Rupee Drops to 96.59 Against US Dollar Amid Oil Price Spike and Market Volatility

The Indian rupee suffered a sharp setback on Wednesday, falling 34 paise to settle at 96.59 against the US dollar, as soaring crude oil prices, rising geopolitical tensions and weak domestic equity markets weighed heavily on investor sentiment.

The domestic currency opened at 96.36 in the interbank foreign exchange market and moved between 96.25 and 96.57 during the trading session before ending at 96.59 (provisional). The decline erased Tuesday's gains, when the rupee had strengthened by 11 paise to close at 96.25.

Currency market experts attributed the weakness to a combination of higher global crude oil prices, renewed geopolitical uncertainty in West Asia and cautious investor sentiment across global financial markets.

According to Dilip Parmar, Senior Research Analyst at HDFC Securities, the rupee came under renewed pressure after a brief recovery, with elevated crude prices and fresh concerns over US tariff rhetoric dampening market confidence. He said the USD-INR pair continues to remain on a bullish trajectory, with immediate support around 96.10, while the currency could retest the 97-mark, which is close to its record high.

Adding to the pressure, Brent crude jumped more than 4 per cent, trading near USD 95 per barrel, amid concerns over the security of oil shipments through key maritime routes, including the Red Sea, the Strait of Hormuz and the Bab el-Mandeb.

Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, said crude prices surged following military strikes involving the US and Iran, while threats to oil shipments further intensified supply concerns. However, he noted that ongoing diplomatic efforts and any intervention by the Reserve Bank of India (RBI) could help limit further weakness in the rupee. He expects the USD-INR to trade between 96.25 and 96.85 in the near term.

The US dollar index, which measures the greenback against six major global currencies, edged 0.07 per cent lower to 101.10, offering little relief to the rupee.

Domestic equities also remained under pressure, with the Sensex plunging 715.06 points to 76,755.05, while the Nifty declined 191.45 points to close at 23,996.25, reflecting broad-based selling across sectors.

Despite the currency's decline, Foreign Institutional Investors (FIIs) remained net buyers, purchasing equities worth Rs 1,650.16 crore on Tuesday, according to exchange data.

With crude oil prices remaining elevated and geopolitical developments continuing to dominate global markets, traders expect the rupee to remain volatile in the coming sessions.