The Indian rupee plunged to an all-time low on Friday, breaching the 96-per-dollar mark intraday, as surging crude oil prices, widening trade deficit, and persistent foreign fund outflows intensified pressure on the domestic currency amid escalating geopolitical tensions in West Asia.
The rupee touched a record low of 96.14 against the US dollar before recovering marginally to settle at 95.81. The currency has depreciated more than 6 per cent so far this year and nearly 2 per cent over the last six trading sessions as fears of a widening Iran conflict pushed global crude prices sharply higher.
“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,” said Dilip Parmar, senior research analyst at HDFC Securities. He added that weak capital inflows and elevated energy prices were likely to keep the rupee under pressure in the near term.
Anuj Choudhary, research analyst at Mirae Asset Sharekhan, said the rupee was expected to trade with a negative bias amid elevated crude prices and inflation risks. “Strong dollar demand and FII outflows may continue to weigh on the rupee, though RBI intervention and a possible hike in import duty on gold and silver could provide some support,” he said.
Brent crude futures rose more than 3 per cent to above $109 per barrel on Friday, heightening concerns over imported inflation, tighter monetary policy and worsening external balances for major energy-importing economies such as India.
“The longer the conflict dragged on, the more the effects would manifest in the form of higher inflation, weaker economic growth, and a deterioration in external balances, especially for large net energy importers,” Khoon Goh, head of Asia Research at ANZ, said in a note.