The Indian rupee opened 25 paise lower at 95.52 against the US dollar on Thursday, as renewed hostilities between Iran and the United States pushed crude oil prices sharply higher, reviving concerns over India’s external balance and inflation outlook.
The domestic currency had strengthened to an intraday high of 95.10 on Wednesday, aided by dollar sales from state-run banks, which traders believe were conducted on behalf of the Reserve Bank of India (RBI).
According to a Reuters report, market participants view the intervention as a signal that the RBI is keen to prevent further depreciation of the rupee, following its announcement of a series of measures to support the currency. However, traders noted that sustained stability in the rupee would also require support from other factors, particularly a moderation in crude oil prices.
Meanwhile, Brent crude oil surged to as high as $95.50 per barrel after the United States carried out fresh strikes on multiple targets in Iran overnight, significantly escalating tensions in the region.
In response, Iran announced the closure of the Strait of Hormuz and said it had launched retaliatory attacks on 18 US military targets in Kuwait and Bahrain. The move marks a sharp shift from recent weeks, when Iran had allowed limited passage of vessels from friendly nations through the critical shipping route.
(more to come)