Rupee slips past ₹91 amid oil fears, geopolitical tensions
What's the story
The Indian rupee has breached the ₹91 per US dollar mark for the first time in a month. The fall comes amid rising geopolitical tensions and a potential spike in global oil prices. Analysts expect the currency could fall further toward ₹91.50 as markets respond to the ongoing US-Israel-Iran conflict. The rupee also faces pressure due to heightened risk aversion among investors.
Market impact
Geopolitical tensions and oil price surge impact rupee
The recent US and Israeli strikes on Iran have triggered a sharp spike in oil prices. This has soured risk appetite in global markets, putting further pressure on the rupee. As a major oil importer, India is vulnerable to potential disruptions in Middle Eastern oil supplies. In response, state refiners are already looking for alternative sources of supply.
Currency forecast
Barclays predicts further decline for rupee
Analysts at Barclays have predicted that the dollar could gain from higher energy prices and heightened risk aversion, pushing the rupee down further. They recommend shorting the rupee using non-deliverable forwards and expect USD/INR to test ₹92 soon. The risk of a prolonged conflict in the Middle East and the central bank's commitment to defending its currency will be closely watched by traders this week.
Economic outlook
Emkay Global warns of macroeconomic risks
Madhavi Arora, an economist at Emkay Global, warned that if Middle East tensions persist, high oil prices could lead to increased input costs and financial market volatility. This could threaten macroeconomic stability. Meanwhile, traders expect the Reserve Bank of India (RBI) to maintain comfortable liquidity conditions in the banking system for March after keeping liquidity above 1% of deposits through February.