Even if the rupee reaches a record low, the RBI may decide to wait and watch when it comes to FX interventions: Professionals.

Even if the Indian rupee falls to a historic low, the Reserve Bank of India (RBI) may choose to wait and watch moving forward due to a number of variables, including the potentially worsening macro conditions brought on by the conflict in West Asia, according to experts. The rupee broke its previous record low of Rs 92.63 per dollar on March 20 and reached a lifetime low of Rs 93.76 to the dollar. One of the biggest intra-day losses in recent months, the rupee closed the day at Rs 93.71 to the dollar after losing more than 100 paise. Due to a public holiday, the currency and fixed-income markets were closed on March 19. It appears that the level of Rs 95 per dollar might not be too far off. The cost of crude oil One of the only explanations for the rupee's persistent underperformance is the increase in Brent crude oil prices. The currency is the worst among rising Asian currencies, including the South Korean won, Thai baht, and Chinese yuan, among others, and has dropped by around 3% since the US-Israel-Iran war began in late February. Some of these economies, like India, are net importers of oil. The Indian rupee’s sharp fall to a record low reflects growing external pressures, especially from rising crude oil prices and geopolitical tensions in West Asia. As India is heavily dependent on oil imports, higher crude prices increase the demand for dollars, weakening the rupee. This has also raised concerns about a widening current account deficit and higher imported inflation, which can impact the overall economic outlook. Experts suggest that the Reserve Bank of India may choose a cautious “wait-and-watch” approach rather than aggressive intervention in the foreign exchange market. The RBI generally focuses on managing excessive volatility rather than defending a fixed currency level. With global uncertainties still evolving, the central bank may prefer to conserve its foreign exchange reserves and intervene only when movements become too sharp or disruptive. Another factor contributing to the rupee’s weakness is the shift in global investor sentiment. Heightened geopolitical risks have pushed investors toward safer assets like the US dollar, leading to capital outflows from emerging markets, including India. This trend has further increased pressure on the rupee, making it one of the weaker performers among Asian currencies in recent weeks. Looking ahead, the direction of the rupee will largely depend on crude oil price trends, geopolitical developments, and foreign investment flows. If global conditions remain unstable and oil prices stay elevated, the rupee may continue to face downward pressure. However, any easing in tensions or supportive action from the RBI could help stabilize the currency in the near term.