Rupee Hits Record Low as Oil Prices Continue to Climb
Indian Rupee Hits Fresh Lifetime Low Against US Dollar
The Indian Rupee extended its decline against the US Dollar for the fifth consecutive session on May 5, hitting a fresh lifetime low. The domestic currency opened 25 paise lower at 95.33 per dollar against Monday's close of 95.08, fueled by higher oil prices.
The sharp decline in the Rupee is attributed to the ongoing geopolitical tensions in the Gulf Region, particularly the Strait of Hormuz, where the US is trying to allow safe passage to ships stuck in the area while Iran has been attacking all such ships. This has led to a surge in oil prices, causing the Rupee to become more vulnerable to the dollar index rising due to safe-haven buying.
According to Finrex, the higher oil prices will continue to exert downward pressure on the Rupee against the dollar, as oil companies and Foreign Portfolio Investors (FPIs) intensify dollar buying. Exporters may continue to sell dollars at the upsides to counter any potential scheme that may come into effect in the future. Importers, on the other hand, may wait for dips to buy dollars for hedging purposes.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Asian Currencies Show Mixed Performance
Asian currencies showed a mixed performance against the previous close, indicating a lack of clear directional trend in the region. The South Korean Won and Chinese Renminbi recorded modest gains of 0.133% and 0.157%, respectively, suggesting some strength in these currencies.
| Currency | Change (%) |
|---|---|
| South Korean Won | 0.133% |
| Chinese Renminbi | 0.157% |
| Japanese Yen | 0.000% |
| Indonesian Rupiah | -0.328% |
The Japanese Yen remained largely unchanged, while the Indonesian Rupiah declined by 0.328%, marking the steepest fall among the listed currencies.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
US Dollar Remains Firm
The U.S. dollar remained firm, supported by safe-haven demand as geopolitical tensions in the Middle East weighed on global risk sentiment. The dollar index stood at 98.48, after rising 0.3% in the previous session.
Investor Takeaway
Investors should be cautious of the rupee's decline and potential impact on the economy.
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