The Indian rupee plunged to a record low on Friday, breaching the 96-per-dollar mark intraday for the first time, as rising crude oil prices, widening trade deficit and continued foreign fund outflows intensified pressure on the domestic currency amid escalating tensions in West Asia.
The rupee touched an all-time low of 96.14 against the US dollar before recovering slightly to settle at 95.81. The currency has weakened by more than six per cent so far this year and nearly two per cent over the past six trading sessions.
Crude Oil Surge Adds Pressure On Rupee
Analysts said the sharp rise in global crude oil prices following developments in the Iran conflict significantly impacted the rupee’s movement.
Brent crude futures climbed over three per cent on Friday to cross 109 US dollars per barrel, raising concerns over imported inflation, higher fuel costs and pressure on India’s external balances.
India remains one of the world’s largest crude oil importers, making the domestic economy highly sensitive to fluctuations in international energy prices.
Analysts Cite Trade Deficit, Dollar Strength
HDFC Securities Senior Research Analyst Dilip Parmar said the widening trade deficit and stronger US dollar added to pressure on the rupee.
“The Indian rupee plunged to a fresh record low as the trade deficit widened beyond market expectations. Global crude prices and the dollar index extended gains after the US rejected Iran’s 14-point peace proposal, fuelling geopolitical anxiety,” Parmar said.
He added that weak capital inflows and elevated energy prices are likely to keep the rupee under pressure in the near term.
Meanwhile, Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said persistent foreign institutional investor (FII) outflows and inflation concerns may continue to weigh on the Indian currency.
“Strong dollar demand and FII outflows may continue to pressure the rupee, although RBI intervention and possible import duty hikes on gold and silver may provide some support,” he said.
Geopolitical Tensions Raise Economic Concerns
Global financial markets have remained volatile due to ongoing geopolitical tensions in West Asia, particularly concerns surrounding Iran and disruptions to energy supply routes.
Khoon Goh, Head of Asia Research at ANZ, warned that prolonged conflict could significantly affect economies dependent on imported energy.
“The longer the conflict drags on, the more the effects will manifest through higher inflation, weaker economic growth and worsening external balances, especially for large net energy importers,” he said.
Inflation, Import Costs Under Watch
Economists believe sustained weakness in the rupee could increase import costs for India, particularly for fuel, edible oil and other essential commodities.
A weaker rupee also raises concerns about inflationary pressure, which may complicate monetary policy decisions in the coming months.
The Reserve Bank of India is expected to continue closely monitoring currency movements and may intervene further in the forex market if volatility intensifies.
