Rupee Slides Past 94, Logs Sharpest Annual Decline in Over 10 Years
Heavy foreign outflows, rising oil prices, and inflation concerns weigh on Indian currency
Mumbai, Mar 28: The Indian rupee plunged to an all-time low, breaching the 94 mark for the first time to settle at 94.81 against the US dollar after touching an intraday record of 94.84. The currency has weakened nearly 4% since late February and about 11% in the current financial year, marking its sharpest annual decline in more than a decade.
Market participants pointed to sustained foreign institutional investor (FII) outflows as the primary driver behind the rupee’s depreciation. Dealers noted that capital outflows have crossed $13 billion this month alone, setting a new record and exerting significant pressure on the domestic currency.
Analysts also highlighted concerns over elevated crude oil prices, with expectations that rates may remain above $100 per barrel in the near term. Higher oil prices are likely to widen India’s import bill and fuel inflationary pressures, further weakening the rupee.
According to forex experts, the currency’s decline is more closely linked to investor selloffs than geopolitical tensions in West Asia. However, some relief could emerge if global conditions stabilise or inflows materialise from major deals, including a potential $4.4 billion investment linked to the Mitsubishi–Shriram Finance transaction.
Meanwhile, domestic financial markets reflected the strain, with equity benchmarks witnessing sharp declines and bond yields rising to multi-month highs. Investors have been pulling funds from both equities and debt amid concerns over inflation, currency volatility, and external imbalances.
Economic outlooks have also been impacted, with growth projections being revised downward and expectations of future interest rate hikes gaining traction. The government’s decision to cut excise duty on fuel may ease price pressures temporarily but could widen the fiscal deficit and increase borrowing needs.
Despite some indications of easing geopolitical tensions, the rupee is expected to remain under pressure in the near term. Analysts suggest it may trade within a weaker range, with downside risks persisting until there is clarity on global developments, including progress in key international negotiations.
