Indian Rupee Reaches New All-Time Low Amid Rise in Global Oil Prices Exceeding $105
Indian Rupee Hits Fresh Record Low Against Dollar Amid Global Market Uncertainty
On May 12, the Indian rupee opened at a fresh record low against the dollar, tracking weakness in Asian currencies. The move comes as President Donald Trump cast doubt on the Iran ceasefire, prolonging uncertainty around the Strait of Hormuz.
At 9:10 am, the rupee was trading at 95.58 against the dollar, down 0.28 percent from its previous close of 95.31. This weakness in the rupee is largely driven by the impact of global market uncertainty on the Asian currency market.
The Brent crude prices rose to $105 per barrel after Trump's statement, reducing hopes of a near-term deal and pushing oil prices sharply higher. The dollar index also strengthened to 98.10. Market participants said that the buying in the dollar during the previous session was largely driven by increased gold imports after Prime Minister Narendra Modi urged the nation to curb gold purchases to conserve foreign exchange reserves and reduce the fiscal deficit through work-from-home measures.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
The Sensex and Nifty both declined more than 1 percent amid concerns over weaker consumption and slowing economic growth. Experts said that the rupee remains vulnerable to elevated crude oil prices and continues to face pressure from rising energy costs.
| Currency | Previous Close | Current Close | Change |
|---|---|---|---|
| South Korean Won | -0.9% | ||
| Indonesian Rupiah | -0.56% | ||
| Philippines Peso | -0.5% | ||
| Japanese Yen | -0.25% | ||
| Malaysian Ringgit | -0.24% | ||
| Singapore Dollar | -0.19% | ||
| Thai Baht | -0.19% |
Asian currencies also traded weaker, with the South Korean won declining by 0.9 percent, the Indonesian rupiah falling by 0.56 percent, the Philippines peso weakening by 0.5 percent, and the Japanese yen slipping by 0.25 percent. The Malaysian ringgit declined by 0.24 percent, while the Singapore dollar and Thai baht lost 0.19 percent each. Exporters who have already sold dollars are expected to wait for further depreciation towards the 96 level, with the Reserve Bank of India currently offering only limited support to the currency. Importers, who earlier received an opportunity to hedge positions, may now wait for a correction in the dollar-rupee pair before increasing hedging activity.
Investor Takeaway
Investors should be cautious of the potential impact of rising oil prices and a weakening rupee on the Indian economy.
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