Rupee weakens as US strike on Iran stokes tensions; opens at 86.77/$

Indian Rupee today: The domestic currency depreciated 18 paise to open at 86.77 against the dollar, after closing at 86.59 on Friday

Indian Rupee slipped after a one-day gain as tensions flared up with investors chasing safe-haven assets after the US struck three nuclear sites in Iran. 

 

The domestic currency depreciated 18 paise to open at 86.77 against the dollar, after closing at 86.59 on Friday, according to Bloomberg. The currency has fallen 1.34 per cent so far this month. 

 

Iran’s Parliament has reportedly approved the closure of the Strait of Hormuz after the US struck three nuclear sites over the weekend. US President Donald Trump declared the three facilities “totally obliterated,” and warned of greater attacks unless Iran makes peace with Israel. 

 

 

Crude oil prices pared gains after it rose as much as 5.7 per cent during the session. Brent crude price was up 1.70 per cent at $78.32 per barrel, while WTI crude prices were higher by 1.71 per cent at 75.10, as of 9:05 AM IST.  Track LIVE Stock Market Updates Here

 

In 2024, about 20 per cent of global petroleum liquids consumption flowed through the Strait of Hormuz, with India among the top destinations for crude oil moving through the route in Asia, according to data from the US Energy Information Administration. Therefore, any potential disruption of the oil trade and crude oil spike could hurt the current account deficit, hurting the currency. 

 

The rupee is expected to open at 86.79 on Monday after strengthening on Friday, noted Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. Despite India's reliance on Iranian oil, it has diversified its sourcing from Russia and the US, reducing its dependence on the Gulf, Bhansali said. "However, higher oil prices could impact the current account, potentially weakening the rupee slightly. "

 

The Reserve Bank of India (RBI) is likely to intervene to maintain market stability, and its forex reserves have reached $698 billion, nearing the all-time high of $705 billion, providing an ample buffer, Bhansali said. "Exporters may consider selling near 86.90 and buying around 86.50, while importers can cover daily cash needs." 

 

Meanwhile, after depreciating 1.29 per cent against the dollar this financial year, the rupee is expected to weaken more because of West Asian military conflicts, with the expectation that prices of crude oil will rise. According to a Business Standard poll, the majority of the respondents expect the rupee to depreciate to 87 a dollar by the end of July.

 

With investors chasing saw assets, the dollar index posted slight gains on Monday. The US dollar index, which measures the greenback against a basket of six major currencies, was up 0.33 per cent at 99.03.