Indian Rupee Hits Record Low Against US Dollar

Indian Rupee Hits All-Time Low Against US Dollar Amid Global Market Uncertainty

The Indian rupee depreciated by 35 paise to close at a record low of 95.63 (provisional) against the US dollar on Tuesday, underscoring the growing concerns of a global economic downturn. The renewed tension between the US and Iran has led to a surge in risk aversion in global markets, with the rupee bearing the brunt of the uncertainty.

Market sentiment remains dominated by fears that the 10-week-old conflict between the US and Iran could further tighten global supply, particularly after US President Donald Trump rejected Tehran's latest response to a US-backed peace proposal. The rejection has sparked concerns that the conflict is unlikely to be resolved in the near future. Prime Minister Narendra Modi's comments over the weekend regarding fuel conservation and lower imports have also contributed to the market's negative sentiment, as investors interpret these comments as a subtle acknowledgement that India's trade deficit and balance-of-payments pressures could worsen if crude prices remain elevated for longer.

At the interbank foreign exchange, the rupee opened at 95.57 and lost further ground to touch an all-time intraday low of 95.74 against the American currency. The USD/INR pair eventually settled at a record closing low of 95.63 (provisional), down 35 paise from its previous close.

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The sharp depreciation of the rupee has been a recurring theme in recent days, with the currency tanking by 79 paise to settle at its record low of 95.28 against the US dollar on Monday. Analysts expect the rupee to trade with a negative bias amid uncertainties between US and Iran peace talks.

The sharp rise in Brent crude prices has triggered fears of supply disruptions and rising energy costs, further exacerbating the market's negative sentiment. IFA Global has noted that the growing realisation of the grim energy situation has spooked markets, with investors becoming increasingly cautious about their investments.

In a bid to conserve foreign exchange and strengthen the economy, Prime Minister Narendra Modi has called for judicious use of fuel, postponement of gold purchases, and foreign travel. He has also suggested reducing petrol and diesel consumption, using metro rail services in cities, carpooling, increased use of electric vehicles (EVs), utilising railway services for parcel movement, and working from home to conserve foreign exchange amid the crisis in West Asia.

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The US President Donald Trump has also weighed in on the conflict, stating that the ceasefire with Iran is at its "weakest" and on "massive life support". His comments have only added to the market's uncertainty, with investors becoming increasingly cautious about their investments.

On the domestic equity market front, Sensex plunged by 1,456.04 points to settle at 74,559.24, while the Nifty tumbled by 436.30 points to 23,379.55. Foreign Institutional Investors offloaded equities worth Rs 8,437.56 crore on Monday, according to exchange data.