The Indian rupee plunged to a fresh record low on Friday, 15 May, as surging crude oil prices nearing $110 per barrel intensified pressure on India’s external sector and broader macroeconomic indicators.
The domestic currency weakened 0.3% to hit an all-time low of 96.05 against the US dollar, surpassing its previous record low of 95.9575 touched in the previous session.
The Indian rupee opened 11 paise weaker at 95.87 against the US dollar on Friday.
The currency has now fallen to fresh record lows for three consecutive sessions, declining around 1.36% this week. Bankers said the pace of depreciation has likely been moderated by the Reserve Bank of India’s intervention.
The rupee hit an unprecedented intraday low of 95.9575 per dollar on Thursday before recovering slightly. Recent indications of potential measures to draw in dollar inflows and alleviate pressure on the currency provided only temporary support, as the rupee quickly resumed its downward trend thereafter.
Ongoing foreign equity withdrawals, high dollar demand from oil marketing firms and importers, and limited dollar sales from exporters continue to negatively impact the domestic currency.
Brent crude prices remained high at around $107 per barrel, indicating ongoing pressure from energy costs. With India importing nearly 90% of its crude oil needs, the rupee is particularly susceptible to fluctuations in oil prices.
Investors are paying close attention to the outcomes of the discussions between Donald Trump and Xi Jinping.
At the same time, the yield on the US 10-year Treasury surpassed 4.50%, its highest level in a year, strengthening the dollar and putting further strain on emerging-market currencies, such as the rupee.
Impact of the dollar
According to experts, the Dollar Index extended gains for a fourth consecutive session after stronger-than-expected US retail sales data and resilient labour market indicators reduced expectations of aggressive Federal Reserve rate cuts. CME FedWatch data now shows the probability of another 25-basis-point Fed rate hike by December rising to nearly 37%, up from around 22% a week ago.
Experts noted that higher US interest rates typically attract global capital to dollar-denominated assets, putting pressure on emerging-market currencies such as the rupee.
They also pointed to lingering geopolitical uncertainty following the meeting between Donald Trump and Xi Jinping. While both leaders attempted to project stability, disagreements over Taiwan and China’s continued oil purchases from Iran kept global tensions elevated.
Analysts said the dollar tends to strengthen during periods of uncertainty as investors seek safe-haven assets. As a result, the rupee remains under pressure from a combination of high crude oil prices, persistent dollar strength, and global inflation concerns, despite domestic policy support.
Rupee Outlook
“Technically, the 94.50–94.80 zone is expected to act as a strong support area for USDINR, while 96.00–96.20 remains a major resistance zone,” said Amit Pabari, MD, Research Team, CR Forex Advisors.
According to Ponmudi R, CEO of Enrich Money, USD/INR is trading above ₹95.8 zone, trading near all-time highs at the upper end of the ascending trendline structure. Immediate resistance stands at ₹95.9– ₹96; a sustained move above this zone could extend rupee weakness up to ₹96.5. On the downside, ₹95.70– ₹95.50 acts as immediate support; a break below this zone could trigger a pullback toward ₹95.30– ₹95.00.
“The near-term bias remains cautiously bullish, driven by persistent dollar demand amid ongoing geopolitical tensions, unless the central bank intervenes,” said Ponmudi.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
