Rupee drowns, closes at five-month low vs dollar amid Middle East tensions

Rupee drowns:

The Indian rupee plunged 23 paise to close at a five-month low of 86.7875 against the US dollar on Monday, pressured by a strengthening US dollar and volatile crude oil prices following the US airstrike on Iran’s nuclear facilities. The sharp decline in domestic equity markets added further strain on the currency.

The rupee opened at 86.75 on the interbank foreign exchange market and fluctuated between 86.67 and 86.85 before settling at 86.78, compared to last Friday’s close of 86.55. This marks the lowest level for the rupee since January 13, when it ended at 86.70.

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Domestic equities reflected the market jitters caused by geopolitical tensions. The benchmark 30-share BSE Sensex tumbled 511.38 points, or 0.62 percent, to close at 81,896.79 after hitting an intraday low of 81,476.76. The broader NSE Nifty index dropped 140.50 points, or 0.56 percent, to finish at 24,971.90, following a low of 24,824.85 earlier in the session.

Market participants appeared cautious but not panicked, as they awaited further developments regarding Iran’s response and the future of Tehran’s nuclear program. The US dollar index gained 0.60 percent to 99.29, reflecting strength against a basket of global currencies. Brent crude oil prices rose slightly by 0.08 percent to $77.07 per barrel, contributing to uncertainty in the markets.

Despite the downward pressure, some support for the rupee came from strong foreign institutional investor (FII) inflows, with FIIs purchasing ₹7,940.70 crore worth of stocks on Friday. Additionally, India’s foreign exchange reserves saw a healthy increase, rising by USD 2.294 billion to USD 698.95 billion for the week ending June 13, according to the Reserve Bank of India.

Analysts warn that the rupee’s trajectory will remain closely tied to global crude oil price fluctuations and the US dollar’s strength amid ongoing geopolitical risks.