Oil surge drags Indian rupee to record low; importers scramble to hedge
The Indian rupee fell to its all-time low on Wednesday, as mounting concerns of a prolonged conflict along a major oil-and-gas corridor in the Middle East heightened the risk of a deeper energy shock and unsettled markets.
By Reuters |
The Indian rupee fell to its all-time low on Wednesday, as mounting concerns of a prolonged conflict along a major oil-and-gas corridor in the Middle East heightened the risk of a deeper energy shock and unsettled markets.
Brent crude extended its rally to a fourth consecutive session, while global stocks slumped as investors braced for an oil shock that could reignite inflation and delay interest rate cuts worldwide.
The rupee, Asia's worst-performing currency this year, slipped to a record low of 92.3025 per dollar before closing at 92.15, falling 0.7% in its worst single-day slide in over a month.
Intervention by the Reserve Bank of India helped limit losses in the face of heightened dollar demand from local corporates, including oil companies.
U.S. and Israeli forces have pounded Iran since Saturday and Iranian drones and missiles have struck Gulf oil refineries and U.S. embassies in Saudi Arabia and Kuwait, raising concerns over the impact on oil importing economies such as India.
"The primary concern for India and China is the passage of crude through the Strait of Hormuz," said Abhishek Goenka, chief executive at FX advisory firm IFA Global.
"While RBI will most likely be present (in FX markets)... Typically, the intervention in such cases is more light-touch as one does not know how much more the situation could worsen."
Traders said that there was a rush among importer clients to cover near-tenor liabilities.
India's benchmark equity indexes - the BSE Sensex and Nifty 50 - fell more than 1% each, while the yield on the 10-year benchmark bond rose 4 bps.
The intensifying conflict has also made currency hedging more expensive for Indian importers, while the Nifty India volatility index climbed to 21, its highest since May 2025, indicating a spike in investor anxiety.
Economists say a sustained rise in oil prices can create growth and inflation pangs for the global economy.
Analysts at Goldman Sachs say that if oil prices rise to $85 per barrel, the Philippines and Thailand would likely experience the largest price increases, with India and China likely to see a more modest rise in inflation.
Brent crude extended its rally to a fourth consecutive session, while global stocks slumped as investors braced for an oil shock that could reignite inflation and delay interest rate cuts worldwide.
The rupee, Asia's worst-performing currency this year, slipped to a record low of 92.3025 per dollar before closing at 92.15, falling 0.7% in its worst single-day slide in over a month.
Intervention by the Reserve Bank of India helped limit losses in the face of heightened dollar demand from local corporates, including oil companies.
U.S. and Israeli forces have pounded Iran since Saturday and Iranian drones and missiles have struck Gulf oil refineries and U.S. embassies in Saudi Arabia and Kuwait, raising concerns over the impact on oil importing economies such as India.
"The primary concern for India and China is the passage of crude through the Strait of Hormuz," said Abhishek Goenka, chief executive at FX advisory firm IFA Global.
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"While RBI will most likely be present (in FX markets)... Typically, the intervention in such cases is more light-touch as one does not know how much more the situation could worsen."
Traders said that there was a rush among importer clients to cover near-tenor liabilities.
India's benchmark equity indexes - the BSE Sensex and Nifty 50 - fell more than 1% each, while the yield on the 10-year benchmark bond rose 4 bps.
The intensifying conflict has also made currency hedging more expensive for Indian importers, while the Nifty India volatility index climbed to 21, its highest since May 2025, indicating a spike in investor anxiety.
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Economists say a sustained rise in oil prices can create growth and inflation pangs for the global economy.
Analysts at Goldman Sachs say that if oil prices rise to $85 per barrel, the Philippines and Thailand would likely experience the largest price increases, with India and China likely to see a more modest rise in inflation.
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