Rupee Falls To Record Low Of 95.58 Against U.S. Dollar Amid Oil Price Surge

The Indian rupee dropped to an all-time low of 95.58 against the U.S. dollar on Tuesday as higher crude oil prices and geopolitical tensions linked to Iran weighed on investor sentiment and increased pressure on the domestic currency.

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The fall came a day after the rupee had closed at a previous record low of 95.31 against the U.S. dollar, marking its steepest single-day decline in more than a month.

Brent crude prices have risen sharply since tensions in West Asia escalated earlier this year, raising concerns over India’s import bill and current account deficit. India imports more than 85% of its crude oil requirements, making the domestic currency sensitive to movements in global oil prices.

According to Reuters, concerns have also increased after U.S. President Donald Trump reportedly described the April ceasefire involving Iran as being “on life support”, reviving fears of prolonged disruption in the Gulf region and additional volatility in energy markets.

RBI Intervention In Focus

According to Reuters, traders expect the Reserve Bank of India (RBI) to continue intervening in the foreign exchange market to limit excessive volatility in the rupee.

Reuters reported on Monday that state-run banks were likely selling dollars on behalf of the RBI after the rupee weakened sharply during trading sessions.

The central bank has also introduced measures in recent weeks aimed at easing dollar demand and stabilising the forex market amid sustained pressure from rising crude oil prices and foreign fund outflows.

A Reuters poll conducted earlier this month projected the rupee to remain around the 95-per-dollar level over the next year. The report added that prolonged geopolitical tensions could weaken the currency further towards the 97-98 range.

Impact On Markets And Economy

There has been some impact on India’s financial markets due to the depreciating rupee as well. The Indian stock market indices had fallen dramatically on Monday due to the increase in crude oil prices, leading to inflation worries.

If the rupee continues to weaken, then the price of imports, especially that of crude oil, will rise, thus resulting in increased levels of inflation.

The government of India had already appealed to the people to cut down on their fuel use and minimize foreign currency transactions.

Investors are expected to closely monitor crude oil prices, developments in West Asia and further RBI measures for direction on the rupee and broader financial markets.