Indian Rupee Hits Historic Low of 95.3 Against US Dollar Amid Oil Price Surge

The Indian rupee plummeted to a historic low of 95.3 against the US dollar on Thursday, driven by soaring global oil prices and a downturn in the domestic equity markets. This marks a significant depreciation for the currency, which opened at 95 in the interbank foreign exchange market and quickly lost 46 paise, reaching an intraday low of 95.3 before recovering slightly to close the trading session at 94.2 against the dollar.

The rupee’s decline follows a rough trading day on Wednesday, where it had already depreciated by 20 paise, closing at 94.8 against the dollar, an all-time low. The recent fluctuations in the currency are largely attributed to external factors, particularly the surge in global oil prices, which spiked more than 7% on Thursday, reaching a four-year high. This increase came in the wake of reports suggesting that US President Donald Trump is considering an extended blockade of Iranian ports, which could further disrupt oil exports from the region.

On Thursday, the benchmark Brent crude oil price soared to $126.4 per barrel before retreating to around $116 per barrel. For comparison, Brent crude was priced at $78 per barrel just before the onset of the current geopolitical tensions on February 27. The Wall Street Journal reported that President Trump has directed US officials to contemplate a prolonged blockade to intensify pressure on Iran and compel the nation to negotiate a peace deal. This uncertainty in the oil market has had a cascading effect on currencies like the rupee, as heightened oil prices increase the cost of imports for India, a major oil consumer.

The impact of rising oil prices is not confined to the currency market; it has also taken a toll on India’s stock market. On Thursday, the Indian equity indices faced significant selling pressure, reflecting investor apprehensions about economic stability in the face of escalating oil costs. The combination of a weakening currency and rising oil prices poses challenges for policymakers as they navigate the complex landscape of inflation and growth.

As the situation unfolds, market analysts and economists will be closely watching for updates regarding US-Iran relations and their potential ramifications on global oil supplies. The Indian government may also need to consider measures to mitigate the adverse effects on the economy from this dual challenge of currency depreciation and rising oil prices.

Source: scroll.in