Rupee Hits Record Low Against US Dollar, Crossing 93 for First Time

Indian Rupee Reaches Record Low Amid Global Energy Disruptions

On March 19, the Indian rupee reached a record low of 93.24 against the US dollar, a decline of 0.65% from the previous day's low of 92.63. This depreciation marks a nearly 2% decline since the start of the US-Iran war.

The surge in oil prices to nearly $120 per barrel on Thursday following attacks on key energy infrastructure in the Gulf region contributed to the decline in the rupee. Although oil prices retreated on Friday, the strain on the rupee is unlikely to ease in the near term.

Foreign investors have pulled out over $8 billion from local stocks in March, the largest monthly outflows since January 2025. A sustained increase in energy prices could hurt India's growth and lift inflation, economists have warned.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Key Developments:

• European nations and Japan have offered to secure safe passage for ships through the Strait of Hormuz.
• The US has outlined moves to boost oil supply.
• Nomura's Sonal Verma expects inflation to rise, but growth may still be 7% in FY27.
• Every $10 oil price rise translates into a 50 bps inflation rise.

Market Outlook:

The Fed's decision to maintain rates in the 3.5-3.75% band, alongside elevated inflation projections and rising geopolitical tensions, reinforces a more extended "higher-for-longer" cycle than markets had anticipated. India's domestic growth fundamentals continue to provide a cushion against global rate volatility, but rate-sensitive emerging markets may face intermittent headwinds as expectations of rate cuts in 2026 get deferred.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline