Indian currency has come under pressure as tensions in West Asia continue to rise. The Indian rupee weakened sharply during the ongoing Iran-Israel war, prompting the Reserve Bank of India (RBI) to step in and support the currency.

According to reports, the RBI has injected around $12 billion into the market this week to prevent a sharp fall in the rupee. The central bank reportedly sold US dollars in the foreign exchange market to stabilise the Indian currency.

Different estimates suggest that the total intervention could range between $9 billion and more than $15 billion, according to a Reuters report.

War tensions shake global markets

The war involving Iran, Israel and the United States has increased uncertainty in global financial markets. After the attacks on Iran by Israel and the US, Tehran has also targeted several Gulf countries, including the UAE.

The rising tensions in West Asia have had a direct impact on global oil markets. Crude oil prices have jumped nearly 16 per cent this week due to fears of supply disruptions.

The geopolitical uncertainty has also affected stock markets around the world, including India.
Rupee and stock market under pressure

The impact of the war was visible in Indian financial markets on Friday. The Sensex closed more than 1,000 points lower as investors turned cautious.

Foreign investors also pulled out nearly $2 billion from the market during the week, increasing pressure on the rupee. At the same time, importers began increasing hedging activities to protect themselves from possible currency fluctuations.

As a result, the rupee fell close to its record low levels during the trading session.

RBI steps in

India currently holds more than $723 billion in foreign exchange reserves, one of the largest reserves in the world. Using this strength, the RBI intervened in the currency market by selling dollars to prevent a sharp decline in the rupee.