Rupee Hits Record Low, Slipping 35 Paise to 95.63 Against US Dollar

Rupee Hits Record Low Against US Dollar Amid Fears of Escalating Middle East Conflict

The Indian rupee slipped 35 paise to hit a record low of 95.63 against the US dollar on Tuesday, 12 May, as concerns over a weakening ceasefire in the Middle East pushed oil prices higher, heightening worries for the import-dependent economy. The rupee started at 95.57 against the US dollar in the interbank foreign exchange market and subsequently dropped to an unprecedented low of 95.63, a decline of 35 paise from its previous closing value.

Monday's Decline On Monday, the rupee plummeted by 79 paise to end at its historical low of 95.28 against the US dollar. The rupee has faced ongoing pressure since the escalation of the Iran conflict in late February, which sent oil prices soaring. Any temporary recovery phases have primarily been supported by sporadic interventions from the central bank.

Ongoing Instability The outlook remains unstable, as progress in US–Iran negotiations has been minimal. While both parties reached a ceasefire agreement on 8 April, recent comments from Donald Trump suggest that the truce might be deteriorating. Trump's remarks have reignited concerns around India's external stability, as higher oil prices widen the import bill, increase dollar demand, and put pressure on the rupee.

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

Market Experts Weigh In According to market experts, the recent surge in Brent crude above $102 per barrel has reignited concerns around India's external stability. They note that comments by Prime Minister Narendra Modi on fuel conservation, lower imports, and reduced overseas spending have been interpreted as a signal of rising concerns around the trade deficit and balance of payments.

Global Economic Trends Despite improving global sentiment, experts note that India has lagged its emerging-market peers. According to data from the Institute of International Finance, EM inflows rebounded strongly in April, but India recorded over $22 billion in equity outflows, reflecting persistent investor caution.

Looking Ahead Going ahead, analysts expect markets to track geopolitical developments, including Donald Trump's engagements, as well as inflation data in India and the US. While headline inflation may ease toward the RBI's 4% target, risks remain from potential second-round effects of elevated crude prices.

Comparison of Rupee's Performance in Recent Quarters

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

Note: The comparison above reflects the historical performance of the rupee against the US dollar in recent quarters.