Rupee rout deepens on global jitters

The rupee plunged 86 paise on Friday to settle at a fresh all-time low of 94.82 against the US Dollar, as global uncertainty and surging oil prices rattled markets. The sharp fall underscores mounting pressure on the domestic currency amid geopolitical tensions and persistent capital outflows.

The rupee opened weak at 94.18 in the interbank market and slid past the 94.50 mark for the first time during the session, before ending at 94.82 (provisional). This comes after it had already slipped to a then-record 93.96 earlier in the week. Markets were shut on Thursday due to Ram Navami.

At the heart of the slide is a potent mix of global and domestic factors. Rising tensions involving Iran and the United States have triggered a surge in crude oil prices, with Brent crude hovering near $110 per barrel. For an oil-dependent economy like India—where over 85% of crude is imported—this translates directly into higher dollar demand. As oil prices rise, Indian importers rush to buy dollars to pay for shipments, increasing pressure on the rupee.

At the same time, global investors are pulling money out of emerging markets, including India, and shifting to the safety of dollar-denominated assets. Heavy Foreign Institutional Investor (FII) outflows, estimated at over Rs70,000 crore this month, have intensified the currency’s decline.

The strengthening of the dollar index, reflecting the greenback’s resilience, has further weighed on emerging market currencies. Risk aversion has firmly taken hold, with investors reacting sharply to any escalation in geopolitical tensions.

The Reserve Bank of India has stepped in to curb excessive volatility, intervening in both spot and forward currency markets using its forex reserves. However, the central bank’s actions have only slowed, not reversed, the rupee’s slide.

Looking ahead, analysts warn that if crude prices remain elevated above $100 per barrel, the rupee could weaken further, potentially testing the 95 mark. For now, the currency remains highly sensitive to global developments, with the trajectory largely dictated by oil prices and geopolitical headlines.