The Indian rupee weakened further on Tuesday, falling by 35 paise to close at a record low of 95.63 against the US dollar, as escalating tensions between the United States and Iran triggered fresh risk aversion across global financial markets.
Forex traders said investor sentiment remained fragile amid fears that the prolonged 10-week conflict in West Asia could further disrupt global energy supplies and intensify pressure on crude oil prices. Concerns deepened after US President Donald Trump rejected Iran’s latest response to a US-backed peace proposal, describing it as ‘totally unacceptable’.
At the interbank foreign exchange market, the rupee opened at 95.57 against the dollar and continued to weaken through the session, eventually touching an all-time intraday low of 95.74 before settling at a record closing low of 95.63 on a provisional basis.
The domestic currency had already suffered a steep decline in the previous session, when it plunged 79 paise to end at what was then a historic low of 95.28 against the greenback.
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Analysts said market participants were also reacting to recent remarks made by Prime Minister Narendra Modi regarding fuel conservation and reducing unnecessary imports. Investors interpreted the comments as an indication that policymakers are increasingly concerned about India’s widening trade deficit and mounting balance-of-payments pressures if crude oil prices remain elevated for an extended period.
Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, said the rupee is expected to remain under pressure because of continuing uncertainty surrounding the stalled peace negotiations between the US and Iran.
He added that rising crude oil prices and a stronger dollar could drag the rupee even lower, although possible intervention by the Reserve Bank of India may help stabilise the currency at weaker levels. According to Choudhary, the USD-INR spot pair is likely to trade within the 95.30 to 96 range in the near term.
Meanwhile, the dollar index—which measures the strength of the US currency against a basket of six major global currencies—rose 0.33 per cent to 98.28.
Global crude oil prices also continued their sharp upward march. Brent Crude surged 3.09 per cent to USD 107.43 per barrel in futures trading, fuelling concerns about energy supply disruptions and imported inflation.
Research firm IFA Global said markets became increasingly nervous after Prime Minister Modi’s advisory on Sunday urging citizens to use fuel carefully and reduce foreign exchange outflows.
During a rally organised by the Bharatiya Janata Party in Hyderabad, Modi encouraged citizens to reduce petrol and diesel consumption, rely more on metro rail services, carpool, adopt electric vehicles, and use railways for parcel transportation. He also advocated work-from-home measures where feasible to conserve fuel and foreign exchange amid the worsening West Asia crisis.
The Prime Minister further advised postponing non-essential foreign travel and gold purchases for a year in order to reduce pressure on India’s foreign exchange reserves.
Investor concerns intensified further after Trump stated on Monday that the ceasefire with Iran was at its 'weakest' and on ‘massive life support’. Speaking at the Oval Office, he criticised Tehran’s response to Washington’s peace proposal and reiterated that the US would continue pursuing what he called a ‘complete victory’.
The weakening rupee and geopolitical uncertainty also weighed heavily on domestic equity markets. The BSE Sensex slumped 1,456.04 points to close at 74,559.24, while the Nifty 50 dropped 436.30 points to settle at 23,379.55.
Foreign Institutional Investors continued aggressive selling, offloading equities worth Rs 8,437.56 crore on Monday, according to exchange data, adding further pressure on both the stock market and the rupee.
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