Rupee slips to 96.31 on US-Iran strikes, foreign outflows
The Indian rupee extended its losses to a fourth consecutive session on Thursday, dropping to 96.31 against the US dollar as escalating military strikes between the US and Iran and sustained foreign investor selling offset a positive open in domestic equities.
The Indian rupee opened at 96.28 against the US dollar before slipping to 96.31 in early interbank trade, marking a decline of 6 paise from the previous session's close. This followed a 9 paise drop on Wednesday, when the local unit settled at 96.25, extending its losing streak to a third consecutive day. The continued depreciation underscores the vulnerability of the emerging market currency to external shocks and shifting capital flows.
Driving the sentiment are escalating military tensions in the Middle East. The United States intensified strikes against Iran early on Thursday, targeting locations further north and firing on a ship accused of attempting to break a US naval blockade. Iran retaliated before dawn with missile and drone fire aimed at Bahrain and Kuwait. The sudden escalation injected fresh volatility into global asset classes, putting immediate pressure on Asian currencies.
For a net oil-importing nation like India, any conflict in the Persian Gulf demands close attention from corporate treasurers and fixed-income investors. However, the immediate impact on the trade deficit was somewhat muted at the time of reporting. Brent crude futures, the global oil benchmark, actually traded 0.31 per cent lower at $84.69 per barrel. This retreat in crude prices prevented a more severe sell-off in the rupee, which typically suffers when energy costs spike.
Domestically, the currency found a floor due to a resilient equity market, which offered some counterweight to the geopolitical risk. The Sensex climbed 185.77 points to 77,400.40 in early trading, while the Nifty rose 42.15 points to 24,132.60. This local stock strength suggests domestic institutional and retail buyers are absorbing foreign exits, providing a degree of stability for the broader financial system.
Despite the equity support, the structural headwind of foreign capital flight continues to weigh heavily on the local unit. Foreign Institutional Investors sold equities worth Rs 735.83 crore on Wednesday alone, according to exchange data. For market participants, the current dynamic presents a dual reality: robust domestic demand for Indian equities is insulating stock indices, but persistent FII outflows combined with geopolitical uncertainty mean the rupee remains under pressure.
