The Indian rupee weakened by 25 paise to settle at 94.47 against the US dollar on Thursday, dragged down by renewed geopolitical tensions in the Middle East. Forex traders said investor sentiment was affected after Iran accused the United States of violating a ceasefire agreement, as Washington carried out fresh attacks in the strategic Strait of Hormuz and civilian areas. Meanwhile, US President Donald Trump maintained that the ceasefire was still in effect, creating further uncertainty in the markets.
Geopolitical Factors Weigh on Rupee
The rupee opened lower and remained under pressure throughout the session, tracking a decline in regional currencies and a rise in crude oil prices. The Strait of Hormuz, a critical chokepoint for global oil shipments, has been a flashpoint in US-Iran tensions. Any disruption in the region could impact oil supplies, adding to inflationary pressures and weighing on the rupee.
Market Sentiment and Outlook
Analysts noted that the rupee's movement will continue to be influenced by developments in the Middle East, as well as domestic factors such as foreign fund flows and the Reserve Bank of India's monetary policy stance. The dollar index, which measures the greenback against a basket of major currencies, also gained ground, adding to the rupee's woes.
On the domestic front, equity markets ended lower, with the benchmark BSE Sensex declining over 200 points. Foreign portfolio investors were net sellers in the capital markets, further pressuring the rupee. Traders are now awaiting cues from the RBI's upcoming monetary policy meeting, where the central bank is expected to maintain a cautious stance amid global uncertainties.
The rupee's fall comes after a period of relative stability, driven by strong foreign inflows and a stable current account deficit. However, the escalation in geopolitical risks has renewed volatility in the currency markets. Market participants are advised to remain vigilant and monitor global developments closely.
