The rupee hit a record low of Rs 95.63, depreciating 35 paise against US dollar in early trade on Tuesday, May 12 as market sentiments remained uncertain over US and Iran tensions after President Donald Trump said that the ceasefire was on life support.
Rupee opened at Rs 95.57 against the US dollar and then fell further to an all-time low of Rs 95.63, according to data from interbank foreign exchange market. On Monday, the Indian currency dropped 79 paise hitting a low of Rs 95.28 against the US dollar.
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Why is rupee falling?
The recent drop in the Indian currency is primarily a result of ongoing geopolitical concerns instead of any domestic concerns. According to Harshal Dasani, Business Head, INVAsset PMS, "The rupee's fall to a record low near 95.63 against the US dollar is less a sign of domestic weakness and more a reflection of a sharp global risk-off move. India is facing the classic pressure points at once: elevated crude prices, stronger safe-haven dollar demand, geopolitical uncertainty and cautious foreign flows. For an oil-importing economy, a weaker rupee immediately revives concerns around imported inflation, current account stress and higher input costs for several sectors."
Sharing outlook for rupee, Dasani added, "The next important level for the market is not just 96 on USD/INR, but whether crude remains elevated and whether the RBI chooses to smooth volatility more actively. Exporters such as IT and pharma may see some margin support, but import-heavy sectors like oil marketing companies, airlines, chemicals and consumer durables could face pressure. Until oil cools or dollar strength eases, the rupee may remain under depreciation pressure in the near term."
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