INR vs USD: Indian rupee trades near record low at 95.46 against US dollar on May 5; details here

Forex traders on Tuesday were focusing on the fragile ceasefire deal between the United States and Iran, as fresh attacks in the Strait of Hormuz weighed down the market sentiment amid a lack of peace deal between the two nations in conflict.

As of 11:37 am (IST), the Indian rupee was trading at 95.408 against the US dollar on Tuesday, compared to 95.388 at the previous currency market close, according to the data collected from Investing.com.

In situations of heightened uncertainty, investors tend to pull money out of the emerging markets like India to shift their investments into other safe-haven bets like gold or a stable benchmark currency like the US dollar, boosting their demand in the market.

The Indian currency was trading close to its all-time low of 95.52 against the US dollar, to which the rupee dropped last week amid the weak global cues from the ongoing conflict in West Asia.

Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, told the news agency PTI that the oil prices, along with the Indian rupee, becoming vulnerable to the US dollar index rise, have weighed down on the domestic currency.

“With oil boiling rupee on Monday fell to a closing low of 95.0875 and this morning the opening was still lower as it becomes more and more vulnerable when dollar index rises due to safe-haven buying and oil prices rise due to the continuous fighting in the Gulf Region,” said Bhansali.

Oil & US dollar impact

Global benchmark, Brent crude oil prices surged to near $114 per bbl during Tuesday’s market session, compared to $113.82 per bbl at the previous commodity market close, according to Investing.com data.

The oil prices were trading higher due to the supply chain disruption risk following the renewed tensions in the Strait of Hormuz, following fresh attacks amid the ceasefire deal.

Latest media reports suggest that 19 Iranian missiles and drones attacked the United Arab Emirates (UAE), which resulted in injuries amid an existing ceasefire deal with the United States. “Market sentiments remained fragile after renewed military exchanges between US and Iranian forces when Iranian forces launched fresh attacks in the Gulf as both sides sought to assert control over the strategic waterway,” Bhansali told the news agency.

These renewed tensions in the Strait of Hormuz have also impacted the US dollar rate, improving the demand for the benchmark currency in the market. The data collected from the Bloomberg US dollar spot index (DYX) showed that the greenback was trading 0.15% higher at 98.521 as of 2:16 am (ET), on May 5, compared to the previous market close.