Rupee breaches 95.80 mark against dollar for the first time

The Indian rupee slid to an all-time low level against the US dollar on Thursday (May 14), breaching the 95.80 mark for the first time, as elevated crude oil prices and sustained foreign portfolio outflows intensified pressure on the country’s external balances.

The rupee weakened 0.1% to 95.85 per dollar in early trade, surpassing its previous all-time low of 95.79 touched in the prior session. The domestic currency has now declined 1.4% this week and has hit record lows in each trading session from Tuesday (May 12) through Thursday (May 14).

Traders said the rupee remains under strain from persistently high oil prices linked to the ongoing Iran conflict and uncertainty over global energy supplies. India, which imports nearly 90% of its crude oil requirements and about half of its natural gas needs, is seen as particularly vulnerable among emerging markets if geopolitical tensions continue to disrupt energy flows.

Brent crude hovered near $106 a barrel as investors awaited discussions between US President Donald Trump and Chinese President Xi Jinping, with markets closely tracking whether the meeting could lead to any progress on the Iran conflict.

Analysts at ING said hopes remain that China could push Tehran towards a deal with the US, potentially helping restore oil shipments through the Strait of Hormuz. Any easing in crude prices would likely offer relief to the rupee, which has been weighed down by rising import costs for weeks.

Apart from oil prices, persistent foreign portfolio outflows have also pressured the currency, contributing to strain on both India’s current account and capital account.

The pressure on the external sector has prompted policy responses from the government. Prime Minister Narendra Modi has called for curbs on non-essential foreign travel and gold imports to help conserve foreign exchange reserves. India has also raised import duties on bullion in an effort to contain the trade deficit.

Brokerage Nomura said additional measures could be introduced in the coming months to reduce import demand and manage external vulnerabilities. These may include steps to discourage electronics imports, tighter norms under the Liberalised Remittance Scheme (LRS), and the possible issuance of diaspora bonds, according to the brokerage.

-With Reuters inputs