Rupee Slips 2 Paise in Early Trade Amid Rising Crude Prices and US-Iran Tensions

MUMBAI — The Indian rupee traded in a narrow range and fell 2 paise to 94.97 against the US dollar in early trade on Wednesday. The downward movement was influenced by renewed US-Iran tensions, higher global oil prices, and rising US Treasury yields.

At the interbank foreign exchange market, the rupee opened at 94.97 against the US dollar, marking a decline of 2 paise from its previous close of 94.95 on Tuesday. Forex traders noted that the Reserve Bank of India (RBI) is keeping a close tab on the currency's movement as external pressures mount.

The dollar index, which measures the greenback's strength against a basket of six major currencies, was trading higher by 0.08 per cent at 99.75. Market participants have raised the probability of a September Federal Reserve rate hike, pushing US Treasury yields higher and triggering a broad dollar rally. The US currency continues to benefit from its safe-haven status amid geopolitical concerns.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, stated that the surge in Brent crude and associated inflation concerns have lifted expectations of a September Fed rate hike, providing additional support to the dollar. Bhansali added that the RBI is monitoring the rupee as Brent crude prices reached $95 per barrel and the dollar index hovered around 99.70 due to risk aversion sparked by renewed fighting between the US and Iran, which heightened fears of prolonged disruptions to crude supplies from the Middle East.

In the global commodities market, Brent crude futures traded higher by 0.99 per cent at $95.59 per barrel, driven by concerns over potential disruptions to crude supplies through the Strait of Hormuz.

Meanwhile, the domestic equities market saw a sharp downturn in early trade. The BSE Sensex tanked 788.52 points to 76,155.76, while the NSE Nifty slumped 269 points to 23,786.80. Despite the broader market sell-off, exchange data showed that foreign institutional investors (FIIs) purchased equities worth ₹1,143.38 crore on a net basis on Tuesday.

"Fluctuations in the foreign exchange market, driven by global crude prices and geopolitical tensions, have an immediate ripple effect on domestic equities and import costs. For businesses and startups operating in India, currency volatility underscores the importance of robust treasury management and careful monitoring of macro-economic indicators to mitigate unforeseen cost pressures." — Dr. Shishir Gupta, Founder & CEO, StartupLanes