The Indian rupee weakened 7 paise to open at 95.75 against the US dollar on Wednesday, continuing its downward trajectory amid persistent geopolitical tensions. According to CNBC TV18, the currency opened in a 95.75-95.78 range, against its 95.68 previous close, reinforcing expectations that the rupee remains vulnerable to slipping past the 96-per-dollar mark. The latest opening reflects ongoing pressure from continued portfolio and merchant flows skewed against the currency due to ongoing geopolitical tensions, with the domestic currency remaining under pressure as fading hopes of a near-term resolution to the Iran conflict kept global risk sentiment fragile and weighed on emerging market currencies.
Iran said on Tuesday that the U.S. had violated a ceasefire by striking targets near the contested Strait of Hormuz, potentially complicating efforts to bring the three-month-long war to a close. As reported by CNBC TV18, this development has kept hopes for an imminent end to the Middle East conflict at bay, contributing to the rupee's continued weakness. The fading hopes of a near-term resolution to the Iran conflict have kept global risk sentiment fragile and weighed on emerging market currencies, raising fears of further escalation in the region and adding pressure on oil-importing economies such as India.
Worries over the economic risks to India from the Iran war have kept foreign portfolio capital in a steady exit mode, with overseas investors selling more than $24 billion of Indian stocks and bonds between March and so far in May. According to CNBC TV18, concerns over the economic impact of the Iran conflict on India have triggered sustained foreign investor selling, with overseas investors offloading more than $24 billion worth of Indian stocks and bonds between March and May so far. This sustained selling pressure has left India staring at a steep balance of payments gap for the fiscal year ending March 2027.
Despite relatively strong macroeconomic fundamentals, structural import dependence continues to bias the currency lower, as noted by Deepali Bhargava, regional head of research for Asia Pacific at ING. As reported by CNBC TV18, Bhargava expects USD/INR to end the year at 95.50, with risks skewed more towards gradual stabilisation than a disorderly weakening. The rupee's position as the fifth-largest global market by capitalisation is under threat as Taiwan closes in on the South Asian nation's spot, powered largely by the rapid rise of chip-making major Taiwan Semiconductor Manufacturing Co.
Key indicators show the one-month non-deliverable rupee forward at 96.20 and onshore one-month forward premium at 37 paisa. The dollar index stands at 99.12 while Brent crude futures are down 0.8% at $98.8 per barrel. According to NSDL data, foreign investors bought a net $230.5 million worth of Indian shares on May 25, while selling a net $20.3 million worth of Indian bonds on the same day. Meanwhile, Asian equities traded higher, supported by gains in technology-heavy markets such as South Korea and Taiwan, although Indian equity futures pointed to a muted opening.
