Rupee Plummets to Record Low Amid Rising Oil Worries and Dollar Demand

Indian Rupee Falls to Record Low Amid Fears of Iran War Disruption

The Indian rupee hit a record low of 92.4750 per dollar on Friday, surpassing its previous all-time low of 92.3575 set on Thursday. The currency closed at 92.4550, down 0.7% on the week, as concerns about the Iran war-induced surge in oil prices weighed on its value.

Traders pointed to elevated offshore dollar bids and a prolonged Middle East conflict as contributors to the rupee's decline. The conflict has prompted foreign investors to sell Indian equities worth nearly $5 billion so far this month, with India's benchmark equity index Nifty 50 falling 2% on Friday.

Analysts warn that a prolonged Middle East conflict could significantly worsen the rupee's outlook, potentially pushing the currency beyond 95 per dollar. India's decision to hold off on signing a trade deal with the United States for several months may also exacerbate the situation.

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The non-deliverable forwards market has also exerted pressure on the rupee, with a near-tenor dollar-rupee volatility skew rising to its highest level since November 2022. Economists at Standard Chartered note that the risk of a sharp widening in India's current account deficit amid weak capital inflows is a concern.

Key Figures:

• 92.4750: Record low value of the Indian rupee per dollar
• 92.3575: Previous all-time low value of the Indian rupee per dollar
• 0.7%: Weekly decline of the Indian rupee
• $5 billion: Value of Indian equities sold by foreign investors this month
• 2%: Friday's decline of India's benchmark equity index Nifty 50
• 95: Potential value of the rupee if the Middle East conflict persists