Rupee Plunges to Record 96.25: Can RBI Shield It from a Century Mark?

The Indian rupee tumbled to a new all-time low of 96.25 against the US dollar on Monday, pressured by soaring crude oil prices, persistent global uncertainty and renewed strength in the US currency. The local currency opened 21 paise lower at the interbank foreign exchange market and continued to weaken during early trade.

The rupee was last seen trading around 96.17 per dollar, compared to its previous close of 95.96. The latest decline comes just days after the currency breached the psychologically important 96-per-dollar mark for the first time on Friday, raising concerns over further depreciation in the near term.

Oil Prices and Geopolitical Risks Add Pressure

A sharp rise in crude oil prices has emerged as a key factor behind the rupee’s weakness. Brent crude climbed above $111 per barrel after reports of an attack on a nuclear facility in the United Arab Emirates (UAE) intensified fears of supply disruptions in the region.

Market participants remained cautious after there was no significant breakthrough in talks between US President Donald Trump and Chinese Premier Xi Jinping.

India, being heavily dependent on oil imports, faces additional pressure whenever global crude prices surge, as higher import bills increase demand for dollars and widen the current account deficit.

Strong Dollar, Weak Emerging Markets

The strengthening US dollar has further weighed on emerging market currencies, including the rupee. Strong economic data from the United States has raised expectations that the Federal Reserve may continue with a tighter monetary policy, increasing demand for the US dollar across global markets.

Economists at JP Morgan noted that India’s growing balance of payments pressures may need to be managed through a combination of rupee depreciation, foreign exchange intervention and measures to attract capital inflows as cited by Reuters.

According to a Moneycontrol, analysts at Finrex Treasury Advisors warned that “only a stoppage of the war and reopening of the Strait of Hormuz can bring about a lower demand on the dollar/rupee pair.” They added that the rupee could weaken toward the 100-per-dollar mark if the Reserve Bank of India (RBI) does not announce measures to improve dollar inflows.

Meanwhile, currency traders expect pressure on the rupee to persist through the week, with the RBI’s market intervention likely to determine whether the depreciation remains gradual or accelerates further.