Key facts
- The Indian rupee depreciated against the U.S. dollar, closing at 95.76.
- Sustained dollar demand from oil companies was a primary driver of the rupee's decline.
- Weak Asian market sentiment also contributed to the pressure on the rupee.
- Geopolitical events, including U.S. strikes on Iran and Iran's threats regarding the Strait of Hormuz, impacted markets.
- U.S. inflation data showed a rise in headline inflation to 4.2% year-on-year.
The Indian rupee weakened against the U.S. dollar on Thursday, nearly reversing gains achieved through the Reserve Bank of India's measures to boost dollar inflows. The currency opened at 95.52 and closed at 95.76, marking a 0.5% decline, as persistent dollar demand from oil companies and weak Asian market cues exerted pressure.
Geopolitical tensions, including U.S. strikes on Iran and Iran's subsequent threats to close the Strait of Hormuz, also influenced market sentiment. While Brent crude oil initially rose over 2% on the news, it later traded marginally lower. Dhaval Shah, founder and managing director of De-Risk Forex Consultancy, suggested that the recent upmove in USD/INR was a corrective rally and anticipated a reversal to around 93.50, supported by RBI measures.
U.S. inflation data reported headline inflation at 4.2% year-on-year, with core readings largely keeping Federal Reserve rate expectations stable, thus having a limited impact on currency movements.