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Rupee at Fresh All-Time Low: The domestic currency hits its fresh all-time low of 96.14 against the US dollar during the day, falling 50 paise from the previous close.
Indian Rupee vs US Dollar: Indian rupee on May 15 plunged to record low.
Rupee at New Record Low: The Indian rupee on Friday breached the 96 mark for the first time in history, falling 50 paise during the day to hit its fresh all-time low of 96.14 against the US dollar, weighed down by rising crude oil prices, a stronger dollar and escalating tensions in West Asia.
The domestic currency opened at 95.86 in the interbank foreign exchange market and slipped further to 96.14 during the trade, falling 50 paise from the previous close. The rupee had settled at 95.64 in the previous close on Thursday.
The rupee has become the worst-performing currency in Asia for the year, registering a loss of over 6 per cent so far this year
Forex traders said the dollar-rupee pair continues to remain under pressure as global investors are rushing towards the US dollar amid uncertainty surrounding the Iran-Israel conflict and fears of supply disruptions in crude oil shipments through the Strait of Hormuz.
Crude Oil Spike Hurting Rupee
One of the biggest reasons behind the rupee’s weakness is the sharp rise in crude oil prices. India imports more than 85 per cent of its crude oil requirement and a weaker rupee makes imports costlier.
Brent crude, the global oil benchmark, rose 1.3 per cent to trade above $107 per barrel in futures trade. Concerns over oil supply disruptions from West Asia have triggered fresh buying in crude, adding pressure on oil-importing economies like India.
The government’s decision to hike petrol and diesel prices by Rs 3 per litre from Friday also reflects rising stress in the energy market due to elevated global crude prices.
Strong Dollar Adding Pressure
Apart from crude oil, the strengthening US dollar is also hurting the rupee. The dollar index, which measures the strength of the greenback against six major currencies, rose 0.24 per cent to 99.05.
According to Amit Pabari, MD of CR Forex Advisors, the dollar has strengthened after strong US retail sales data and stable labour market numbers reduced expectations of aggressive rate cuts by the US Federal Reserve.
“When global uncertainty rises, investors usually move towards the dollar as a safe-haven asset,” he said.
Santosh Meena, Head of Research at Swastika Investmart Ltd, said, “The Indian rupee touching a new record low around 96.06 against the US dollar reflects rising global uncertainty and sustained demand for the dollar. Higher crude oil prices are increasing India’s import costs, while strong US interest rates and foreign fund outflows are putting additional pressure on emerging market currencies, including the rupee.”
A weaker rupee can increase inflationary pressure in India because imports such as fuel, electronics, and industrial raw materials become more expensive. On the other hand, sectors that earn significant revenue in dollars, including IT and pharmaceutical companies, could see some benefit from improved earnings realisation, he added.
“Going ahead, market sentiment will largely depend on crude oil prices, global geopolitical developments, foreign investor activity, and the Reserve Bank of India’s measures to manage currency volatility,” Meena added.
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