The Indian rupee depreciated to around 93 per US dollar, its weakest level on record, under pressure from surging crude oil prices and escalating geopolitical tensions in the Middle East. Brent crude and India’s crude basket both rose above $105–$111 per barrel after attacks on key energy infrastructure and renewed threats to supply routes through the Strait of Hormuz.
The resulting increase in oil import costs has heightened concerns about inflation and a widening current account deficit, particularly as India relies on imports for more than 80% of its energy needs. Importers have accelerated their dollar purchases, while foreign investors have withdrawn nearly $8 billion from Indian equities so far in March, exacerbating capital outflows.
The Reserve Bank of India has intervened in the foreign exchange market to curb excessive volatility and support the rupee, but it has allowed the 92.50 level to be breached. This suggests a cautious, calibrated approach to currency management in the face of thin market liquidity and persistent external risks.
