Rupee slumps to record low against US dollar today

The Indian rupee today hit a lifetime low in early trade today as a sharp surge in global crude oil prices threatened to push up imported inflation and widen the country's trade and current account deficits.

The partially convertible rupee was trading at 76.92, after touching 76.96, its weakest level ever. It had closed at 76.16 on Friday. The benchmark 10-year bond yield was trading at 6.86%, up 5 basis points on the day.

The previous record low for rupee was on April 22, 2020 when it had hit 76.90 during COVID-19 pandemic.

India is the world's third-largest importer of crude oil, and rising prices also hurts the rupee. Oil prices soared more than 6%, touching their highest since 2008 on Monday after the United States and European allies mull a Russian oil import ban. Indian shares tumbled over 2.5% today, with investors dumping risky assets.

The Reserve Bank of India usually sells dollars via state-run banks to prevent sharp moves in the rupee. With forex reserves at $631.53 billion by early March, traders feel it has enough firepower to avert a much sharper fall in the currency.

The key concern, however, is whether the RBI will be forced to act to contain inflation by raising interest rates in the aftermath of the Ukraine crisis.