’s decline, RBI data shows that the rupee has appreciated by approximately 0.2 per cent against the US dollar during the current financial year up to June 19.
Market participants are expected to continue closely tracking developments in global energy markets, US monetary policy and geopolitical events in the Middle East, all of which are likely to influence the rupee’s trajectory in the coming weeks.
