Rupee slides toward record low as Brent crude tops $100
The Indian currency opened at 96.63 against the dollar as surging energy prices and escalating Middle East conflicts threaten to reverse recent macroeconomic improvements.
The Indian rupee fell 6 paise to open at 96.63 against the US dollar on Friday, putting the currency on the brink of a new record low. The immediate catalyst was a 7% surge in Brent crude, which pushed the global benchmark above $100 a barrel for the first time in two months.
The oil spike followed claims by Yemen's Houthi rebels that they attacked two Saudi oil tankers in the Red Sea. This compounded existing shipping disruptions in the Strait of Hormuz and triggered sharp warnings from US President Donald Trump, who threatened a large-scale strike on Tehran as American military operations against Iran entered their 12th consecutive night.
For India, the world's third-largest crude importer, the rapid price reversal from $70 a barrel just weeks ago poses a direct threat to external balances. Higher energy costs risk widening the current account deficit and stoking domestic inflation, driving up demand for dollars and eroding the benefits of recent Reserve Bank of India measures designed to attract foreign capital.
The rupee's weakness is also part of a broader emerging market retreat driven by risk-off sentiment. The US 10-year Treasury yield has climbed to roughly 4.70% on renewed inflation fears, prompting investors to abandon riskier assets in favor of safe havens.
Currency traders are simultaneously tracking the status of India-US trade negotiations. A temporary tariff arrangement, which imposed an additional 10% US duty on certain Indian exports, is set to expire on July 24. A timely agreement could cushion the rupee, but a failure to secure a deal would compound existing oil-related pressures.
Analysts expect the downward momentum to continue. Amit Pabari, managing director of the research team at CR Forex Advisors, said, "as crude oil has moved in line with our expectations, we expect the rupee to follow the same path. With Brent near $100 and geopolitical risks still elevated, USDINR is expected to move beyond the 97.00 level, with 97.50 likely in the near term." On the downside, the 96.00 to 96.10 zone is seen as the first key layer of support.
