Rupee Hits Two-Month Low as Oil Surges
The Indian rupee weakened to a two-month low against the US dollar on Monday as rising crude oil prices intensified concerns over India’s import costs, inflation outlook and external finances.
Indian rupee hits two-month low
The rupee declined by about 0.2% to 96.4575 against the dollar during trading, moving closer to its record low of 96.96. The currency had already fallen approximately 1% during the previous week amid renewed geopolitical uncertainty.
Demand for dollars from oil-importing companies increased as global crude prices climbed. Foreign investment outflows and cautious sentiment across domestic financial markets also added pressure on the Indian currency.
The benchmark Nifty 50 index fell around 0.5%, while India’s 10-year government bond yield increased by approximately three basis points as investors assessed the potential inflationary impact of expensive energy imports.
Rising oil prices pressure rupee
Brent crude futures climbed about 2.5% to more than $90 a barrel following an escalation in military exchanges between the United States and Iran. Concerns about shipping through the Strait of Hormuz have kept energy markets volatile.
India imports nearly 90% of the crude oil it consumes, making the economy particularly vulnerable to sustained price increases. Higher oil prices can widen the trade and current account deficits by increasing the country’s dollar-denominated import bill.
Rising energy costs may also contribute to inflation and reduce demand for Indian assets among overseas investors.
State-run banks limit rupee losses
Dollar sales by state-run banks helped contain the rupee’s decline during the session. Currency traders said the transactions may have been conducted on behalf of the Reserve Bank of India, although the central bank does not routinely confirm its market interventions.
The RBI has previously used dollar sales to reduce excessive currency volatility. Traders will continue monitoring crude prices, foreign investment flows and possible central-bank action as the rupee approaches its record low.
