Slowly and definitely, the rupee is feeling the strain of the war involving the US, Israel and Iran.
The Indian rupee sank to a historic low as global tensions showed no signs of letting up. Meanwhile, oil prices shot through the roof.
The mood across financial markets reportedly turned cautious even as the local currency bore the brunt of it.
By 12:39 pm, the rupee was trading at Rs 92.24 against the US dollar. In the process, it crossed the Rs 92 mark for the first time ever. The drop came as investors sought safety amid the escalating global conflict.
The weakness in the rupee reflects the strain building up in global markets. A sharp rise in crude oil prices, coupled with a stronger US dollar, has weighed on several emerging market currencies. The rupee is among them.
The biggest pressure point right now is oil. Tensions in the Middle East have sparked fears of possible supply disruptions. The region is a key oil producer, and even the hint of instability can send prices higher.
For India, that is a serious concern. The country imports nearly 85% of its crude oil needs. When oil prices rise, India’s import bill swells.
That, in turn, increases the demand for dollars to pay for those imports. As demand for the US currency rises, the rupee weakens. Higher oil prices can also push up inflation and widen the current account deficit, both of which add to the currency’s troubles.
At the same time, the US dollar has gained strength globally. In uncertain times, investors tend to move their money into assets seen as safer, such as the dollar and US government bonds.
This shift means funds often flow out of emerging markets and into the United States. Currencies like the rupee then come under additional pressure.
The currency’s fall is part of a wider pattern. Equity markets across Asia traded lower after Wall Street closed in the red overnight. Investors cut back on risk as geopolitical worries deepened.
For now, much depends on how the situation in the Middle East unfolds and where crude oil prices head next. If tensions intensify and oil continues to climb, the rupee could remain under strain in the days ahead.
Also Read: US-Israel War On Iran: Why A Clean Energy Transition Is Even More Crucial Now For India https://www.vibesofindia.com/us-israel-war-on-iran-why-a-clean-energy-transition-is-even-more-crucial-now-for-india/
