The Indian rupee just hit a new bottom. On Friday, March 13, the currency slumped to a record low of 92.45 against the US dollar. So, why the sudden drop? Brent crude is the culprit. Now, with oil sitting above $100 a barrel, investors are spooked. Actually, the fear of a widening current account deficit (CAD) is very real. But the RBI isn’t sitting idle. Indeed, traders say the central bank is aggressively selling dollars to stop the bleeding.

The Oil Pressure Cooker

Look, India imports over 80% of its energy. And with the Strait of Hormuz still closed, the bill is getting fat. Previously, we saw the rupee end at 92. Today, it opened at 92.35 and kept sliding. Since the US-Israel-Iran war started on February 28, the rupee has lost more than 1%. Basically, every extra dollar for oil is a hit to the rupee.

The Numbers Today:

• Previous Close: Rs 92.00

• Today’s Low: Rs 92.45

• Oil Price: $100+ per barrel

• Next Target: Rs 92.80 (per CR Forex)

The Deficit Danger

But what happens if oil stays high? Actually, it’s bad news for the CAD. Radhika Rao from DBS Bank warns that $100 oil could push the deficit up by 0.35% of GDP. Last year, the deficit was 1%. Now, it’s already hitting 1.3%. So, the math isn’t looking good for the government. Indeed, if prices don’t cool soon, the economic impact will be “acute.”

What the Experts Say

Now, where is the rupee headed? Amit Pabari from CR Forex thinks we could see 92.80 soon. Still, some hope the RBI will keep intervening. But traders worry the RBI might let it slide if oil stays at $100. Turns out, burning through reserves to fight a global oil surge is a losing game.

So, what’s the bottom line? Basically, as long as the war rages in West Asia, the rupee stays under pressure. Next, keep an eye on those RBI debt purchases. However, until the ships start moving through Hormuz again, don’t expect a recovery.

Are you worried about imported inflation hitting your wallet as the rupee weakens?

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