Daijiworld Media Network - Mumbai
Mumbai, May 8: The rupee depreciated by 25 paise to close at 94.47 (provisional) against the US dollar on Friday, reversing gains recorded in the previous two sessions amid renewed tensions between the United States and Iran over the Strait of Hormuz.
Forex traders said investor sentiment weakened after Iran accused the US of violating the ceasefire by carrying out fresh attacks in the Strait of Hormuz and civilian areas, even as US President Donald Trump maintained that the ceasefire remained in effect.
At the interbank foreign exchange market, the rupee opened at 94.58 against the greenback and later touched an intra-day low of 94.68, registering a decline of 46 paise from the previous close. The domestic currency eventually settled at 94.47, down 25 paise from Thursday’s closing level of 94.22.
Market experts said rising geopolitical uncertainty, weak domestic equities and risk aversion in global markets weighed heavily on the rupee.
Brent crude oil prices, which had earlier declined to around USD 98 per barrel amid hopes of a US-Iran peace deal, edged higher to nearly USD 100 per barrel as investors reassessed the prospects of stability in West Asia.
Anuj Choudhary said the rupee is expected to trade with a slight negative bias due to geopolitical tensions and recovering crude oil prices.
“We expect the rupee to trade with a slight negative bias amid renewed geopolitical tensions in the West Asia war. Recovery in crude oil prices and weak global markets may also pressurise the rupee. FII outflows may further drag the rupee lower,” he said.
He added that traders are also likely to take cues from the upcoming US non-farm payrolls data and projected the USD-INR spot price to trade in the range of 94.10 to 94.90.
On Friday, the United Arab Emirates responded to a missile and drone attack hours after the US claimed it had thwarted attacks on three naval ships in the Strait of Hormuz.
Iranian state media reported that Iranian forces exchanged fire with “the enemy” on Qeshm Island in the Strait of Hormuz. Reports also mentioned loud explosions and defensive firing in western Tehran late Thursday night.
Meanwhile, the dollar index, which measures the strength of the US currency against a basket of six currencies, was trading 0.15 per cent lower at 97.91.
Brent crude futures were trading down 0.25 per cent at USD 99.81 per barrel.
In the domestic equity market, the BSE Sensex declined 516.33 points to close at 77,328.19, while the NIFTY 50 fell 150.50 points to settle at 24,176.15.
According to exchange data, Foreign Institutional Investors sold equities worth Rs 340.89 crore on Thursday.