Indian Rupee Hits Record Low of 82 as Rising Oil Prices Weigh
The Indian rupee hit a record low against the dollar on Friday as rising oil prices, corporate dollar demand and growing fears of a hawkish Federal Reserve battered the currency this week.
The rupee fell as much as 0.4% to an all-time low of 82.356 to the dollar. It was also set to lose nearly 0.8% this week in its fourth straight week of losses.
Rising oil prices were the biggest weight on the rupee this week, given India’s status as the third-largest crude importer in the world. The country imports about 80% of its oil requirements, making the rupee sensitive to any rises in oil prices.
Oil prices rose on the back of a “deep” supply cut by the Organization of Petroleum Exporting Countries and its allies, and are set for more volatility as the U.S. readies a response to the move.
Crude prices are up between 7% and 11% this week, and are set for their biggest weekly gain since the early days of the Russia-Ukraine conflict this year.
Reuters reported that the rupee also came under pressure from corporate dollar demand, particularly among importers and for defense-related payments.
Emerging market currencies faced renewed pressure from the dollar this week, as the greenback firmed ahead of key U.S. nonfarm payrolls data due later in the day. Traders fear that a stronger-than-expected reading will give the Fed more space to hike interest rates sharply, boosting the dollar and providing more headwinds to other currencies.
Recent weakness in the rupee has driven dollar selling by the Reserve Bank of India to support the currency. But this has raised concerns over India’s dwindling foreign exchange reserves.
The RBI also hiked interest rates by 50 basis points last week, and reiterated its commitment to tightening monetary policy in the face of a weakening rupee and rising inflation.