The Indian rupee weakened sharply by 15 paise to 96.14 against the US dollar on Monday amid strains from soaring crude oil prices and uncertainty around the West Asia crisis.
The local currency breached the psychologically important 96 level against the US greenback at open and continued to depreciate further. On Monday, the Rupee closed at 95.98.
"The RBI's evident intent to defend the 96 zone and the continuing swap inflows suggest that upside will remain limited, with 96.10–96.20 as a key resistance zone. A sustained break below 95.70 could open the way towards 95.20–95.00," said Amit Pabari, MD at CR Forex Advisors.
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Rupee's weakness comes in the backdrop of an overall bearish market sentiment with a steep decline in the domestic equity market, FII outflows and a global equity selloff. In the previous session, safe-haven assets like gold and silver dipped nearly 3%.
"The rupee's depreciation is also supporting INR-denominated metal prices, while the currency continues to track foreign portfolio outflows and elevated crude prices. Ongoing U.S. tariff tensions related to India's purchases of Russian oil remain an additional external factor, while the RBI is likely to continue smoothing excessive volatility around key levels. The bias remains cautiously constructive for the dollar, with a decisive break above 96.40 opening the way toward 96.60. A sustained move below 96.00, however, could ease the immediate upward pressure," said Ponmudi R, CEO of Enrich Money.
Oil prices extended gains for a second session, with Brent crude holding above $106 a barrel and West Texas Intermediate approaching $94, as uncertainty around US-Iran negotiations outweighed the partial restoration of flows through Saudi Arabia's key East-West pipeline.
The market is weighing two competing forces: the prospect of more supply returning through Saudi Arabia and the continued uncertainty around the Strait of Hormuz.
Iranian officials have privately expressed pessimism about reaching a deal with Washington that would end hostilities and reopen the waterway before the US midterm elections in November, according to Bloomberg reports. President Donald Trump has also rejected an Iranian proposal linked to reopening the strait within seven days.
US-Iran talks remain fluid, however. Reuters reported that officials from both sides were separately engaging with mediators in a renewed effort to end the conflict and reopen the Strait of Hormuz.
Rupee's Scary Freefall
In May, the Indian rupee had weakened rapidly against the US dollar, hitting new all-time lows during each session at the heels of the on-going Iran conflict. At one point, the street was expecting the local legal tender to touch 100/dollar levels.
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