The rupee fell to a record low on Thursday, breaching its previous all-time level as rising crude oil prices and a hawkish stance from the US Federal Reserve added to pressure on the currency.
The rupee dropped to 95.2325 against the US dollar, down 0.4% on the day, slipping past its earlier low of 95.21 recorded in March. The currency has now declined more than 5% so far this year, extending losses from last year as well.
One of the biggest
As of 10:15 am, Brent crude was trading at $125.15 per barrel, up over 6%, while WTI crude stood at $110.12, rising more than 3%. The rally has been driven by escalating geopolitical tensions involving , including the possibility of a prolonged blockade impacting oil flows through the .
According to Kotak Securities, oil prices have been supported by tight supply conditions, including a sharp drawdown in US crude inventories and
“Escalating US pressure on Iran, including potential extension of a naval blockade and stricter enforcement actions on tanker movements, has heightened concerns over constrained flows through the Strait of Hormuz,” it said.
India imports a large share of its requirements, which means . This increases demand for dollars, putting pressure on the rupee.
At the same time, rising oil prices also push up inflation, which can further weaken the currency by impacting investor confidence and economic stability.
The pressure on the rupee has been compounded by global factors.
The US Federal Reserve’s recent policy stance has been seen as relatively hawkish, with markets scaling back expectations of rate cuts.
This has strengthened the US dollar and pushed up bond yields, making US assets more attractive compared to emerging markets like India.
The rupee’s weakness also reflects broader challenges in India’s external sector.
Trade tensions with the US, weaker capital inflows and the ongoing energy shock have all contributed to sustained pressure on the currency. A weaker rupee can also trigger a negative cycle, as it reduces returns for foreign investors and may lead to further outflows.
At the same time, a depreciating currency increases the cost of imports, adding to inflationary pressures in the domestic economy.
The trajectory of crude oil prices and global interest rate signals will remain key for the rupee going forward.
If oil prices continue to stay elevated and global financial conditions remain tight, pressure on the currency could persist in the near term.