The local currency came under pressure after fresh hostilities emerged in the West Asia following stalled peace talks between the United States and Iran. The US military said Iranian missile attacks targeting Bahrain, Kuwait and other regional locations were either intercepted or unsuccessful, while diplomatic efforts between Washington and Tehran showed limited progress.
The developments supported a third straight daily increase in oil prices. Brent crude futures rose about 1% to nearly $97 per barrel, raising concerns over India’s import bill and current account deficit, given the country’s dependence on crude imports.
Most Asian currencies traded lower, with the Indonesian rupiah touching a record low. Market participants said the rupee was also weighed down by continued foreign portfolio outflows from Indian equities.
Foreign investors were net sellers of more than $800 million worth of Indian shares on Tuesday, according to provisional exchange data. Separately, NSDL data showed foreign investors sold a net $403.3 million worth of Indian equities on June 1, while purchasing a net $2.7 million worth of Indian bonds.
Traders expect the Reserve Bank of India (RBI) to continue intervening in the foreign exchange market to curb excessive volatility. Market focus is also shifting to the RBI’s monetary policy decision due on Friday.
While most economists expect the central bank to keep interest rates unchanged, rising crude oil prices and geopolitical uncertainties have increased attention on the RBI’s inflation outlook and policy guidance.
Analysts said the central bank’s commentary on the future path of interest rates will be closely watched, especially amid concerns that higher energy costs could add to inflationary pressures.
Among other market indicators, the dollar index stood at 99.21, while the one-month non-deliverable rupee forward was quoted at 95.63. The benchmark 10-year US Treasury yield was at 4.46%.
-With Reuters inputs
