Rupee Reaches New Low of 93.98 Against US Dollar Amid Escalating Middle East Tensions

Indian Rupee Hits Record Low Amid Middle East Conflict

On Monday, the Indian rupee fell to a record low of 93.98 against the U.S. dollar, surpassing its previous low of 93.7350 set on Friday. The decline is attributed to concerns over the Middle East conflict disrupting energy supplies, posing risks to Asia's third-largest economy.

The rupee has depreciated approximately 3% since the Iran war began on February 28, driven by a more than 50% surge in oil prices and severe disruptions to gas supplies. Analysts predict further decline for the rupee and its Asian peers if the conflict persists.

Asian currencies fell between 0.1% and 0.8% on Monday as hopes of an off-ramp to hostilities dimmed over the weekend. The dollar index rose 0.3% to 99.9, benefiting from safe-haven demand.

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Market performance was characterized by a "sell-everything mood," affecting equities, bonds, and precious metals. India's benchmark equity index Nifty 50 fell more than 2% on Monday, while the yield on the benchmark 10-year note rose 10 basis points to 6.847%.

Foreign investors have withdrawn over $11 billion from Indian stocks and bonds in March, with the month on track for the heaviest monthly outflows since October 2024, further pressuring the local currency.

Despite facing multiple headwinds, the rupee has held up relatively better than its peers during the crisis, thanks to frequent interventions by the Reserve Bank of India. However, the central bank's presence in the market was mild on Monday, with traders attributing it to the non-deliverable forwards market.

Investors are now focused on a looming deadline set by U.S. President Donald Trump, who has threatened to hit Iran's electricity grid if the Strait of Hormuz is not reopened by around 2344 GMT on Monday.

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