MUMBAI: The rupee had its worst loss in over four years to close at 93.71 on Friday, down 82 paise or close to 0.95%, as worries over the ongoing war in the Middle East deepened.
The rupee fell more than 1.1% to 93.7350 or 103 paise against the dollar during the day, eclipsing its previous record low of 92.63 on Wednesday. It closed at 93.71, down about 1.3% on the week, the steepest decline since late 2022. The unit opened down at 93.15 and continued to bleed through the day despite a positive equity market.
On MCX, the unit touched 93.80 or 1.13% losing 103 paise from the previous close.
A prolonged spike in crude prices could slow growth and stoke inflation in the world's third-biggest oil importer and consumer.
The oil shock has prompted foreign investors to pull out over $8 billion from domestic equities this month, the largest outflow since January 2025 which adds to the strain on the rupee. Last year they had ripped the market of $18.9 billion.
With today’s loss, the rupee remains the worst currency in Asia as it has lost more than 5.5% till date this year. In 2025, the unit had lost 4.9%.
With no sign of the conflict easing, the rupee looks increasingly vulnerable and many analysts like Goldman Sachs and UBS see it breaching 95 sooner rather than later.
Oil prices surged to over $119 a barrel earlier this week—a 53% spike since the war began more than two weeks ago, before retreating Friday to about $110 as some countries offered to join efforts to secure safe passage for ships through the Strait of Hormuz, which ferries over 20% of global oil and gas supply. For India the Strait carries half of all oil and gas imports.
Another pain for the rupee is the continuing strengthening of the dollar which has been rising against all currencies due to its safe-haven nature. The US Fed’s hawkish narrative is also adding pressure on the rupee, traders said.
For the domestic economy, the implications of a prolonged war go beyond the rupee. A weaker rupee, combined with elevated crude prices, could push up imported inflation, particularly in fuel and commodities, and increase costs for businesses and consumers, forcing the RBI to act on the rate front.