The rupee depreciated 28 paise to 94.77 against the US dollar in early trade on Thursday as market sentiment took a dramatic turn after reports emerged that the US and Iran are discussing a 14-point Memorandum of Understanding (MOU) aimed at reducing tensions and reopening negotiations.
Forex traders said Brent oil prices, which had fallen to $98 on the US-Iran peace deal, edged slightly higher to $101 per barrel after investors weighed the prospects for a Middle East peace deal.
Moreover, factors such as unabated foreign capital outflows amid rising geopolitical uncertainties further dented investor sentiment.
At the interbank foreign exchange market, the rupee opened at 94.77 against the US dollar, registering a fall of 28 paise over its previous close.
On Wednesday, the rupee appreciated 69 paise to close at 94.49 against the US dollar.
"Markets are currently focused on the critical 48-hour window during which the US expects Tehran’s formal response through Pakistani mediators," said CR Forex Advisors MD Amit Pabari.
US President Donald Trump on Wednesday threatened Iran with more bombing if it doesn't reopen the Strait of Hormuz, amid a report that the warring sides were nearing an agreement to end the war.
US media outlet Axios reported, quoting US officials and two other sources, that the US and Iran were getting close to a one-page memorandum of understanding to end the war and set a framework for more detailed nuclear negotiations.
The US expects Iranian responses on several key points over the next 48 hours, Axios reported, adding that nothing has been agreed yet. This was the closest the parties had been to an agreement since the war began.
Markets react
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 98.01, down 0.01 per cent.
Brent crude, the global oil benchmark, was trading higher by 0.65 per cent at $101.83 per barrel in futures trade.
On the domestic equity market front, the 30-share benchmark index Sensex declined 160.24 points to 77,798.28 in early trade, while the Nifty was down 30.25 points to 24,300.70.
Foreign Institutional Investors offloaded equities worth ₹5,834.90 crore on Wednesday, according to exchange data.
On the domestic macroeconomic front, the country's goods and services exports rose 4.6 per cent to an all-time high of $863.11 billion during 2025-26, up from $825.26 billion in 2024-25, despite global economic uncertainties, according to revised commerce ministry data.
Merchandise exports grew 0.93 per cent to $441.78 billion in the last fiscal year from $437.70 billion in 2024-25, the data showed.
Published on May 7, 2026