Daijiworld Media Network - Mumbai
Mumbai, Jul 20: The rupee weakened by 12 paise to 96.42 against the US dollar in early trade on Monday, pressured by rising crude oil prices, continued foreign fund outflows and strong demand for the American currency amid escalating tensions in West Asia.
According to forex traders, higher global crude prices and sustained selling by foreign investors in domestic equity markets weighed on the Indian currency.
At the interbank foreign exchange market, the rupee opened at 96.53 against the US dollar, compared to its previous close of 96.30. It later recovered some ground to trade at 96.42, down 12 paise from Friday's closing level.
On Friday, the rupee had gained 12 paise to settle at 96.30 against the dollar, supported by positive domestic market sentiment and easing US Treasury yields.
Meanwhile, the dollar index, which measures the greenback's strength against a basket of six major currencies, was trading marginally lower by 0.05 per cent at 100.54.
Brent crude, the global oil benchmark, rose 2.45 per cent to USD 90.26 per barrel in futures trade, driven by mounting geopolitical tensions as the United States and Iran moved closer to a wider conflict. Shipping through the strategically important Strait of Hormuz has also been severely disrupted.
The United States carried out another round of airstrikes on Iran early Monday after announcing the death of another American service member. In response, Iran launched missiles towards Jordan, raising fears that the conflict could spread further across the region.
Bahrain also activated missile alert sirens on Monday morning, warning residents of a possible Iranian retaliatory strike following the US attacks.
In the domestic equity market, the BSE Sensex fell 593.78 points, or 0.76 per cent, to 77,557.67, while the NSE Nifty declined 169.20 points, or 0.70 per cent, to 24,165.10 in early trade.
Exchange data showed that Foreign Institutional Investors (FIIs) remained net sellers on Friday, offloading equities worth Rs 376.41 crore.
Meanwhile, Reserve Bank of India data released on Friday showed that the country's foreign exchange reserves increased by USD 964 million to USD 675.157 billion in the week ended July 10. In the previous week, reserves had risen by USD 7.26 billion to USD 674.193 billion.