MUMBAI: The rupee depreciated 17 paise to 92.71 against US dollar in early trade on Thursday as the fragile ceasefire and Iran's threat to step out of the talks if Israel kept bombing Lebanon kept investors wary.
Forex traders said markets are in a wait-and-watch mode rather than strong directional positioning as the situation in West Asia remains fragile.
Geo-Political uncertainty was still high amid Iran’s threat to step out of the talks if Israel kept bombing Lebanon, keeping investors wary of the opening of the Strait of Hormuz.
At the interbank foreign exchange market, the rupee opened at 92.63 against the US dollar, then gained ground to touch 92.71 against the US dollar in initial trade, registering a gain of 17 paise over its previous close.
On Wednesday, the rupee had settled at 92.54 against the American currency.
Iran closed the Strait of Hormuz again in response to Israeli attacks in Lebanon. The White House demanded that the channel be reopened and sought to keep peace talks on track.
"The fragile ceasefire could be jeopardized by the renewed Middle East tensions as Israel struck Lebanon and Iran warned of moving out of the ceasefire if strikes against Lebanon continued," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
This caused the dollar index to rise to 99.10, with the Euro and GBP both falling against the dollar. Asian currencies also fell from their Wednesday highs.
The RBI left Interest rates unchanged on Wednesday but flagged risks to the Indian economy from disruptions caused by the Iran war, Bhansali noted.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.10 per cent at 99.03
Brent crude, the global oil benchmark, was trading higher by 1.93 per cent at USD 96.52 per barrel in futures trade.
On the domestic equity market front, the 30-share benchmark index Sensex dropped 243.57 points to 77,319.33 in opening trade, while the Nifty declined 88.3 points to 23,909.05.
Foreign Institutional Investors offloaded equities worth Rs 2,811.97 crore on Wednesday, according to exchange data.
Meanwhile, India's Foreign Secretary Vikram Misri met senior US officials here and discussed ways to further deepen the defence and trade relations and exchanged views on the developments in the Indo-Pacific and West Asia.
On a three-day visit here, Misri met under secretaries Michael Duffey and Elbridge Colby in the Department of Defence, and under secretaries Jeffrey Kessler and William Kimmitt in the Department of Commerce.