The Indian Rupee managed to recover some ground on Thursday, March 5, trading at 91.58 against the US Dollar. This stabilization comes after a sharp decline on Wednesday when the currency touched a historic intraday low of 92.31. Reports indicate that the Reserve Bank of India (RBI) intervened in the market to prevent further depreciation, while global geopolitical tensions continue to keep investors cautious regarding the economic outlook.
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How the Rupee moved in the last 24 hours
The currency markets witnessed significant volatility after reopening on Wednesday following the Holi holiday on Tuesday. The rupee slipped to an intraday low of 92.31 per dollar before closing at 92.15. By Thursday, it recovered to 91.58. Market experts point out that state-run banks were seen selling dollars aggressively, likely on behalf of the central bank, to keep the rupee from sliding past the 92.50 mark.
Sudarshan Nambiar from Yes Bank noted that this selling effectively arrested the slide, though the depreciation bias remains due to external factors. Foreign Institutional Investors (FIIs) also pulled out significantly, selling equities worth over ₹3,200 crore in a single session, which added to the demand for dollars and put pressure on the local currency.
Reasons behind the sharp fluctuations
Several external factors are weighing heavily on the Indian currency right now. The primary trigger has been the escalation in the Middle East, specifically reports of strikes involving Iran. This situation led to the closure of the Strait of Hormuz, a critical route for global oil trade. Consequently, Brent crude oil prices spiked above $82 per barrel due to immediate supply fears.
Since India imports about 85% of its fuel requirements, any sharp rise in crude oil prices puts immediate pressure on the rupee. During such uncertain times, investors often shift their money to “safe-haven” assets like the US Dollar, causing emerging market currencies like the Rupee to fall further.
Impact on daily life and economy
For the common public, a weaker rupee combined with high oil prices is a matter of concern. Dr. Raghuram Rajan, former RBI Governor, highlighted that if the currency continues to fall, it could increase the cost of imported goods and fuel. This inflationary pressure eventually impacts the price of everyday items in the market.
- Fuel Costs: High crude prices directly impact petrol and diesel rates.
- Electronics: Imported gadgets and components become more expensive.
- Education: Students studying abroad face higher costs for fees and living expenses.
