The Indian rupee has reached a new low against the US dollar, trading near 94.27 as of Friday, marking the first time the currency has fallen below 94 per dollar.
The local currency opened at 94.15 on Friday and is currently trading at 94.27, a significant increase from Wednesday’s close of 93.97. This depreciation follows a broader trend, with the rupee having declined by as much as 3.6% since the beginning of the year due to ongoing global volatility.
The current situation is largely attributed to the conflict in the Middle East. Increased risks surrounding the duration of the war, particularly the potential for a prolonged conflict with Iran, have contributed to the rupee’s weakness. Brent crude prices have surged above $100 per barrel, adding to inflationary pressures and widening the current account deficit.
G Chokkalingam, Founder & MD, Equinomics Research, anticipates a potential recovery. “Till the Iran war ends, it will remain weak. Once the war ends, it is likely to bounce back to at least 90 against the US Dollar,” he stated.
As of Friday, the rupee opened 30 paise lower, sinking to 94.28 against the dollar, a new low. Currency and fixed income markets were closed on March 26 due to a public holiday. The rupee has already depreciated more than 3 percent since the start of the conflict, with no immediate signs of stabilization.
US President Donald Trump’s decision to delay planned strikes on Iranian power plants did not bolster investor confidence. Iran has rejected a proposed deal, further fueling uncertainty.
Elevated Brent crude prices are expected to contribute to a higher import bill and exacerbate the current account deficit, continuing to pressure the rupee downwards.
Amit Pabari, managing director at CR Forex Advisory, noted, “While the global impact of the conflict suggests there is increasing pressure for de-escalation, the path to that outcome remains unclear. If tensions ease meaningfully, the rupee could see a recovery of around Rs 1 to Rs 1.5. But until there is clarity, volatility is likely to persist.”
Traders are closely monitoring the Reserve Bank of India’s (RBI) potential intervention in the spot and non-deliverable forwards (NDF) markets, following the RBI’s previous efforts to prevent a sharp decline in the currency.
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