4 Reasons Why INR Slipped Below 92 per Dollar Again

SYNOPSIS: The Indian rupee fell to a record low of 92.54 against the US dollar, pressured by surging oil prices, global risk-off sentiment, weaker Asian markets, and a stronger dollar amid escalating geopolitical tensions.

The Indian rupee came under pressure on Monday, 9th March, slipping to a record low as global crude oil prices surged amid escalating tensions in the Middle East. The currency weakened to around 92.54 against the US dollar, reflecting growing concerns about India’s external balance and the potential impact of higher oil import costs on the economy.

This intraday low of 92.545 marked a decline of about 0.65 percent from its previous close of 91.94. The fall of more than 60 paise in a single day represents one of the sharpest declines seen in recent months, highlighting the increasing pressure on the domestic currency.

According to market reports, the Reserve Bank of India (RBI) may have stepped in to manage the volatility in the forex market. Market participants indicated that the central bank likely sold dollars earlier in the session, even before the domestic spot market opened. This intervention briefly helped the rupee recover from around 92.30 to 92.20, although the broader pressure on the currency remained.

I. Oil prices surge amid escalating conflict

The Iran-Israel-US conflict has now entered its 10th day, and this is not just a regional issue – it is now having ripple effects across global markets. One of the biggest immediate impacts has been the sharp rise in crude oil prices. With tensions escalating in the Middle East and shipping disruptions reported through the Strait of Hormuz, a key route for global oil trade, crude prices have surged past $100 per barrel for the first time since 2022.

The global benchmark for oil, Brent crude, is hovering near $117 per barrel, reflecting a sharp rise of nearly 25 percent from Friday’s close of around $93 per barrel. Meanwhile, the US benchmark West Texas Intermediate (WTI) has also rallied strongly (close to $115 per barrel). Such sharp increases in crude prices tend to put pressure on emerging market currencies like the INR, especially since countries like India rely heavily on imported oil.

II. Indian markets take a hit

The surge in crude prices has weighed heavily on Indian equity markets. On Monday, the Sensex plunged nearly 2,500 points, while the Nifty slipped below the 23,800 level, reflecting investor concerns over the economic impact of rising energy costs.

Market experts believe that sustained high oil prices could pose challenges for economies that depend heavily on imports. An analyst at Geojit Investments noted that Brent crude moving above $115 per barrel represents a significant oil shock for markets. For large oil-importing countries like India, prolonged high crude prices could increase inflationary pressures and affect economic growth.

Even if the higher oil costs are not fully passed on to consumers, inflation could still rise, which may influence monetary policy and market sentiment. Another key uncertainty is the duration of the conflict. This unpredictability is also likely to keep foreign investors cautious. After a brief phase of buying in February, FIIs have once again turned net sellers, adding to the pressure on Indian equities.

III. Asian markets also feel the heat

The escalating geopolitical tensions have not only affected India but also shaken investor confidence across Asian equity markets. In early trading on Monday, several major Asian indices witnessed sharp declines as crude oil prices surged and uncertainty around the Middle East conflict intensified.

Japan’s Nikkei 225 recorded one of the steepest falls in the region, dropping more than 7 percent, while the broader Topix index declined by about 6 percent. South Korea’s Kospi index also slid around 9 percent, prompting a temporary halt in Kospi 200 futures trading due to excessive volatility. Meanwhile, Hong Kong’s Hang Seng futures were trading below the previous closing level, reflecting weak investor sentiment across the region.

When Asian markets decline sharply, it often leads to capital outflows from emerging markets as investors shift funds toward safer assets. This typically increases demand for the US dollar, which in turn puts additional pressure on emerging market currencies such as the INR.

IV. Dollar strength adds to the pressure

At the same time, the US Dollar Index (DXY), which measures the strength of the dollar against a basket of six major currencies, has been climbing, nearing the 100 mark as global investors move toward the greenback amid rising uncertainty.

One reason for the stronger dollar is the weakness in the euro, which carries the largest weight in the index at nearly 57 percent. Europe’s heavy dependence on Middle Eastern energy supplies has made the euro more vulnerable during the recent surge in oil prices. As a result, the euro has already fallen more than 2 percent this month, indirectly pushing the dollar higher.

Foreign Institutional Investors (FIIs) have also been pulling money out of Indian equities. According to NSE data, FIIs were net sellers of domestic stocks worth Rs. 6,030 crore as of 6th March. A stronger USD often reduces the attractiveness of emerging market assets, which can accelerate capital outflows and further weaken currencies like the INR.

What analysts say about the rupee

Market experts believe the INR could continue trading in the 91-92 range against the USD in the near term. Analysts suggest that the 91.40-91.50 zone may act as an important support level, and if this level holds, the currency pair could gradually move toward the 92.50-93.00 range.

Some analysts also warn that the INR remains vulnerable due to the sharp rise in oil prices, which have already surged more than 25 percent since last Friday. Several Asian currencies also weakened during Monday’s session, reflecting broader pressure across emerging markets. According to currency experts, the rupee could even approach the 93 level if crude oil continues to trade above $100 per barrel in the coming sessions.

Another group of analysts noted that the rupee recently slipped past the 92 mark against the USD, reaching a record low as soaring oil prices and heightened geopolitical tensions weighed on sentiment. While the RBI had intervened earlier to stabilise the currency, continued strength in oil prices has kept pressure on the rupee, with importers hedging their exposure and exporters holding back amid uncertainty.

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