Indian Rupee Hovers Near Record Low

The Indian rupee slipped to around 93.5 per dollar, pausing losses after stabilizing briefly as persistent geopolitical tensions and elevated oil prices continued to weigh on the currency. Although hopes have emerged that the conflict may end soon following statements from Donald Trump, lingering uncertainties are keeping investors cautious. March saw global funds withdraw around $12 billion from Indian equities, the steepest monthly outflow on record. Brent crude, up 44% since February, could climb further if the Strait of Hormuz remains effectively closed, adding to currency pressures. Analysts warn that if the conflict in Iran persists, the rupee could weaken to 100 per dollar or beyond, despite recent measures by the Reserve Bank of India to curb its roughly 10% decline over the past year. Market positioning remains bearish, with options pricing indicating roughly a 13% chance of the rupee reaching 100 by June and a 41% probability by year-end.

The Indian rupee weakened to 95 per US dollar at the end of the fiscal year, a new record low, to pare the momentary rebound from RBI intervention. The Reserve Bank of India capped positions on foreign exchange to reprieve the selloff for the currency before local markets repivoted to favor hard foreign exchange. The rupee lost nearly 10% in the financial year, including a 3.6% plunge in March after the outbreak of war in the Middle East raised macroeconomic headwinds for the currency. Geopolitical instability favors the dollar due to global markets opting for save haven assets, and the halt of business activity in Gulf states pressured the outlook for remittances from Indian workers that serve as a source for foreign exchange inflows to the country. Additionally, the consequent surge in energy prices magnified rupee selling as India imports a large majority of its crude oil and product to fuel manufacturing and transportation.

The Indian rupee strengthened to around 93.9 per dollar, rebounding sharply after hitting record lows as authorities stepped in to contain pressure on the currency. The gains followed the Reserve Bank of India’s announcement of new limits on banks’ foreign-exchange exposure, capping onshore open positions at $100 million per day, effective April 10. The measure compels lenders to scale back large positions and curbs their ability to build aggressive one-sided bets against the rupee. The intervention comes as the rupee has declined more than 4% over the past month, falling to around 94.82 per dollar. Earlier interventions to stabilize the currency have already contributed to a drop of over $30 billion in foreign-exchange reserves in the first three weeks of March, limiting the central bank’s flexibility for further direct action.