The Indian Rupee weakened sharply on Friday, breaching the 93 mark against the US Dollar for the first time, amid growing concerns over the economic fallout of escalating tensions in the Middle East.
The rupee fell nearly 0.7 per cent to 93.27 per dollar, surpassing its previous record low earlier this week. The decline comes as the ongoing conflict involving Iran disrupts global energy supplies and drives up crude oil prices.
Oil prices trigger currency pressure
India, the world’s third-largest oil importer, is particularly vulnerable to rising crude prices. Oil surged close to $120 per barrel before easing slightly, intensifying fears of higher inflation and slower economic growth.
Experts warn that a prolonged spike in energy costs could widen India’s fiscal and current account deficits, putting further pressure on the currency.
Foreign outflows add to concerns
The currency’s fall has been accompanied by significant foreign investor outflows. Reports indicate that over $8 billion has been pulled out of Indian equities this month—the largest outflow in over a year.
This trend reflects growing investor caution amid global uncertainty and rising geopolitical risks.
Rupee under sustained pressure
Over the past year, the rupee has depreciated by around 7 per cent against the dollar, weighed down by multiple global and domestic factors, including trade tensions and regional conflicts.
Analysts suggest that if the conflict persists, the rupee could weaken further, potentially approaching the 95 per dollar mark.
Central bank interventions offer some support
Despite the sharp decline, interventions by the Reserve Bank of India have helped cushion the fall to some extent. Compared to some Asian peers, the rupee has shown relative resilience due to policy support and market management.
However, market volatility remains high, with investors closely monitoring geopolitical developments and global energy trends.