INR vs USD: Rupee Weakness Persists As Currency Hovers Around All-Time Low of 96.38 Amid Oil Shock

Mumbai, May 19: The rupee remained under pressure on Tuesday as elevated crude oil prices, persistent foreign fund outflows and weakness across Asian currencies continued to weigh on sentiment, keeping the currency near record lows against the US dollar.

The rupee was trading at 96.3625 per dollar after touching an all-time low of 96.3875 in the previous session, with traders expecting continued volatility amid fragile global risk appetite and concerns over India’s widening trade deficit. To be sure, the rupee had started two paise lower today at 96.37 per dollar

Some Support

The rupee found some support during the session due to dollar sales reportedly by large state-run and foreign banks, a move that markets interpreted as possible intervention by the Reserve Bank of India (RBI). However, the central bank appears focused on slowing the pace of depreciation rather than defending any specific exchange rate level.

The rupee’s slide has largely been driven by the sharp jump in global crude oil prices following the Iran conflict. Brent crude has surged nearly 50% since tensions escalated in the Middle East, significantly increasing India’s import bill given the country’s heavy dependence on imported energy.

Widening Deficit

India imported crude oil worth $20.72 billion in April alone, pushing the country’s merchandise trade deficit to $28.38 billion, according to reports. Persistently high oil prices could widen India’s current account deficit and keep pressure on the currency over the coming months.

Apart from oil, rising US bond yields and broad weakness across Asian currencies have compounded the pressure on the rupee. The benchmark US 10-year Treasury yield hovered near 4.6%, reflecting investor concerns that global central banks may need to maintain elevated interest rates for longer if energy-driven inflation remains sticky.

Others Weaken

Asian currencies such as the Indonesian rupiah and Philippine peso have also weakened sharply in recent weeks, as investors moved towards safe-haven assets amid geopolitical uncertainty and volatile commodity markets.

Foreign portfolio outflows have further intensified the strain on the rupee. Overseas investors have pulled out more than $20 billion from Indian equities since the Iran conflict began, adding stress to India’s capital account and weakening overall dollar inflows into the domestic market.

The rupee is unlikely to see meaningful relief unless crude oil prices retreat sustainably below the $100-per-barrel mark or foreign capital inflows return. Market participants will continue to closely monitor developments in the Middle East, RBI intervention activity and movement in global bond yields for further direction on the currency.

Source: rates from https://www.moneycontrol.com/markets/currencies/