It is not just Western sanctions on Russia that accelerated the trend to circumvent the dollar, but the strength of the currency in the past year has also posed a challenge.
On Thursday, the rupee plunged 32 paise to close at an all-time low of 81.94 against the US dollar. High volatility in the crude oil market led to the fall of the rupee.
The rupee opened at Rs 81.52 on Thursday at the interbank forex market and then went down to Rs 81.94. During the day, the local unit witnessed an intra-day high of 81.51.
Meanwhile, the dollar index rebounded from trading under 111 earlier in the session, while US yields also crept higher toward 3.78%.
Experts said outflows due to defense-related payments and demand for dollars from oil importers accelerated the rupee’s slide.
On Tuesday, the rupee appreciated by 20 paise to end at 81.62 against the US dollar. The forex market was closed on Wednesday on the occasion of Dussehra.
The oil prices remained around $94 per barrel and are further expected to rise as OPEC+ has announced plans to cut production by 2 million barrels per day.
Since last week, oil has increased by about $10/barrel after losses were caused by concerns about declining demand.
As India is the third-largest oil importer in the world, further increase in crude prices would harm the rupee.
(with inputs from Agencies)