The rupee ended at a record low of 83.54 against the dollar on Monday as investors were besieged by the escalating political tensions in West Asia that led them to scoop up the US currency as a safe asset.

Fears over the US Federal Reserve delaying its decision to cut rates accelerated the risk-off mode, enhancing the lure of the dollar. The rupee closed at 83.45 to the dollar on Monday.

Stocks were also not spared for the second consecutive session over fears Israel would retaliate against Iran’s direct attack on Saturday.

The 30-share BSE Sensex tanked 456.10 points or 0.62 per cent to end at 72943.68 after plummeting 714.75 points during intra-day trades to touch a low of 72685.03. On the NSE, the broader Nifty declined 124.60 points or 0.56 per cent to finish at 22147.90.

At the inter-bank forex market, the rupee opened marginally weak at 83.51 against the previous close of 83.45. It came under pressure as worries over escalating tensions between Iran and Israel led to a flight of safety into assets such as the dollar.

Consequently, the greenback rose against other currencies with the Dollar Index (DXY) which gauges its strength against a basket of six currencies surging to an intra-day high of 106.44 against its previous close of 106.21.

Strong retail sales in the US were another factor that contributed to the dollar’s gain as that raised expectations the Fed would postpone its interest rate cut beyond July.

Forex circles said that while the rupee declined to a day’s low of 83.55, further losses were averted on suspected intervention from the Reserve Bank of India (RBI).

Jateen Trivedi, an analyst at LKP Securities, said the rupee’s weakening was on account of the strengthening of the dollar index which remained above 106. `` This put pressure on the rupee, exacerbated by selling in the capital markets. Additionally, concerns over geopolitical issues in West Asia added to the downward pressure on the currency,’’ he added.

Anuj Choudhary of Sharekhan by BNP Paribas, said while the 10-year US bond yields rose to 4.66 per cent, the highest since November 2023, weak domestic markets and rising geopolitical tensions put pressure on the rupee.

``We expect the rupee to remain weak amid ongoing geopolitical uncertainties which could impact risk currencies and a surge in the US dollar. Rising global crude oil prices and a rise in US treasury yields amid expectations of a delay in rate cut in the US may also pressurise the rupee. Markets will take cues from Israel’s response to the attack by Iran.”

Choudhary expects the domestic currency to trade in a range of Rs 83.30-83.80.

The forex and the stock markets will be closed on Wednesday on account of Ram Navami.

Dire Strait

Analysts expect disruption in India’s shipments to Tehran and other countries and spot LNG prices to spike in the absence of an alternative route other than the Strait of Hormuz, the latest flashpoint in the worsening standoff in West Asia.

Some analysts expect crude oil prices to rise $100 per barrel as the benchmark Brent is trading around $90 per barrel.

Brokerage Motilal Oswal said if Iran successfully enforces a blockade of the Strait of Hormuz, crude oil prices and LNG prices will rise.