The Indian rupee extended its losing streak against the US dollar on Monday, pressured by a firm American currency and weak sentiment in equity markets. The domestic unit closed 8 paise lower at a provisional rate of 90.28 against the greenback.
Geopolitical Tensions Drive Dollar Strength
Forex dealers attributed the rupee's weakness primarily to renewed geopolitical tensions following recent US military action in Venezuela. This event triggered a risk-averse sentiment across global markets, strengthening the US dollar and overshadowing the supportive impact of softer crude oil prices on the rupee.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, explained that the escalation between the US and Venezuela prompted investors to seek safer assets. "The rupee weakened as escalating geopolitical tensions... triggered risk aversion in currency markets," he stated, as quoted by PTI.
Intraday Volatility and Cumulative Loss
The rupee witnessed significant volatility during the trading session. It opened at 90.21 in the interbank foreign exchange market, then slid to an intraday low of 90.50 amid sustained dollar buying. The currency later recovered some ground to settle at the day's close of 90.28.
This session marked the fourth consecutive day of decline for the rupee. Since December 30, 2025, when it had settled at 89.75, the Indian currency has now depreciated by a cumulative 53 paise against the US dollar.
Broader Market Sentiment and Supporting Factors
The risk-off mood was reflected in other financial indicators. The dollar index, which gauges the greenback's strength against a basket of six major currencies, was up 0.24% at 98.39. Domestically, equity benchmarks also fell, with the Sensex dropping 322.39 points and the Nifty declining 78.25 points.
However, analysts pointed to some mitigating factors that provided cushion to the rupee at lower levels:
- Lower Crude Oil Prices: Brent crude futures slipped 0.36% to $60.53 per barrel, which benefits India's import bill.
- Foreign Fund Inflows: Foreign institutional investors (FIIs) turned net buyers in equities, purchasing shares worth Rs 289.80 crore on Friday.
- RBI's Forex Reserves: Data showed India's foreign exchange reserves increased by $3.293 billion to $696.61 billion for the week ending December 26.
Choudhary noted that easing oil prices could help limit the rupee's downside, and potential intervention by the Reserve Bank of India (RBI) might also offer support. Market participants are now likely to monitor the US ISM manufacturing PMI data for further direction, with the USD-INR spot pair expected to trade in the range of 90 to 90.60 in the near term.
