Indian Rupee Hits New Record Low Against US Dollar at 92.45 Amid Crude Oil Price Concerns

Indian Rupee Hits Record Low

On March 13, the Indian rupee (INR) slumped to a record low of 92.45 against the US dollar (USD), as investor sentiment remained fragile due to elevated Brent crude prices above $100 a barrel. This has raised concerns about a widening current account deficit (CAD).

The RBI has been actively selling INR to protect the currency in the wake of elevated crude prices. Traders speculate that the RBI may allow the currency to depreciate further if crude prices persist above $100 a barrel. Since the conflict began on February 28, the INR has fallen by more than 1%.

The USD/INR pair is expected to move towards the 92.50-92.80 range in the coming sessions, driven by elevated oil prices and persisting geopolitical tensions. India's reliance on oil imports, meeting over 80% of its energy needs, makes it vulnerable to higher crude prices.

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Higher oil prices result in a fatter import bill, leading to importers paying more USD per barrel, further weakening the INR. This highlights a looming deficit risk for India if crude prices do not begin to cool soon. In the third quarter, the CAD widened to $13.2 billion, accounting for 1.3% of the Gross Domestic Product (GDP).

DBS Bank estimates that crude oil prices above $100 per barrel could push the CAD shortfall by 0.35% of GDP. The near-term trajectory for the INR will depend largely on crude prices and developments in West Asia, with sustained prices above $100 per barrel likely to keep the currency under pressure.