The currency has come under strain amid rising geopolitical tensions that have disrupted energy markets, particularly around the Strait of Hormuz, a key transit route for crude supplies.

Higher oil import costs typically weigh on the rupee by widening India’s trade deficit and increasing dollar outflows.

Dealers said sustained demand for the U.S. dollar from importers, especially oil companies, has kept the rupee under pressure. Concerns over global inflation and tighter financial conditions have also supported the dollar, limiting gains in emerging market currencies.

Market participants pointed to uncertainty stemming from escalating conflict in the Middle East as a key driver behind risk aversion, prompting investors to shift toward safe-haven assets.

Traders said the Reserve Bank of India was likely present in the foreign exchange market to smooth volatility, helping the rupee avoid sharper losses. The central bank typically intervenes to curb excessive fluctuations rather than defend specific levels.

Analysts expect the rupee to remain sensitive to oil price movements and global risk sentiment in the near term, with any further escalation in geopolitical tensions likely to add to downward pressure.

The data comes as Hanoi continues months-long negotiations with Washington over a trade agreement, with talks complicated by the widening trade gap and disagreements over tariff levels the United States wants to impose on Vietnamese goods, officials have said.

According to U.S. figures, Vietnam’s trade surplus with the United States reached $19 billion in January, the largest among all U.S. trading partners. It was followed by Taiwan, Mexico and China.

Vietnamese exports to the United States rose 53% from a year earlier to exceed $20 billion in January, the data showed. During the same period, U.S. imports from China dropped by 46%.

Vietnam’s surplus with the United States has been larger than China’s since the second quarter of 2025 and was second only to Mexico in the previous three quarters. For the full year 2025, Vietnam’s trade surplus with the United States totaled $178 billion.

Vietnam’s export growth to the United States has accelerated as higher tariffs on Chinese goods reduced Beijing’s direct shipments to the U.S. market.

At the same time, Vietnam’s imports of Chinese goods many used in manufacturing products for re-export reached record levels in January, according to Vietnamese data.

The administration of Donald Trump has repeatedly accused Vietnam of serving as a transit point for Chinese goods bound for the United States, which may face lower duties when labeled as “Made in Vietnam.”

Under U.S. rules, goods deemed to have been illegally transshipped can face tariffs of up to 40%. However, the White House has not yet specified the criteria it will use to determine whether exports constitute illegal transshipment.

Washington launched new investigations this week into Vietnam and other countries over possible unfair trade practices.The United States imposed tariffs of 20% on Vietnamese goods in August.

After the U.S. Supreme Court struck down Trump’s global tariffs as unlawful in February, the White House introduced a temporary 10% global tariff for 150 days.