The domestic currency came under pressure amid uncertainty surrounding US-Iran negotiations, which has kept global oil markets volatile. Brent crude remained near the $95-per-barrel mark after posting sharp gains in the previous session, raising concerns for oil-importing economies such as India.
Foreign portfolio investor (FPI) selling also added to the pressure.
Overseas investors have sold nearly $2.5 billion worth of Indian equities over the last two trading sessions, according to exchange data.
Since the start of the Iran conflict in late February, cumulative foreign outflows from Indian equities have approached $25 billion.
Despite the recent weakness, traders noted that the rupee has avoided a sharper depreciation due to interventions by the Reserve Bank of India (RBI) in the foreign exchange market, even as crude prices remain elevated and portfolio outflows persist.
Analysts at MUFG said the rupee remains vulnerable if tensions in the West Asia escalate further, warning that the dollar/rupee pair could move towards 98 and potentially even 100 if disruptions around the Strait of Hormuz intensify.
Meanwhile, the dollar index edged higher to 99.19, while Asian currencies traded in a narrow range. Equity futures also indicated a softer start for Indian markets, reflecting cautious investor sentiment.
–With Reuters inputs
