FX.co ★ Indian Rupee Falls to Record Low

The Indian rupee weakened to 95 per US dollar at the end of the fiscal year, marking a new record low and erasing its brief rebound following Reserve Bank of India (RBI) intervention. The RBI had imposed limits on foreign exchange positions in an effort to stem the currency’s selloff, but sentiment in domestic markets soon shifted back in favor of hard foreign currencies. Over the full financial year, the rupee depreciated by nearly 10%, including a 3.6% drop in March alone after the outbreak of war in the Middle East intensified macroeconomic pressures on the currency. Heightened geopolitical risk tends to support the US dollar as global investors move into safe-haven assets, while the disruption to business activity in Gulf states has clouded the outlook for remittances from Indian workers—an important source of foreign exchange inflows. At the same time, the resulting spike in energy prices accelerated rupee selling, as India relies heavily on imports of crude oil and refined products to meet its manufacturing and transportation needs.