The Indian rupee declined against the dollar on Wednesday as crude oil prices approached $90 a barrel, driven by geopolitical tensions and supply concerns linked to the Strait of Hormuz, affecting currency and equity markets.
The rupee weakened in early trading on Wednesday as a jump in Brent crude towards $90 a barrel unsettled currency markets and revived concern that tensions around the Strait of Hormuz could keep oil supply under pressure. Reuters reported that the rupee opened at 95.40 to the dollar before slipping to 95.42, a decline of 6 paise from its previous close.
Traders said the market had become less confident that a swift US-Iran deal would ease risks to shipping through the key Gulf waterway. Reports of attacks on vessels have added to fears of a physical supply squeeze, while oil import demand from local companies has continued to support dollar buying. Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors, told Reuters that 95.50 was the immediate level to watch for the rupee, with 95.80 to 96.00 possible if crude prices stay elevated.
Brent crude was trading about 1% higher at $89.80 a barrel in futures trade, after touching $89.36 earlier in the session, while the dollar index was little changed at 99.87. Bhansali said the currency market was also waiting for US inflation data, with the dollar getting some support from higher oil but capped by expectations that price pressures may continue to ease.
Indian equities were slightly weaker in early trade, with the Sensex down 35.99 points at 78,097.31 and the Nifty lower by 31.15 points at 24,444.55. Exchange data showed foreign institutional investors bought shares worth ₹258.55 crore on a net basis on Tuesday.
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