The Indian rupee sunk to a new low against the US dollar on Friday amid elevated oil prices, souring economic outlook and relentless foreign capital outflows. The local currency depreciated 42 paise to 93.05 during early session, according to Bloomberg data.
Among emerging Asian peers, the INR was the worst performer after the Thai Baht and Malaysian Ringgit.
On year-to-date basis, the INR has lost 3.4% in value against the greenback. The currency market was closed on Thursday due to a public holiday.
Escalating tensions in the Gulf have triggered a global risk-off sentiment. The conflict has increasingly taken the shape of energy warfare, with attacks on critical infrastructure by both sides driving a sharp spike in crude oil prices and rattling investor confidence.
Meanwhile, the dollar index was above 99 after losing more than 1% in the previous session, as hawkish signals from other major central banks strengthened their currencies at the dollar's expense.
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Oil Prices, FII Selloff
Oil prices eased after hitting their highest levels since mid-2022, as signals from the US and Israel helped calm markets unsettled by escalating tensions in the Gulf. Brent crude slipped toward $107 per barrel, while US benchmark West Texas Intermediate (WTI) hovered near $94.
Despite the dip, oil markets remain under pressure from one of the most severe supply shocks in recent history. The conflict has disrupted nearly 10 million barrels per day of output across Gulf producers, according to international estimates. Brent prices have surged nearly 50% this month, reflecting the global nature of the disruption.
Higher oil prices threaten to bring imported inflation into India and erode value of the currency. The current account deficit could also widen with India importing over 80% of its energy needs.
Adding to the pressure on the INR is foreign institutional outflows from local equities that have hit nearly Rs 74,000 crore over the past 12 sessions.
Indian importers have stepped up dollar purchases. Meanwhile, the Reserve Bank of India has intervened to support the currency but allowed the 92.50 level to be breached, signaling cautious management amid thin liquidity and persistent external risks, according to Jigar Trivedi, senior research analyst at IndusInd Securities.
The RBI's net-short dollar book, a measure of the degree it has sold forward its stockpile of US currency, is nearing $100 billion across offshore and onshore markets, Bloomberg News reported on Thursday. This is used as a key tool for defending the rupee.
ALSO READ: Goldman Sees Rupee Sliding To 95, Putting Pressure on RBI
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