Indian Rupee Crash: The Indian rupee has reached an all-time low of 95.27 against the US dollar. This sharp decline comes amid a surge in crude oil prices.
Historical fall in the Indian Rupee
Rupee vs. Dollar: As soon as the market opened today, April 30th, the rupee once again fell below the 95 level against the US dollar. The rupee reached close to 95.21 per dollar today. Rising crude oil prices and strong demand for the dollar have pushed the rupee to its lowest level ever.
The rupee opened at 95.02 per dollar on Thursday, down 0.2% from its previous close of 94.84 against the US dollar. It then slipped to a new record low of 95.27 against the dollar, well below its previous record low of 95.22 set in March.
Why did the rupee surrender before the dollar?
- The currency's weakening today is primarily due to a surge in oil prices. Brent crude futures are trading above the $122 per barrel mark, their highest level in more than three years. Meanwhile, the US benchmark, West Texas Intermediate, is also trading higher, around $110 per barrel. Since India imports a large portion of its oil needs, higher oil prices mean a greater need for dollars. Consequently, oil companies will buy more dollars. This will increase dollar demand, weakening the rupee.
- Selling by foreign investors is also a major reason for this. Due to tensions between the US and Iran, global investors are withdrawing money from riskier markets like India and investing it in the safe-haven US dollar. This is also strengthening the dollar.
- The Reserve Bank of India's limited role is also a major reason for this decline. While the RBI is intervening in foreign exchange reserves to shore up the rupee, its efforts are failing in the face of global factors such as rising oil prices and a strong dollar.
Impact on India
- Due to the dollar becoming expensive, everything from studying abroad to travelling will become expensive because you will have to spend more money than before.
- Other imported electronic goods like smartphones and laptops will also become expensive.
- A weakening rupee will further increase costs for oil companies, and this is likely to lead to higher fuel prices in the domestic market.
