INR vs USD: Rupee loses 5% so far since US-Iran conflict; drops to a fresh record low of 95.86 on May 14

Experts said that the Indian currency was witnessing extensive pressure from the rising prices of fuel to jewellery, and every other imported commodity, which were experiencing higher rates in the domestic market.

After dropping to a record low level in the morning market hours, the domestic currency recovered as reports emerged that India is considering a reduction in taxes paid by foreign bond investors in an effort to attract inflows, according to a Bloomberg report.

People aware of the development told the news portal that the Reserve Bank of India has recommended the move of tax cuts, which is currently being considered by the Finance Ministry.

As of 11:57 am (IST), the Indian rupee was trading 0.15% down at 95.443 against the US dollar on Thursday, compared to 95.616 in the previous currency market close, according to Investing.com data.

NSE data showed that during Wednesday’s trading session, foreign investors sold a total of ₹4,703.15 crore worth of assets from the capital markets across both exchanges, shifting their bets away from emerging equity markets.

While the continued FII selloff pressured the Indian rupee, the domestic investors remained a key support for the Indian markets, with overall purchases of ₹5,869 crore worth of assets in a single trading session.

Rupee loses 5% during US-Iran conflict

The Indian rupee has lost nearly 5% against the US dollar ever since the beginning of the conflict between the United States and Iran in West Asia. The Indian currency rates have weakened to their recent record low level on Thursday, compared to around 91.677 levels back on March 2, after the markets reopened post the military strikes on Iran.

Traders tend to shift towards safe-haven investment options like the US dollar rate, treasuries, among other asset classes, as they change their strategy away from high-risk bets in emerging market currencies and markets.

Investing.com data showed that the Indian rupee has lost 6% over the last three months, and weakened nearly 2% in the last one week due to the increasing geopolitical risks.

Dollar snapshot

Due to the rising uncertainty over the US-Iran conflict in West Asia, global investors have been fuelling the US dollar demand in the market, considering the greenback as the global benchmark currency.

Data collected from the Bloomberg US dollar spot index (DYX) showed that the greenback was trading 0.02% lower at 98.502 as of 2:10 am on May 14, compared to the previous currency market close.

Although the dollar rate was marginally in the red zone, the overall US dollar rates were elevated this week due to investors seeking more of the safe-haven currency amid a lack of a potential peace deal between the United States and Iran.

All eyes are now focused on any positive global cues or relief which can uplift the sentiment of investors around the world.