MUMBAI: The Indian rupee weakened to a record closing low of 96.53 against the US dollar on Tuesday, marking its sixth consecutive session of decline. Sustained high crude oil prices and adverse global cues weighed heavily on the currency, with the local unit closing 18 paise lower compared to 96.35 in the previous session. During intraday trading, the rupee touched a low of 96.61, reflecting persistent pressure from external factors and weak market sentiment.
Crude Oil Prices and Current Account Deficit
High crude oil prices have triggered expectations of a widening current account deficit. Dealers noted that for the rupee to stabilise, measures to curtail the deficit or a return of foreign investment flows are necessary. While there have been discussions about tax breaks for foreigners investing in bonds, rising yields in the US render these tax breaks ineffective.
Exchange Rate Outlook
Dealers indicated that the exchange rate appears to be headed towards the 97 level. Benchmark Brent crude has risen over 50% since the start of the conflict, posing a significant challenge for India, which imports most of its crude oil requirements.
The rupee's decline reflects broader global economic pressures, with investors closely monitoring developments in crude oil markets and global monetary policy. The persistent weakness in the rupee could have implications for import-dependent sectors and overall economic stability.
