The Indian rupee opened marginally higher at 95.70 against the US dollar on Thursday, 4 June, gaining 1 paisa at the start of trade. However, the local currency remains under pressure from persistent foreign fund outflows, weak regional currencies and lingering geopolitical uncertainty in the Middle East.
Investor sentiment has been weighed down by fading hopes of a breakthrough in US-Iran negotiations, raising concerns that the conflict could drag on for longer than expected. A prolonged escalation in the region poses a significant risk for India, one of the world’s largest net importers of crude oil.
Foreign portfolio investors continued to pare exposure to Indian equities, with preliminary data showing net outflows of nearly $600 million on Wednesday, following around $3 billion of selling over the previous three trading sessions. The pace of outflows in June has already almost matched the total recorded in May.
Currency traders, as per a Reuters report, noted that the combination of sustained equity outflows and renewed tensions in the Gulf has revived upward pressure on the dollar-rupee pair. However, market participants expect potential policy measures to support the rupee, which could help cushion the currency against further weakness amid the fallout from the US-Iran conflict.
