Rupee tumbles to new low of 92.35 against dollar

MUMBAI: The rupee fell to a record low on Monday and closed at 92.33, down 58 paise from Friday’s close of 91.75, as escalating conflict in West Asia pushed crude oil prices to around $119 a barrel and triggered foreign capital outflows from oil-importing markets seeking safer assets. The currency touched a record low of around 92.35 during the session, pressured by rising oil prices, a stronger dollar, and foreign portfolio outflows, while central bank intervention through dollar selling likely helped limit steeper losses.

Crude oil prices surged above $100 a barrel, reaching levels last seen in mid-2022 and increasing pressure on oil-importing Asian economies. Several regional currencies also weakened sharply, with some touching record lows as investors reassessed risks linked to higher energy costs and geopolitical tensions.

“India imports nearly half of its total energy needs, including crude oil, gas, fertilisers and edible oils. That exposure becomes a major risk when global prices rise sharply. Roughly speaking, every one-dollar increase in the price of crude adds about $1.8 billion to India’s annual import bill. If crude were to rise by about $50 a barrel, the additional cost could reach close to $90 billion, which is more than 2% of GDP,” said Neelkanth Mishra, chief economist, Axis Bank.

He said that if prices remain elevated for an extended period, it would create a significant distortion in the balance of payments. Even if the increase were closer to $50 billion rather than $90 billion, the strain would still be substantial. In the near term, prices could move even higher as tensions build, he said.

He said the conflict could be short lived because it does not serve the interests of major powers such as the United States or China to allow it to drag on. “What we are likely seeing is a phase of brinkmanship that may last a few weeks—perhaps four to six weeks—before some form of resolution emerges,” he said.