The Indian rupee declined to its lowest level on record against the US dollar on Friday, closing at 94.82 in the interbank foreign exchange market amid rising tensions in West Asia and a sharp increase in crude oil prices.
The rupee opened at 94.18 and remained under sustained pressure throughout the trading session, weakening steadily to settle at the new record low. Earlier, the currency had slipped to 93.96, which was its previous lowest level.
Market participants attributed the decline to ongoing geopolitical conflict in West Asia, elevated crude oil prices, and continued selling by foreign investors.
Geopolitical tensions in West Asia have increased uncertainty in global markets, prompting investors to shift towards safe-haven assets such as the US dollar, thereby exerting pressure on the rupee.
Brent crude prices have risen to approximately $110 per barrel. As India imports a significant portion of its energy requirements, higher oil prices have increased demand for dollars, contributing to the rupee’s depreciation.
Foreign institutional investors have recorded substantial outflows from Indian markets in recent weeks, amounting to billions of dollars. This has further increased demand for the US currency and added pressure on the rupee.
The strengthening of the dollar index has also weighed on emerging market currencies, including the rupee, in line with broader global trends.
The depreciation of the rupee was reflected in domestic equity markets.
The BSE Sensex declined by approximately 1,690 points, or 2.2%, to close at 73,583, while the Nifty 50 fell by around 487 points.
The market downturn resulted in a loss of approximately ₹8.5 lakh crore in investor wealth.
The weakening rupee has implications for domestic consumers and the broader economy.
Higher import costs are expected to increase inflation, particularly for fuel such as petrol and diesel. Expenses for students studying abroad are likely to rise due to the increased cost of foreign exchange. Additionally, the government may face higher pressure on the import bill and subsidy expenditure.
A weaker rupee may benefit exporters, as payments received in dollars translate into higher realizations in local currency, with sectors such as information technology, pharmaceuticals, and textiles potentially gaining.
