Indian rupee hits all-time low of ₹92.17 against US dollar
What's the story
The Indian rupee has hit a new low against the US dollar, breaching the ₹92 mark for the first time ever. The decline comes as oil prices surge due to escalating tensions in the Middle East. The rupee fell to 92.17 per dollar, down 0.7% from its previous all-time low of 91.9875 hit in late January.
Economic impact
Rising oil prices could increase India's import bill
The rising oil prices are expected to increase India's import bill and inflation. The rupee's depreciation could also trigger foreign portfolio outflows from Indian equities. Further, the remittance flows from Indians working in the Middle East could be impacted by the ongoing conflict. "Remittances from the Middle East as well as capital flows are likely to get impacted in the scenario of an extended regional conflict," analysts at Kotak Mahindra Bank said.
Forecast
Extended crisis could worsen macroeconomic outlook
Analysts at Kotak Mahindra Bank have warned that an extended crisis could worsen India's macroeconomic outlook. They predict a widening current account deficit, higher inflation, sharper rupee depreciation, and lower GDP growth. The rupee's decline is also being driven by fast-moving market dynamics, such as importers buying foreign exchange while exporters not selling as quickly.