Rupee Falls To Record Low Of ₹92.45 Against U.S. Dollar As Crude Prices Stay Above $100

The Indian rupee declined to a fresh record low of ₹92.45 against the U.S. dollar on March 13 as rising global crude oil prices and geopolitical tensions in West Asia weighed on the currency, according to Reuters.

The rupee opened at ₹92.35 per dollar and weakened further during the session. By 1 pm, it was trading at ₹92.45 compared with ₹92 in the previous trading session.

The currency markets have remained volatile following the escalation of the conflict between the US, Israel, and Iran, which started on February 28, causing disruptions in energy markets.

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Crude Oil Prices Add Pressure On Currency

The crude oil prices remain high in the world market, with Brent crude trading higher than $100 per barrel, as per data provided by Reuters.. Rising oil prices increase import costs for energy-importing economies such as India.

India imports more than 80% of its crude oil requirements, according to data from the Ministry of Petroleum and Natural Gas. Higher crude prices increase the country’s import bill as oil purchases are settled in U.S. dollars.
An increase in import payments will result in a rise in demand for dollars, which may cause a decline in the value of the rupee in relation to the U.S. dollar.

The Strait of Hormuz, a key global shipping route for crude oil and natural gas, has remained closed during the ongoing conflict, according to Reuters. The waterway is one of the most important global transit routes for energy supplies.

Current Account Deficit Data

India’s current account deficit widened during the third quarter of the financial year, according to data released by the Reserve Bank of India.

The deficit stood at $13.2 billion, or 1.3% of gross domestic product, compared with $11.2 billion, or around 1% of GDP, in the same period a year earlier, according to RBI data.

A higher current account deficit can put pressure on the domestic currency because it indicates that the country is spending more on imports than it earns from exports and capital inflows.

Central Bank Monitoring Currency Movements

Foreign exchange market conditions are closely monitored by the RBI as part of its duty to ensure the smooth functioning of the market.

Several factors affect the rupee's movement, which include crude oil prices, financial market situations globally, capital flows, as well as geopolitical situations.

With crude oil prices trading above $100 a barrel, as well as the geopolitical situations prevailing in the West Asian region, the currency exchange market has been sensitive to the situations prevailing globally, as indicated by the Reuters as well as the RBI statistics.