Rising US Treasury yields and elevated oil prices drive the INR to record lows against the USD amid Fed policy uncertainty.
The Indian Rupee fell to a new record low against the US dollar as Treasury yields surged past March highs and oil prices remained elevated. Investors grew impatient with the prolonged US-Iran stalemate, which kept geopolitical risks in focus and weighed on emerging market currencies like the INR.
Prior to this drop, the Rupee had shown a strong correlation with oil prices, which spiked due to tensions in the Strait of Hormuz. Meanwhile, US inflation concerns and hawkish Fed commentary fueled expectations that the central bank may keep rates higher for longer, further strengthening the dollar.
Markets now await clarity on the Strait’s reopening, which could ease oil prices and revive rate cut bets. However, persistent inflation or prolonged hostilities may push the Fed toward tighter policy, sustaining pressure on the Rupee.