MUMBAI: The rupee depreciated 11 paise to 96.36 against the US dollar in early trade on Wednesday as crude oil prices climbed on renewed geopolitical tensions, and demand for the US dollar increased as investors moved toward safe-haven assets.
Forex traders said concerns over the security of oil shipments through the Red Sea and Strait of Hormuz continue to support crude oil prices.
Moreover, Houthi threats against shipping and ongoing US-Iran hostilities have kept a geopolitical risk premium in the market, they said.
At the interbank foreign exchange market the rupee opened at 96.36, registering a fall of 11 paise from its previous close.
On Tuesday, the rupee had settled at 96.25 against the American currency.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 101.15 down 0.01 per cent, as the latest escalation in the US-Iran conflict has increased demand for the US dollar as a safe-haven currency.
Brent crude, the global oil benchmark, was trading higher by 1.18 per cent at USD 92.08 per barrel in futures trade.
RBI’s measures to attract overseas deposits have generated significant foreign currency inflows, boosting market confidence and providing support to the rupee, said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
Dealers are watching for the RBI's participation through state-owned banks to smooth currency market volatility, Bhansali said.
"The central bank appears to be allowing gradual adjustments while preventing disorderly moves," he added.
On the domestic equity market front, the 30-share benchmark index Sensex was trading 0.52 per cent down at 77,070.61, while the Nifty fell 0.34 per cent to 24,104.40.
Foreign Institutional Investors on Tuesday purchased equities worth Rs 1,650.16 crore, as per exchange data.