Rupee hits record low near 96.9 as oil, Iran war lift dollar

The Indian rupee fell to a record low near 96.9 per U.S. dollar on Wednesday, marking an eighth straight session of losses as rising crude prices, the U.S.-Iran standoff and higher U.S. Treasury yields strengthened the dollar.

The slide leaves the rupee about 6% weaker since late February, when it traded near 87 per dollar, and more than 50% weaker in cumulative terms since 2009. Foreign portfolio investors have withdrawn more than $22 billion from Indian equities so far this year, increasing demand for dollars and adding conversion pressure on the currency.

The standoff in the Middle East has disrupted shipping through the Strait of Hormuz and contributed to higher benchmark oil prices, raising India’s oil import bill. Elevated U.S. Treasury yields have drawn capital toward dollar assets, reducing flows into emerging-market currencies.

Global asset managers including Aberdeen, MetLife Investment Management and Gamma Asset Management warned the rupee could weaken further if the standoff continues. Rajeev De Mello, global macro portfolio manager at Gamma Asset Management, warned: ‘The rupee remains vulnerable to further depreciation, and 100 against the dollar is an important psychological threshold that investors will increasingly focus on. The most immediate catalyst for a break of the level would be another leg higher in oil prices.’

Authorities in New Delhi have taken steps to limit dollar outflows. The government raised domestic fuel prices, increased duties on gold imports and Prime Minister Narendra Modi urged citizens to conserve fuel and avoid non-essential foreign travel. Citi economists led by Samiran Chakraborty expect the government may introduce additional measures, including possible curbs on outward business investment.

Market participants say the rupee’s path will depend on oil price movements and global investor sentiment. They note that a sustained rise in crude or a prolonged period of high U.S. yields would intensify depreciation pressure, while diplomatic progress in the Middle East or a shift in U.S. monetary policy could ease pressure on the currency.