Kotak Securities warns currency may remain under depreciation pressure as crude prices rise amid escalating West Asian tensions
The Indian rupee has come under renewed pressure in the foreign exchange market, touching a fresh record low near 92.30 against the US dollar in the spot market, as soaring crude oil prices and tightening global dollar liquidity weigh on the currency.
According to Kotak Securities, the rupee could continue to face depreciation pressures if crude oil prices remain elevated amid escalating geopolitical tensions in West Asia.
Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, said the surge in USD/INR reflects the combined impact of rising oil prices and a broader shortage of dollar liquidity in global markets.
“USDINR has surged to a fresh all-time high near 92.30 in the spot market, driven by the sharp rise in crude oil prices and a broader shortage of dollar liquidity in global markets amid the escalating conflict involving Iran, the US and Israel,” Banerjee said.
He added that the Reserve Bank of India (RBI) is likely to intervene periodically to contain excessive volatility and prevent a disorderly depreciation in the rupee.
“However, as long as crude oil prices remain elevated, the rupee could continue to face depreciation pressures,” Banerjee said.
Market participants are also closely watching developments around the Strait of Hormuz, a critical global oil transit route, where any prolonged disruption could further push up crude prices and intensify pressure on oil-importing economies such as India.
Government sources said India is closely monitoring the evolving situation but remains prepared to manage any potential supply-side disruptions.
India currently holds around 25 days of crude oil inventory and another 25 days of petrol and diesel inventory, providing a buffer against short-term supply shocks. Overall, the country has an inventory cover of nearly eight weeks of crude oil and petroleum products.
Officials also noted that only about 40 per cent of India’s crude imports pass through the Strait of Hormuz, with the remaining 60 per cent sourced from other routes and suppliers. India continues to import Russian crude under existing contracts.
Sources added that the country remains in a comfortable position regarding LPG and LNG supplies despite the rising geopolitical tensions.
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