On Friday, the Indian rupee once again took a dive against the dollar and reached the lowest level in its history. Amidst the ongoing turmoil in the financial markets globally, the price of one dollar has now become Rs 92.39. In the previous trading session also, the rupee had touched a low of 92.3575, but Friday’s fall left this record behind.
Indian currency burning in the fire of crude oil
The biggest and direct reason for this huge fall of the rupee is the war that broke out in the Middle East (Iran). This conflict has created an atmosphere of great fear and uncertainty in the financial markets around the world. Crude oil, which was stable around $70 per barrel before the war started, has now reached the very sensitive level of $100 per barrel. India is largely dependent on crude oil imports for its energy supply. In such a situation, this wild rise in oil prices is creating big economic risks for the country. When oil is expensive, the country has to spend more dollars to maintain energy supplies, which puts huge pressure on the rupee.
Since the beginning of the Iran war, the Indian currency has fallen by more than one percent. The ever increasing cost of crude oil and the weakness of the rupee have a direct impact on the economic health of the country. When prices of basic commodities like crude oil increase in the international market, the energy supply chain becomes expensive. This situation is posing a big challenge to the Indian economy.
Reserve Bank becomes a shield amidst instability
However, amidst this disappointing scenario, there is a matter of relief. The position of the Indian rupee still remains slightly better compared to the currencies of other emerging markets of the world. This stability has not come on its own, but the Reserve Bank of India (RBI) has played an important role behind it. The Reserve Bank has made direct interventions in the foreign exchange market from time to time, so that the rupee can be prevented from falling suddenly. Due to this active step of RBI, the rupee has got support to some extent. Despite this, until the situation in the Middle East normalizes and crude oil prices soften, there is little chance of this turmoil in the market calming down.