The rupee slipped to a fresh record low on Tuesday, May 5, as elevated crude oil prices and renewed geopolitical tensions in the Gulf drove demand for the US dollar.
The currency weakened to 95.39 per dollar in early trade, breaching its previous record low of 95.33 touched last week. It opened 22 paise lower at 95.31 and declined about 0.3 percent during the session.
Escalating US-Iran tensions, including fresh strikes in the region, have unsettled global markets and dampened hopes of a near-term resolution. The uncertainty has pushed up crude oil prices, adding pressure on oil-importing economies such as India.
Other Asian currencies sensitive to oil price movements, including the Indonesian rupiah and Philippine peso, also came under pressure amid rising investor caution.
Analysts said the primary trigger for the rupee’s weakness remains the sharp rise in crude oil prices. As India depends heavily on oil imports, higher prices translate into increased demand for dollars, weighing on the domestic currency.
Additional pressure is emerging from the unwinding of non-deliverable forward (NDF) positions, which has further boosted dollar demand in offshore markets.
Market participants also flagged concerns around the US fiscal situation. The US national debt has now exceeded the size of its economy for the first time since World War II, raising questions about the sustainability of higher interest rates.
This could limit further gains in the dollar, even as it retains safe-haven appeal during periods of uncertainty.
At the same time, possible intervention by Japanese authorities to support the yen may also cap the dollar’s strength globally.
With India’s forex reserves easing from recent highs, the Reserve Bank of India’s room for aggressive intervention has narrowed.
However, analysts expect the central bank to consider measures to stabilise the currency, including steps to attract NRI deposits and ease investment norms to boost dollar inflows.
According to market experts, the 95.30–95.50 range is likely to act as a near-term resistance zone for the rupee. A temporary pullback towards 94.20–93.80 levels is possible, although underlying pressure is expected to persist due to elevated crude oil prices and continued geopolitical risks.
Rupee hits fresh record low of 95.39 per dollar
Rising crude oil prices remain the key trigger
Gulf tensions intensify pressure on oil-importing economies
RBI may consider steps to support the currency
Near-term volatility likely to continue
(By arrangement with livemint.com)