Rupee vs Dollar: The Indian rupee continued its slide on Friday, opening 11 paise weaker at 95.87 against the US dollar as rising US Treasury yields, elevated crude oil prices and persistent foreign fund outflows weighed heavily on the domestic currency.
The rupee has now weakened for three consecutive sessions and has declined around 1.36% so far this week, hitting fresh record lows.
On Thursday, the rupee touched an all-time intraday low of 95.9575 against the dollar before recovering marginally as sustained foreign equity outflows, strong dollar demand from oil marketing companies and importers, and muted exporter dollar selling continued to weaken sentiment.
The pressure on the rupee has intensified amid a sharp rise in crude oil prices. Brent crude remained elevated near $107 per barrel, reflecting concerns over global energy supplies and geopolitical tensions. India, which imports nearly 90% of its crude oil requirements, remains highly vulnerable to rising oil prices and a stronger dollar.
Investors are also closely monitoring the outcome of discussions between US President Donald Trump and Chinese President Xi Jinping, amid fears that worsening geopolitical tensions could further disrupt global markets.
At the same time, the US 10-year Treasury yield crossed 4.50%, its highest level in nearly a year, strengthening the dollar globally and creating additional pressure on emerging market currencies, including the rupee.
Which sectors could benefit and which may suffer?
Market experts believe that if the rupee weakens further towards the psychologically important ₹100 per dollar mark, the impact on the Indian economy and equity markets could be significant and uneven across sectors.
“A move of the Indian rupee toward Rs. 100 per US dollar would significantly impact the economy and stock market. A weaker rupee increases import costs, especially for crude oil, electronics, and chemicals, leading to inflationary pressure. Sectors dependent on imports, such as aviation, FMCG, and automobiles, may face margin pressure,” said Pranay Aggarwal, Director and CEO, Stoxkart.
According to Aggarwal, rising currency volatility could also make foreign investors more cautious, potentially increasing market swings and reducing risk appetite in import-heavy sectors.
However, he believes some sectors may benefit from a weaker rupee. Export-oriented industries such as IT services, pharmaceuticals, specialty chemicals and textiles could gain because dollar-denominated revenues would translate into higher earnings in rupee terms.
“A weaker rupee also creates opportunities. Indian exports become more competitive globally, benefiting pharma, textiles, and manufacturing exporters. Companies earning in dollars could report stronger profits, supporting select sectors in the stock market. Maintaining some allocation to gold can help hedge against currency weakness and inflation,” Aggarwal added.
He further pointed out that gold prices in India could rise further if the rupee weakens sharply, as bullion imports become costlier. This could increase inflationary pressure and affect consumer spending.
Crude oil and geopolitical tensions to keep rupee under pressure
Apart from foreign fund outflows and rising US Treasury yields, analysts believe the recent spike in crude oil prices and escalating geopolitical tensions in the Middle East are emerging as major pressure points for the Indian rupee. Since India remains heavily dependent on imported crude oil, any sustained rise in energy prices tends to widen the trade deficit, increase inflationary risks and weaken the domestic currency.
According to Jigar Trivedi, Senior Research Analyst, IndusInd Securities, the rupee’s recent weakness is closely linked to rising geopolitical uncertainty in the Middle East and the sharp rise in crude oil prices.
“The Indian rupee fell to its weakest level on record as investors worried over a fraying ceasefire in the Middle East, which triggered a fresh rally in oil prices and deepened concerns over the economic impact on a net energy-importing economy like India,” said Jigar Trivedi, Senior Research Analyst, IndusInd Securities.
Trivedi added that rising crude oil and gold prices are likely to keep pressure on the rupee in the coming months, while persistent dollar demand from importers could drive further depreciation in the domestic currency.
He also warned that in an extreme geopolitical scenario involving further escalation between the US and Iran, crude oil prices could surge sharply, creating additional risks for the Indian economy and currency markets.
“Year to date, the Indian Rupee has dropped by more than 6%, and in the short term, levels around 96 and 97 are resistance. In the extreme scenario of an escalating war between the US and Iran, if WTI oil hits $120 per barrel, the rupee could approach 100, putting the economy at risk,” noted the expert.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
