The Indian rupee slipped to a fresh all-time low against the US dollar on Wednesday, extending its recent decline as rising oil prices, foreign exchange outflows and importer demand continued to weigh on the currency.
The rupee weakened 0.1 per cent to 95.7450 per dollar, moving past Tuesday's previous record low of 95.7375, per a report by Economic Times.
Market participants said overseas debt repayments and strong importer hedging demand added pressure on the domestic currency despite recent government measures aimed at conserving foreign exchange reserves.
Also Read | Buying gold may soon pinch harder as India increases import tariffs to 15%
Oil prices add pressure on economy
The ongoing US-Iran conflict has sharply increased global crude oil prices, creating additional strain on India’s external sector. Brent crude prices have reportedly climbed nearly 50 per cent since the conflict escalated on February 28.
The surge in oil prices has raised concerns around inflation, economic growth and the rupee's future trajectory. Economists have revised growth forecasts lower while warning of continued pressure on the currency.
"A collapse in oil prices or a resumption in portfolio flows are prerequisites for a durable turnaround in the rupee's bearish run," said Radhika Rao, senior economist at DBS, per Economic Times.
Analysts noted that the rupee's losses could have been significantly steeper if not for regular intervention by the Reserve Bank of India and the use of regulatory measures to stabilise the market.
Govt and RBI respond to currency concerns
Over the weekend, Prime Minister Narendra Modi called for measures to conserve foreign exchange reserves. Soon after, the Centre raised import duties on precious metals in an attempt to reduce demand and support the rupee.
"Markets are pricing in rate hikes to defend the ‌rupee and address potential inflationary pressures, although we do not expect policy tightening to be the immediate response," Rao added.
Also Read | Dalal Street bleeds for 2 days straight: Can these 5 stocks defy the market today?
Per Economic Times, speaking at an event in Switzerland, RBI Governor Sanjay Malhotra said the central bank could look past temporary supply shocks but may step in if inflation pressures become long-lasting.
He also indicated that India may eventually need to raise domestic fuel prices if the Middle East conflict continues for an extended period.
Global markets remained cautious overall, although technology-linked stocks gained amid renewed optimism around artificial intelligence.
