Rupee Weakens Past 94 Amid Oil Price Surge

Rupee Weakens Past 94 Amid Oil Price Surge

Why in the News ?

The Indian rupee has depreciated beyond ₹94 per U.S. dollar, marking its fourth consecutive fall, due to rising crude oil prices, global uncertainty, and capital outflows, despite intervention by the Reserve Bank of India.

Recent Trends in Rupee Depreciation:

  • Exchange Rate Fall: Rupee declined by 23 paise to ₹94.01 per dollar, breaching the 94 mark.
  • Continuous Decline: Marks the fourth straight session of depreciation, indicating sustained pressure.
  • RBI Intervention: Despite efforts by the central bank, downward trend could not be fully controlled.
  • Stock Market Impact: Equity indices like Sensex and Nifty fell nearly 1% due to global uncertainties.
  • Safe-Haven Shift: Investors moving towards U.S. dollar and safe assets, weakening emerging market currencies.

Key Factors Behind Rupee Weakness

  • Rising Crude Oil Prices: Oil prices crossing $100/barrel increase India’s import bill.
  • Current Account Deficit (CAD): Higher imports widen CAD, putting pressure on the currency.
  • FPI Outflows: Foreign Portfolio Investors (FPIs) withdrawing funds reduces dollar inflows.
  • Geopolitical Tensions: Conflict in West Asia and uncertainty in Strait of Hormuz disrupt supply chains.
  • Strong Dollar: Appreciation of the U.S. dollar globally limits rupee recovery.

About Exchange Rate & Currency Depreciation :

●  Exchange Rate: Value of one currency in terms of another (₹ vs $).

●  Currency Depreciation: Fall in value due to higher demand for foreign currency.

●  Key Determinants:

○   Trade balance (exports-imports)

○   Capital flows (FPI, FDI)

○   Inflation and interest rates

●  Impact of Depreciation:

○   Increases import costs and inflation

○   Boosts export competitiveness

●  Policy Tools: RBI uses forex reserves, interest rates, and interventions to stabilise currency.