
The Indian rupee depreciated 25 paise to close at 94.47 (provisional) against the U.S. dollar on Friday (May 8, 2026), after rising in the past two sessions, on renewed tensions between the U.S. and Iran over the Strait of Hormuz. At the interbank foreign exchange market, the rupee opened at 94.58 against the U.S. dollar, then lost momentum and touched 94.68 against the American currency, registering a fall of 46 paise over its previous close. On Thursday, the rupee pared initial losses and settled the day on a positive note, up 27 paise at 94.22 against the greenback, as reported by The Hindu. Forex traders said investor sentiments were affected after Iran accused the U.S. of violating the ceasefire as the U.S. carried out fresh attacks in the Strait of Hormuz and civilian areas, while President Donald Trump said the ceasefire was still in effect. Risk aversion in global markets and weak domestic equities also weighed on the rupee, with the currency showing mixed performance amid ongoing geopolitical uncertainties.
India's foreign exchange reserves declined by $7.794 billion to $690.693 billion during the week ended May 1, according to data released by the Reserve Bank of India (RBI) on Friday. The reserves had fallen by $4.82 billion in the previous reporting week ended April 24, taking the overall forex kitty to $698.487 billion. India's forex reserves had touched an all-time high of $728.494 billion during the week ended February 27 before the outbreak of the Middle East conflict, which triggered pressure on the rupee and prompted the RBI to intervene in the foreign exchange market through dollar sales. The decline in forex reserves comes amid continued geopolitical tensions and dollar demand from oil refiners and importers, adding pressure on the rupee despite central bank support measures.
Brent crude was trading lower by 0.25% at $99.81 per barrel in futures trade, providing some relief to the rupee despite ongoing geopolitical tensions. Brent oil prices, which had fallen to $98 per barrel amid the US-Iran peace deal, edged higher to around $100 per barrel as investors weighed the prospects for a West Asia peace deal. Although US President Donald Trump said the ceasefire remained in effect and Washington was awaiting Tehran's response to a fresh peace proposal, a flare-up in fighting occurred on Thursday as Washington awaited a response from Tehran to its proposal to end the conflict. Market participants noted that measures announced by the Reserve Bank of India to support the rupee have provided only temporary relief, while persistent dollar demand from oil refiners and hedging activity by importers continued to pressure the currency. If optimism on a U.S.-Iran deal is misplaced yet again, the dollar would have plenty of upside room to recover with 'a good chance investors will prove more cautious and won't jump as aggressively into de-escalation trades', analysts at ING noted.
On the domestic equity market front, Sensex fell 516.33 points to settle at 77,328.19, while the Nifty dropped 150.50 points to 24,176.15. Foreign Institutional Investors offloaded equities worth ₹340.89 crore on Thursday (May 7), according to exchange data. The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 97.91, down 0.15%, showing mixed signals for currency markets. Bhansali further added that the rise in oil prices took USD/INR higher towards 94.43 this morning in Asian trading, and the dollar index also moved higher towards 98.22 while Asian currencies were a tad weaker. Traders expect the rupee to trade between 93.75 and 94.75 on Friday and next week, as the central bank would likely buy dollars to shore up its reserves at around 94/$ levels, according to The Economic Times. Investors await a key U.S. labour market report due later in the day, with next week's focus on India's consumer inflation data for April, alongside news-flow surrounding the Iran war.
Despite market volatility, India's goods and services exports rose 4.6% to an all-time high of $863.11 billion during 2025-26, up from $825.26 billion in 2024-25, according to revised commerce ministry data as reported by The Hindu BusinessLine. Merchandise exports grew 0.93% to $441.78 billion in the last fiscal year from $437.70 billion in 2024-25, the data showed. India is among the most exposed to economic risks arising around prolonged conflict in the Middle East as it imports a majority of its energy needs, making the rupee particularly sensitive to oil price volatility and geopolitical developments.