Rupee Hits Fresh Record Low, Trades Below 96.50 Against Dollar
Indian Rupee Hits Record Low Against Dollar Amid Elevated Brent Crude Prices and Global Tensions
The Indian rupee breached the Rs 96.50 per dollar level on May 19, due to consistently elevated Brent crude prices dampening investor sentiment for the currency, while sustained tensions in West Asia continued to add pressure on the Indian unit. The rupee fell to a record low of Rs 96.52 per dollar, compared to Rs 96.35 per dollar in the previous trading session.
The rupee had opened at Rs 96.37 per dollar and moved within a 25-paise range throughout the day. This move marks the eighth straight session of declines in the currency, bringing the rupee's losses to more than 6 percent since the start of the year. The rupee has emerged as the worst-performing Asian currency so far this year.
Brent crude prices were trading at $110 per barrel, despite falling nearly 2 percent overnight, after US President Donald Trump announced that he would pause a potential attack on Iran to allow for negotiations for the war in West Asia to come to an end.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
The elevated energy prices are detrimental to the Indian rupee, considering that India is a net oil importer, which imports nearly 85 percent of its energy needs. Elevated oil prices will increase the import bill and widen the current account deficit. Additionally, foreign investors have pulled out nearly $2.6 billion from Indian equities, according to recent data.
The Indian government has decided to hike fuel prices by at least 90 paise for the second time in a week, after announcing a Rs 3 per litre hike a few days ago. This would mark the government's first hike in retail fuel prices in four years.
| Currency Pair | May 19 | Previous Trading Session |
|---|---|---|
| USD/INR | Rs 96.52 | Rs 96.35 |
| Change | -0.17 | -0.12 |
The rupee's decline is expected to continue, with some market analysts predicting that it may shift its focus toward the Rs 97 per dollar mark, as global forces tighten their grip and energy costs increase.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
Investor Takeaway
The rupee's decline may have a significant impact on the Indian economy, and investors should be cautious of the potential risks.
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