Rupee slipped 19 paise to hit a record low of 95.50 against the US dollar on Tuesday, 12 May, as concerns over a weakening ceasefire in the Middle East pushed oil prices higher, heightening worries for the import-dependent economy.
The currency declined 0.2% to 95.55 per dollar, surpassing its previous all-time low of 95.4325 recorded last week, as rising crude prices weighed on sentiment.
The rupee has faced ongoing pressure since the escalation of the Iran conflict in late February, which sent oil prices soaring. Any temporary recovery phases have primarily been supported by sporadic interventions from the central bank.
The outlook remains unstable, as progress in US–Iran negotiations has been minimal. While both parties reached a ceasefire agreement on 8 April, recent comments from Donald Trump suggest that the truce might be deteriorating.
On Monday, Trump remarked that the ceasefire was “on life support,” pointing to disagreements over essential demands, such as a stop to hostilities on various fronts, the removal of a US naval blockade, the revival of Iranian oil exports, and reparations for war-related damage.
According to market experts, the recent surge in Brent crude above $102 per barrel has reignited concerns around India’s external stability, as higher oil prices widen the import bill, increase dollar demand, and put pressure on the rupee. They note that comments by Narendra Modi on fuel conservation, lower imports, and reduced overseas spending have been interpreted as a signal of rising concerns around the trade deficit and balance of payments.
Despite improving global sentiment, experts note that India has lagged its emerging-market peers. According to data from the Institute of International Finance, EM inflows rebounded strongly in April, but India recorded over $22 billion in equity outflows, reflecting persistent investor caution.
Going ahead, analysts expect markets to track geopolitical developments, including Donald Trump’s engagements, as well as inflation data in India and the US. While headline inflation may ease toward the RBI’s 4% target, risks remain from potential second-round effects of elevated crude prices.
(more to come)