Rupee falls near 2022 lows as oil jumps
The Indian rupee fell 23 paise to 95.96 against the US dollar on Thursday, marking its lowest provisional close in recent trading. The decline placed the currency near a level not seen since early 2022, highlighting the impact of external shocks. Market participants noted that such a move often coincides with heightened volatility in commodity markets, as crude oil prices surged and the dollar strengthened amid global economic uncertainty.
Traders attributed the drop to a 2.74% rise in Brent crude to $105.90 per barrel, reversing earlier stabilization after the Iran war disrupted markets. The rise in Brent reflected renewed concerns over supply disruptions in the Middle East, a region whose geopolitical tensions frequently influence global energy pricing. Oil prices had fallen from around $72 per barrel in late February but rebounded following stalled diplomatic talks between the US and Iran, and President Donald Trump’s warning of potential “annihilation” against Iran and Tehran’s retaliatory defiance at the UN further escalated tensions.
The rupee opened at 95.84 in interbank trading, dipped to an intraday low of 95.98, and closed at 95.96, down from 95.73 the prior day. It faced pressure from a stronger dollar—backed by expectations of further Federal Reserve rate hikes and higher US bond yields. The dollar index, a weighted average of the greenback against six major currencies, edged higher, reinforcing the currency’s downward pressure. The 10-year Treasury yield, a benchmark for long-term borrowing costs, crossing the 5% threshold for the first time since 2007, signaled tighter financial conditions worldwide.
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Domestic equity markets worsened the outlook as the Sensex dropped 1,247.71 points (1.67%) to 73,580.54, and the Nifty fell 383.70 points (1.64%) to 23,063.10. Heavy selling in shares pushed investors toward safer assets, reinforcing the dollar’s strength. Both benchmarks responded sharply, as investors shifted capital into safer instruments amid the uncertainty.
Analysts noted the rupee faced immediate resistance at the 96.00 psychological mark, with a break above that level potentially accelerating depreciation. Traders often regard round numbers such as 96.00 as key thresholds, and a breach could trigger algorithmic selling. Support was seen near 95.43, though further losses could follow if oil prices or US rate expectations worsen. That support level may act as a floor if selling intensifies.
Foreign institutional investors had shown some resilience the prior day, buying equities worth ₹1,617.45 crore net. Their net purchase the previous session indicated a willingness to engage despite volatility, but Thursday’s market downturn signaled broader risk aversion and showed the fragile sentiment among overseas capital flows.
