INR vs USD: Rupee Slides to Fresh Record Low of 96.34 as Oil Surge to $111 per barrel, Rising US Yields Pressure Currency 

Mumbai, May 18: The rupee slipped to a fresh record low on Monday as soaring crude oil prices and rising U.S. Treasury yields intensified pressure on the domestic currency amid worsening global risk sentiment. 

The rupee fell to a fresh low of 96.34 against the dollar, passing its previous all-time low of 96.13 hit on Friday. The currency has now fallen for five consecutive sessions and remains the worst-performing major Asian currency this year. At the time of writing, the rupee was trading 30 paise lower at 96.27. Moreover, it opened 21 paise lower against the dollar. To be sure, the rupee had broken the psychological level of Rs 96 per dollar on Friday itself, a first for the home currency. 

Crude Climb 

The latest bout of weakness came as crude oil prices surged following a drone attack on a nuclear facility in the United Arab Emirates and continued uncertainty surrounding the U.S.-Iran conflict. Brent crude climbed above $111 per barrel, raising concerns over India’s inflation outlook and current account deficit given the country’s heavy dependence on imported energy.  

Pressure on the rupee was compounded by a sharp rise in global bond yields. The benchmark U.S. 10-year Treasury yield climbed to around 4.63%, fuelling worries that the Federal Reserve may keep interest rates elevated for longer due to persistent inflation risks linked to higher oil prices.  

RBI Rescue 

The Reserve Bank of India reportedly likely intervened in the foreign exchange market to curb excessive volatility and slow the pace of depreciation. However, persistent foreign portfolio outflows and deteriorating risk appetite continued to weigh heavily on the rupee. Foreign investors have pulled out more than $23 billion from Indian markets since March amid rising geopolitical uncertainty and concerns over India’s macroeconomic outlook.  

The weakness in the currency also mirrored broader pressure across emerging market assets. Asian equities declined sharply, while regional currencies including the Indonesian rupiah also touched record lows against the dollar as investors moved towards safer assets.  

Local Yields 

Any further escalation in Middle East tensions or another spike in oil prices could deepen pressure on the rupee in the coming weeks. Several global brokerages now expect the currency to weaken further towards the 97-98 per dollar range by the end of the year if crude prices remain elevated and capital outflows persist.  

The rupee’s slide also pushed domestic bond yields higher, with India’s benchmark 10-year government bond yield rising above 7.1% amid concerns that imported inflation could limit the Reserve Bank of India’s room for future rate cuts. 

 Source:

• spot rates from https://www.moneycontrol.com/markets/currencies/