The Indian rupee fell to a fresh record low on Wednesday, 13 May, extending its decline as overseas debt repayments and importer hedging demand outweighed the limited support from higher duties on precious metal imports.
The currency touched an all-time low of 95.80 against the US dollar, weakening by nearly 30 paise from the day’s high.
Persistent pressure from rising energy prices amid the US–Iran conflict has further strained India’s macroeconomic outlook. Economists have responded by trimming growth forecasts, raising inflation projections, and cautioning that the rupee could remain under sustained pressure in the near term.
The rupee opened slightly higher by 2 paise at 95.61 against the US dollar on Wednesday, 13 May, bolstered by recent tariff hikes. However, the gains are limited by elevated oil prices and rising US inflation.
India has raised tariffs on precious metals from 6% to 15% to ease pressure on the currency, which has been affected by rising crude prices linked to the ongoing conflict in Iran. Since the conflict began on 28 February, Brent crude prices have surged by nearly 50%, resulting in a more than 5% depreciation of the rupee.
In response to this situation, Prime Minister Narendra Modi recently called for measures to conserve foreign exchange reserves. The government has also increased import duties on gold and silver to curb demand and support the currency.
Globally, markets remained cautious. Currency markets were largely stable, while technology-focused equities rose as optimism surrounding artificial intelligence outweighed concerns about geopolitical tensions and persistent US inflation.
Rupee Outlook
Khushi Mistry, Research Analyst at Bonanza, said the rupee’s weakness is being driven primarily by elevated crude oil prices (which account for ~22% of imports), FII/FPI outflows, interest rate differentials with the US, and broader dollar strength.
She noted that while gold imports—nearly 11% of India’s total imports—do contribute to the external imbalance, curtailing them can offer only marginal relief. The recent duty hike is likely to reduce official gold imports in the short term and help trim the current account deficit, thereby slightly easing pressure on the rupee.
However, she cautioned that the move alone is unlikely to reverse the currency’s decline. If pressure persists, the government may need to supplement it with additional measures, including RBI intervention and steps to support capital inflows.
(more to come)