USD vs INR: Rupee Slumps to Record Low at 95.23 as Oil Surges, Modi Urges Austerity

Mumbai, May 11:The rupee touched a fresh record low of 95.23 against the dollar on Monday, as surging crude oil prices following stalled US–Iran peace talks and weak domestic equity sentiment hammered the local unit.

The currency slide also followed Prime Minister Narendra Modi’s austerity appeal urging citizens to conserve fuel, reduce non-essential foreign travel and postpone discretionary gold purchases for a year, in a bid to limit pressure on foreign exchange reserves.

At the time of writing, rupee was trading at 95.16 against the dollar, down 68 paise from the previous close. At open, the currency had plunged 40 paise to 94.88.

Oil Surge Amplifies Dollar Demand

Crude oil remains India’s largest import, and higher global prices typically stretch apart the trade deficit by increasing dollar outflows. With Brent prices rising on renewed Middle East tensions, dollar demand from oil importers intensified, weighing on the rupee.

India’s heavy dependence on imported energy makes the rupee particularly sensitive to oil movements. When crude prices rise, oil marketing companies and other importers pile in for more dollars to settle payments, increasing pressure on the domestic currency.

At the same time, geopolitical uncertainty prompted a flight towards dollar as a safe-haven asset, further strengthening the greenback and worsening the rupee.

Equities Under Pressure

Domestic equity markets aided the rupee’s slide by falling sharply. The benchmark indices melted more than 1% in early trade, showing broad-based selling.

Market breadth remained negative, and volatility indicators stayed elevated, signalling widespreadcaution. The fall in equities and the rupee underscores a risk-off environment as global cues drag sentiment.

Central Bank Intervention Likely

State-run banks were reportedly selling dollars, likely at the request of the central bank, to arrest the rupee’s slide. To be sure, such interventions have been reported in recent sessions as well, aimed at rescuing the rupee from more damage.

Despite intermittent support, analysts warn that sustained high oil prices could keep pressure on the currency unless geopolitical tensions ease or capital inflows improve. India’s external account remains closely linked to energy prices, making crude trends a key driver for the rupee’s near-term direction.

Outlook

With crude volatility elevated and global risk sentiment fragile, the rupee is likely to remain sensitive to developments in the Middle East, dollar strength and domestic equity flows. Market participants will closely monitor oil movements, foreign fund activity and any further policy signals for cues on the currency’s trajectory in the coming sessions.

Source:

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