USD vs INR: Rupee Breaches 94, Melts 37 Paise as Oil Boils and Curbs Ease

Mumbai, April 23:Rupee breached the 94 mark on Thursday meting as much as 37 paise against the dollar as elevated crude oil prices and the recent rallying of foreign exchange curbs by the Reserve Bank of India (RBI) sent the currency spiralling.

At the time of writing, the rupee had pared losses to trade at 94.09, down 29 paise from the previous close.

To be sure, today marks the fourth day of the currency’s slide against the dollar, the fall having reversed the temporary rally seen earlier this month as the RBI stepped in to rescue the rupee from record lows with restrictions on rupee derivative trades and global cues chipping in to support the currency.

But now that the RBI has rolled back some of those curbs and oil has lifted once again, the rupee is backsliding.

Crude Impact

The rupee rumble is majorly due to the oil on boil as benchmark crude is back above $100 per barrel over supply disruptions in the Strait of Hormuz and doubts about the durability of the Iran ceasefire. Any escalation will likely further tighten supply and push prices higher.

To be sure, India is import dependent as far as crude goes and any rise in oil prices feeds into dollar demand which then pressures the rupee. The dollar demand is caused by Indian oil marketing companies that need to purchase the fuel with the greenback. Moreover, a persistent rise in crude prices widens the current account gap and stokes inflation risks, further weakening the rupee.

Easing Impacts

Recent steps by the RBI to roll back some restrictions on rupee derivative trades also contributed to the currency’s fall.

And the global cues did nothing to help either as the dollar stayed firm, aided by elevated bond yields, whereas geopolitics in the Middle East continued to rattle the markets. To be sure, emerging market currencies have taken a hit from this uncertainty surrounding the Iran ceasefire.

Sensitive Currency

Analysts warn that the rupee could remain under pressure if crude prices stay elevated. Some estimates suggest the currency may weaken further beyond current levels, especially if geopolitical risks intensify or oil sustains its upward trajectory.

Overall, the rupee’s breach of the 94 level underscores its sensitivity to external shocks, particularly energy prices and geopolitical developments. With crude holding firm and uncertainty around the ceasefire persisting, the near-term outlook for the currency remains cautious, with risks skewed towards further depreciation.

Source:

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