USD vs INR:Rupee Hits Record Low of 95.75 as Boiling Oil Prices and Escalating Iran Tensions Hammer Home Currency

Mumbai, May 12:The rupee slid to a fresh record low on Tuesday, hammered hard by surging crude oil prices and amplified uncertainty over a fragile US–Iran ceasefire, which has kept global energy markets on the boil.

The rupee fell to an all-time low of 95.75 per dollar, as investors reacted to escalating oil prices and persistent foreign outflows. The currency has been under strain amid heightened geopolitical tensions and concerns that prolonged instability in the Middle East could bring massive disruption to global oilshipments.

At the time of writing, the rupee was trading at 95.71, down 39 paise. To be sure, the rupee had recorded an all-time low at the open itself, plunging 19 paise to 95.50, and eclipsing its previous low of 95.43 recorded last week. The currency kept falling from there with reports suggesting that the central bank had stepped in to arrest the slide.

Pressure Amplified

Brent crude boiling near $105 per barrel has amped up pressure on oil-importing economies like India, heightening concerns over the current account gap and inflationary outlook. The dual combine of higher crude prices and sustained portfolio outflows has increased demand for dollars, further straining the rupee.

Going ahead, the currency will likely remain vulnerable as traders price in the risk that the US–Iran ceasefire could spiral, thereby triggering more volatility in oil prices. If crude prices stay elevated, import costs may remain high, complicating the macroeconomic backdrop and limiting room for policy flexibility.

Broader Caution

The rupee’s weakness comes alongside broader market caution, with equity indices also under pressure due to the same external triggers. Elevated energy costs are adding to inflation concerns, which in turn could influence expectations around monetary policy decided by the central bank periodically. For an import-dependent economy such as India, higher oil price gains typically translate into currency strain, as costlier crude imports increase dollar demand.

Despite periodic central bank interventions aimed at smoothing volatility, rupee remains sensitive to global developments with the local unit’s performance reflecting not just domestic factors but also the interplay of geopolitical risk, commodity dynamics, and foreign capital flows.

Overall, the rupee’s record low underscores the consequences of boiling oil prices and geopolitical uncertainty on emerging market currencies, with traders keeping a close watch of developments in US–Iran negotiations and crude trends. If energy markets stabilise, pressure on the rupee could back down but continued volatility in oil prices may keep the rupee under strain in the near term.

Source:

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