USD vs INR: Indian Rupee hits record low of 92.33 against US dollar amid rising crude oil prices

The Indian rupee touched a record low of 92.33 on Monday, March 9, as a sharp rise in global oil prices, fueled by the escalating Middle East conflict, heightened worries about India's external balances. The rupee opened 0.50%, or 46 paise, lower at 92.1975 per US dollar as against its Friday's close of 91.74.

The drop of over 50 paise from the close represents one of the steepest single-day declines for the rupee in recent months, underscoring the increasing pressure on the rupee.

Reports indicated that the Reserve Bank of India (RBI) likely intervened in the foreign exchange market earlier in the session to mitigate volatility. Market participants suggest that the central bank was probably selling dollars before the domestic spot market opened, which allowed the rupee to temporarily rebound from approximately 92.30 to 92.20 before the official opening.

Rising crude oil prices weigh on rupee

Brent crude prices surged over 25% to about $117 a barrel, continuing last week's nearly 28% increase that was sparked by the onset of the Iran war.

The approximately 50% rise in oil prices has been fueled by the intensifying US-Israeli conflict with Iran, which has led some major producers in the Middle East to reduce supplies and raised concerns about a sustained disruption of shipments through the Strait of Hormuz.

Rising crude oil prices present a major concern for India, a significant oil importer, as they lead to increased import expenses, potentially widen the current account deficit, and put additional strain on the rupee.

Iran announced on Monday the appointment of Mojtaba Khamenei as the successor to his father, Ali Khamenei, as the supreme leader, indicating that hardliners continue to maintain a strong influence in Tehran amid the ongoing conflict with the United States and Israel, which heightens the chances of a lengthy war.

Rupee Outlook

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, was quoted by PTI as saying the rupee will continue to be at risk due to increasing oil prices, which have surged by over 28% since the previous Friday's close.

On Monday, Asian currencies also experienced declines. Bhansali noted that the rupee could reach 93.00 if oil prices stay above USD 100 in the upcoming trading sessions.

“The Indian rupee slipped past 92 per dollar, marking its lowest level on record, pressured by soaring oil prices and heightened geopolitical tensions in the Middle East. The Reserve Bank of India intervened last week to support the currency, but further gains in oil pushed the rupee lower as importers hedge and exporters hold back amid uncertainty,” said Jigar Trivedi, Senior Research Analyst at IndusInd Securities.

According to him, broad risk-off sentiment and rising demand for the US dollar continue to amplify pressure on the rupee.

“Key levels for the USDINR pair on the upside are 92.50 - 92.70 - 92.80 - 93. While on the flip side, support is seen at 91.80 - 91.50,” said Trivedi.

Amit Pabari, MD, CR Forex Advisors, said that the USDINR pair has been gradually strengthening its support levels.

“For the coming days, 91.40 – 91.50 is likely to act as a strong support zone, and if this base holds, the USDINR pair could gradually move toward the 92.50 - 93.00 levels,” said Pabari.

(With inputs from agencies)

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