Indian Rupee hits record low as oil shock tests RBI’s firepower

ALBAWABA- India’s currency is under renewed strain, with the rupee sliding to a record low against the U.S. dollar in late April, intensifying pressure on the Reserve Bank of India to steady markets while shielding the broader economy.

The rupee weakened to around 96 per dollar on Thursday, marking a sharp decline from levels near 91–92 earlier this year and extending a multi-year slide that has eroded more than 12% of its value since early 2023. 

Traders say the central bank has stepped in through suspected dollar sales and regulatory adjustments to contain volatility, but the pressure shows little sign of easing.

At the heart of the sell-off is India’s heavy reliance on imported oil. With more than 85% of its crude oil sourced abroad, rising global prices, exacerbated by tensions in the Middle East, are feeding directly into higher import bills, inflation concerns, and a widening current account deficit. 

Much of India’s energy supply flows through the Strait of Hormuz, where heightened security risks have pushed up shipping and insurance costs, adding another layer of strain.

Geopolitical constraints are also limiting access to discounted crude, particularly amid sanctions-linked disruptions tied to Iran, further tightening supply options for Indian refiners.

For businesses and households, the currency slide is beginning to bite. A weaker rupee raises the cost of fuel, raw materials, and imported goods, squeezing companies' margins and adding to inflationary pressures for consumers.

The RBI now faces a delicate balancing act, including defending the currency without draining reserves too aggressively, while also supporting growth at a time when higher energy costs are already weighing on economic activity. Unless oil markets stabilise, the central bank’s room to manoeuvre could narrow in the months ahead.