The Indian rupee depreciated by 22 paise to settle at 94.23 against the US dollar on Friday, marking a fresh low amid persistent geopolitical tensions and their impact on global fuel prices. Despite a ceasefire agreement between the United States and Iran, uncertainty regarding ship movement through the Strait of Hormuz continued to rattle markets, forex analysts noted.
Market Impact
The uncertainty surrounding the Strait of Hormuz, a critical chokepoint for global oil shipments, unsettled global fuel prices and triggered a massive sell-off in domestic equity markets. Foreign fund outflows further exacerbated the rupee's decline, as investors sought safer havens amid the volatility.
According to forex traders, the rupee opened weak and remained under pressure throughout the session, eventually closing at 94.23, down 22 paise from the previous close of 94.01. The domestic currency had earlier touched an intraday low of 94.30.
Global Factors at Play
The ongoing geopolitical instability in the Middle East, particularly the unresolved situation in the Strait of Hormuz, has kept oil prices elevated. Higher crude oil import costs weigh heavily on India's trade deficit and exert downward pressure on the rupee.
Meanwhile, the dollar index, which measures the greenback's strength against a basket of six major currencies, remained firm, adding to the rupee's woes. The interplay of these factors has made the Indian currency one of the worst performers in the Asian region this week.
Outlook
Analysts suggest that the rupee's trajectory will largely depend on the resolution of geopolitical tensions and the direction of foreign capital flows. Any further escalation in the Middle East could push the rupee beyond the 94.50 mark, while a de-escalation might trigger a recovery. Market participants are advised to monitor developments in the Strait of Hormuz and global crude oil prices closely.
