The Indian rupee weakened by 41 paise to close at 94.56 (provisional) against the US dollar on Tuesday, as rising crude oil prices and continued foreign capital outflows amid escalating geopolitical tensions weighed on investor sentiment.
Forex traders noted that the rupee has already seen a sharp decline, factoring in concerns over a widening Current Account Deficit (CAD) and volatile capital flows. Sustained foreign fund outflows also added pressure, with Foreign Institutional Investors (FIIs) withdrawing over USD 19 billion from Indian equities so far this year.
At the interbank foreign exchange market, the rupee opened at 94.35 against the US dollar, slipped to an intraday low of 94.58, and eventually settled at 94.56 (provisional), marking a fall of 41 paise from its previous close.
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On Monday, the rupee had ended marginally higher by one paisa at 94.15 against the US dollar. “The primary pressure on the rupee stems from weak capital inflows. Net FDI inflows have remained subdued, while FPI flows are impacted by global uncertainty, relatively high equity valuations, and the lack of a strong AI-led investment narrative in India,” said Rajani Sinha, Chief Economist at CareEdge Ratings.
Meanwhile, the dollar index, which measures the greenback against a basket of six currencies, rose 0.24 per cent to 98.73. Global oil benchmark Brent crude was trading 2.62 per cent higher at USD 111.07 per barrel in futures trade, further adding to external pressures. “There is considerable uncertainty surrounding the West Asia conflict. Even if tensions ease in the near term, crude prices are expected to average USD 85–90 per barrel in FY27. Under this scenario, the rupee is likely to trade in the 92–93 range on average,” Sinha added.
In the domestic equity market, the BSE Sensex fell 416.72 points to close at 76,886.91, while the NSE Nifty declined 97 points to end at 23,995.70.
Exchange data showed that FIIs offloaded equities worth Rs 1,151.48 crore on Monday.
“The rupee appears somewhat undervalued based on interest rate differentials and real effective exchange rate indicators. However, if geopolitical tensions escalate further and crude oil prices rise, additional downward pressure on the rupee cannot be ruled out,” Sinha said.
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