Rupee tumbles to eight-week low as oil prices spike, dollar demand surges

The rupee slipped to 94.83 against the US dollar on Tuesday, marking its steepest decline in eight weeks as a combination of elevated energy costs and global market headwinds pressured the domestic currency. The unit had closed at 94.49 the previous session, signalling a notable deterioration in sentiment towards emerging market assets.

Rising crude oil prices emerged as a key headwind for the rupee, threatening to widen India's current account deficit and intensifying pressure on the currency. As oil quotations climbed, importers moved to hedge their exposure, triggering additional dollar demand at a time when global risk appetite remained subdued.

The broader dollar strength reflected persistent risk-off sentiment in international markets, with investors rotating away from higher-yielding emerging market currencies in favour of safe-haven assets. This defensive positioning compounded selling pressure on the rupee, which remains sensitive to swings in commodity prices and global financial conditions.

Analysts expect the currency to remain vulnerable to further volatility unless crude prices stabilise or global sentiment improves. The rupee's weakness could feed into imported inflation, adding complexity for policymakers already managing multiple economic headwinds.