The Indian rupee has plummeted to a fresh lifetime low of 96.86 against the US dollar, marking its ninth consecutive session of depreciation, as elevated global crude prices and a surging greenback fuel inflation worries and trigger capital outflows.
Illustration: Dominic Xavier/Rediff
Key Points
- The Indian rupee closed at a fresh lifetime low of 96.86 against the US dollar, depreciating 16 paise in its ninth consecutive session of decline.
- Elevated global crude prices, particularly amid the West Asia crisis, are stoking inflation worries and contributing to the rupee’s weakness.
- A strong US dollar and rising US Treasury yields have further exacerbated inflation concerns and reduced expectations for rate cuts.
- The rupee’s sharp decline is a significant economic warning sign for Indian policymakers, investors, and businesses.
- Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,597.35 crore on Wednesday, adding to the downward pressure on the currency.
Declining for the ninth consecutive session, the rupee depreciated 16 paise to close at a fresh lifetime low of 96.86 against the US dollar on Wednesday as elevated global crude prices amid the West Asia crisis stoked inflation worries.
At the interbank foreign exchange market, the rupee opened at 96.89 against the US dollar, then lost further ground to touch a record low of 96.95. It went up to the day’s high of 96.65 before settling at a fresh all-time low of 96.86 against the greenback, registering a fall of 16 paise over its previous close.
In the previous session, the rupee tumbled 50 paise to settle at 96.70 against the dollar.
Factors Driving Rupee’s Decline
“Indian rupee hit fresh lows on a strong dollar and a surge in US treasury yields.
“US 30-year treasury yields rose to a two-decade high, while the 10-year yields rose to a 16-month high.
“This led to inflation worries and sell-off in global markets, making the markets risk-averse,” said Anuj Choudhary, Research Analyst, Commodities Research at Mirae Asset Sharekhan.
“We expect the rupee to trade with a negative bias on risk aversion in the global markets amid inflation worries. A strong dollar and rising US Treasury yields raised inflation concerns and trimmed rate cut expectations. USD/INR spot price is expected to trade in a range of Rs 96.5 to Rs 97.10,” he added.
Economic Warning Signs and Global Context
The rupee’s sharp decline has emerged as one of the biggest economic warning signs for policymakers, investors and businesses. Once considered among Asia’s more stable currencies, the rupee has now become one of the worst-performing emerging market currencies this year, pressured by a toxic mix of expensive oil, capital outflows, widening trade deficits and a surging US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 99.42, higher by 0.09 per cent.
Brent crude, the global oil benchmark, was trading down 2.77 per cent at $109.95 per barrel in futures trade.
The US Senate advanced legislation on Tuesday that seeks to force President Donald Trump to withdraw from the Iran war, as a growing number of Republicans defied President Donald Trump’s wishes.
On the domestic equity market front, Sensex rose by 117.54 points to settle at 75,318.39, and Nifty was up 41 points to 23,659.
Foreign Institutional Investors offloaded equities worth Rs 1,597.35 crore on a net basis on Wednesday, according to exchange data.
