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Rupee Hits Record Low Near 92.30 vs Dollar Amid Oil Spike, Geopolitics

The Indian rupee has plummeted to a historic low against the US dollar, breaching the 92.30 mark in spot trading. Analysts attribute this sharp depreciation to soaring global crude oil prices and a dollar liquidity crunch, exacerbated by escalating tensions in West Asia. Kotak Securities warns the rupee will remain under pressure as long as oil stays high, though the RBI is expected to intervene to prevent disorderly moves. Indian government sources, however, assert the country is in a comfortable position with eight weeks of fuel inventories and limited exposure to the critical Strait of Hormuz shipping route.

Key Points: Rupee at Record Low, Faces Pressure from Oil & Geopolitics

  • Rupee hits record low near 92.30
  • High crude oil prices primary driver
  • Strait of Hormuz disruptions key risk
  • RBI expected to intervene to curb volatility
  • India holds 8 weeks of fuel inventory
3 min read

Rupee to face continued depreciation pressures: Kotak Securities

Indian rupee hits all-time high near 92.30 vs USD. Kotak Securities warns of continued depreciation pressure from high crude oil prices and West Asia tensions.

"USDINR has surged to a fresh all-time high... driven by the sharp rise in crude oil prices and a broader shortage of dollar liquidity. - Anindya Banerjee"

New Delhi, March 4

The Indian rupee has come under fresh pressure in the foreign exchange market, hitting an all-time high near 92.30 against the US dollar in the spot market, driven by soaring crude oil prices and a global dollar crunch amid escalating tensions in West Asia.

Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, on Wednesday stated that with crude oil prices remaining elevated, the rupee is likely to face continued depreciation pressures.

Banerjee said, "USDINR has surged to a fresh all-time high near 92.30 in the spot market, driven by the sharp rise in crude oil prices and a broader shortage of dollar liquidity in global markets amid the escalating conflict involving Iran, the US, and Israel. We expect the RBI to intervene periodically to contain excessive volatility and prevent a disorderly depreciation in the rupee. However, as long as crude oil prices remain elevated, the rupee could continue to face depreciation pressures."

Banerjee stated that the Strait of Hormuz, a critical oil shipping route, is a key variable to watch, and prolonged disruptions could push oil prices higher, weakening the rupee further.

"The key variable to monitor now is the status of the Strait of Hormuz, a critical artery for global oil shipments. The longer disruptions persist, the higher oil prices are likely to move, which in turn could push USDINR further upward. Conversely, any quick de-escalation in the conflict and restoration of normal shipping flows through Hormuz could help stabilise crude prices and provide some relief to the rupee. Near-term outlook: We expect USDINR spot to trade in a range of 91-93," he added.

Amid turmoil in West Asia, government sources on Tuesday said that India has a total of eight weeks of crude oil and petroleum products inventory, which includes strategic reserves, and only about 40 per cent of India's crude oil imports transit through the Strait of Hormuz, significantly limiting exposure to regional disruptions.

They asserted that the country remains in a comfortable position on energy security amid the evolving situation in the West Asian region.

Sources said India is closely monitoring developments in the region but is well-prepared to manage any potential supply-side challenges due to adequate inventory levels and diversified sourcing.

According to sources, India currently has around 25 days of crude oil inventory. Additionally, the country maintains about 25 days of petrol and diesel inventory.

Overall, India has a total inventory cover of nearly eight weeks of crude oil and petroleum products, ensuring energy security in the event of short-term disruptions.

Only 40 per cent of India's crude moves through the Strait of Hormuz, and 60 per cent of the rest of the crude comes from other sources. India continues to import Russian crude as per previous contracts.

The sources further stated that India is in a comfortable position with respect to LPG and LNG supplies.

- ANI

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Reader Comments

S
Sarah B
Living in India for 5 years now, and the currency volatility is a constant stress for expats sending money home. The RBI's intervention is crucial, but the global factors are so strong. Hoping for a quick de-escalation in West Asia for everyone's sake.
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Priya S
The article says we have 8 weeks of inventory and only 40% oil comes via Hormuz. That's somewhat reassuring. But the bigger question is about inflation control. RBI might have to keep interest rates high for longer, which isn't good for home loans or business growth. Tough balancing act ahead. 🤔
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Rohit P
Good to see we are still importing Russian crude. That's a smart move to keep costs in check. We have to be pragmatic about energy security. The focus should be on accelerating domestic renewable energy projects to reduce this external vulnerability in the future.
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Anjali F
While the analysis is sound, I respectfully think it misses the impact on middle-class families planning foreign education for children. A falling rupee makes those dreams so much more expensive. It's not just about petrol prices, it's about life plans getting derailed.
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Karthik V
The Strait of Hormuz is the real chokepoint. Global politics affecting our kitchen budget again. Time to seriously push for electric vehicles and solar power. Jai Hind! 🇮🇳

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