The rupee slumped by 34 paise to close at 95.08 (provisional) against the American currency on Wednesday as crude prices crossed the USD 100 per barrel mark, stoking concerns over inflation and high forex outflows.
Weak equity markets and FII outflows also pressurised the rupee, forex traders said.
Brent crude futures surpassed USD 100 a barrel for the first time in almost six weeks after attacks on oil facilities and ships in West Asia threatened to weaken the already strained supply chain amid the US-Iran tensions. Brent crude was trading higher by 2.94 per cent at USD 100.73 per barrel.
At the interbank foreign exchange market, the rupee opened at 94.80, also its intra-day high, against the US dollar. The local unit fell to an intraday low of 95.22 as crude oil prices surged. The rupee settled at 95.08 (provisional), down 34 paise from its previous close of 94.74.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 98.84, higher by 0.05 per cent.
"The rupee declined today on rising crude oil prices and risk aversion in global markets. Brent has breached the USD 100 mark on further escalation of tensions between the US and Iran. FII outflows too pressurised the rupee. However, rupee recovered initial losses on a weak dollar," said Anuj Choudhary, Research Analyst, Mirae Asset Sharekhan.
The local currency is expected to trade with a negative bias on risk aversion in global markets and worries over rising crude oil prices. Escalation of geopolitical tensions between the US and Iran may also pressurise the rupee, he added.
The US military destroyed five Iranian oil tankers on Tuesday in response to the latest attacks on its warships, and Iran hit back at American targets in Jordan.
On the domestic equities market front, Sensex tanked 813.35 points to settle at 74,764.23 while Nifty was down 203.60 points to 23,431.50.
Foreign institutional investors (FIIs) sold equities worth Rs 123.19 crore on a net basis on Tuesday, according to exchange data.
