The Indian rupee fell by 17 paise to settle at ₹86.72 per US dollar in early trade today, pressured by a surge in global crude oil prices and geopolitical tensions in the Middle East. The decline in the international oil benchmark and a firmer dollar weighed heavily on the currency, overshadowing stabilizing factors such as foreign inflows and healthy forex reserves .
What’s Driving the Weakness?
- Oil Spike Following US-Iran Tensions
- The US conducted airstrikes on Iranian nuclear facilities, pushing Brent crude to ₹77.27 (USD 77.27) per barrel, marking its highest level since January.
- Markets fear supply disruptions in the Strait of Hormuz, a strategic chokepoint responsible for ~20% of global oil shipments.
- Stronger Dollar, Weak Equities
- The US dollar index strengthened by approximately 0.31% to 99.01, adding to the rupee’s decline.
- Indian equity benchmarks also tumbled—Sensex dropped over 700 points (~0.8%), while Nifty fell 1.1%, increasing outflows from the forex market.
- Geopolitical Risk Premium
- Ongoing Middle East tensions have led analysts to caution that further escalation could push Brent crude to USD 81-110 per barrel, exacerbating inflation and current account pressures.
What’s Mitigating the Slide?
- Foreign Inflows & Forex Reserves
- Despite the weakness, foreign institutional investors (FIIs) pumped ₹7,940 crore into equities on Friday, and India’s forex reserves rose by USD 2.29 billion to USD 698.95 billion, providing some buffer.
- RBI Intervention
- Traders suggest the Reserve Bank of India (RBI) may have intervened marginally to prevent disorderly rupee movements .
Market Outlook & Expert Views
- Short-Term Weakness
- Analysts expect the rupee could further weaken toward ₹86.80–87.50 if crude prices escalate.
- Volatility Levels
- Surprisingly, one-month implied volatility remains contained, suggesting markets view the downside as gradual and not signaling a sharp depreciation yet.
- Warning from MUFG & Goldman Sachs
- MUFG cautions that India remains vulnerable as an oil importer and may need to revise rupee forecasts. Goldman warns crude could spike if tensions persist .
Key Takeaways for Investors & Traders
| Area | Implications |
|---|---|
| Currency Outlook | Weakness likely to continue if crude remains elevated; RBI may help stabilize levels |
| Inflation & Trade Deficit | Higher oil prices could inflate inflation and widen trade gaps |
| Equity Market Pressure | Risk aversion may persist; foreign flows crucial |
| Hedging Strategy | Exporters and importers should actively hedge exposure at ~₹86.80–87.00 zone |
| Technical Support/Resistance | Immediate support around ₹86.50; key resistance near ₹86.00 where RBI may intervene |
Conclusion
The ₹86.72 rupee level reflects growing concerns over escalating Middle East tensions and revived crude oil volatility. While India’s macro buffers and RBI support offer short-term relief, persistent supply-side pressure could prolong the currency’s weakness. Stakeholders—especially exporters, importers, and portfolio managers—need to closely track global risk cues and adjust hedging and portfolio strategies accordingly.
Also Read: PNB Disburses ₹17 Crore to Martyrs’ Families Under Rakshak Plus Scheme
One thought on “Rupee Drops 17 Paise to 86.72 Amid Rising Crude Oil & Geopolitical Tensions”