India’s currency is under pressure — and analysts say the rupee could test new lows

cnbc.com:

The Indian rupee has come under intense selling pressure due to a perfect storm of global headwinds which analysts say will continue to pummel the currency in the months ahead.

In recent weeks, the Indian currencytested record lows and breached the 80 rupees per U.S. dollar level at least twice in July, recovering only after the Reserve Bank of India (RBI) stepped in to stem the slide.

The currency has since regained some ground and was around 79.06 to the dollar on Thursday.

The recent sharp declines prompted a swift response from policymakers to assuage concerns about a rupee sell-off, which could drive prices even lower.

Finance Minister Nirmala Sitharaman attributed the rupee's depreciation to external reasons, in a written statement to parliament in late July.  

Global factors such as the ongoing Russia-Ukraine war, soaring crude oil prices and tightening of global financial conditions are among the key reasons for the weakening of the Indian rupee against the dollar, she said. 

Analysts agreed the currency is being buffeted from multiple fronts globally.

India's exposure to high energy prices has had knock-on effects on the currency, with the rupee falling more than 5% against the dollar year-to-date.

Soaring energy prices are especially challenging for India — the world's third largest oil importer — which typically buys oil in dollars. When the rupee weakens, its oil purchases become more expensive. 

According to Nomura analysts, for every $1 increase in the price of oil, India's import bill increases by $2.1 billion.

There's been a «significant uptick» in Russian oil deliveries bound for India since March after Russia's invasion of Ukraine began — and New Delhi looks set to buy even more cheap oil from Moscow,