Indian Rupee Tumbles to Two-Week Low Amid Ongoing US-Iran Tensions

The Indian Rupee has been under pressure against the US Dollar, trading at its two-week low of around 95.75. The USD/INR pair is being impacted by the ongoing tensions between the United States and Iran regarding the Strait of Hormuz, a critical chokepoint for global energy supply.

Oil prices have been elevated due to the uncertainty over the strait's reopening, with MCX Crude Oil trading 0.6% higher at Rs. 8,130, close to its three-week high of Rs. 8,170. Economies reliant on oil imports, such as India, tend to underperform in a high-oil-price environment.

Analysts at BNY highlight that hopes for a rapid reopening of the Strait of Hormuz have faded, with US President Donald Trump stating he will not seek to revive the expired U.S., Iran truce. This has left the conflict and control of the vital shipping route unresolved, with Washington demanding unrestricted passage through the strait.

The RBI has also taken steps to intervene in the foreign exchange market, ending its FCNR(B) swap window early due to strong inflows and rising liquidity costs.