India rupee at three-month low as oil spikes on mideast conflict

The currency fell 0.4% after declining as much as 0.5% to 86.8875 per dollar, the lowest since March 17.

The Indian rupee weakened to its lowest level in three months, as a surge in oil prices underscored the nation’s vulnerability to energy shocks.

The currency fell 0.4% after declining as much as 0.5% to 86.8875 per dollar, the lowest since March 17. The decline mirrored losses in most other emerging Asian currencies. Sovereign bonds also fell, with the yield on the 10-year bond rising by four basis points to 6.30%

Brent crude has climbed about 20% this month, driven by escalating tensions between Israel and Iran. India relies heavily on overseas crude purchases to meet its energy needs, and rising oil prices pose risks to both the country’s fiscal position and inflation outlook.

“The volatility in the market will continue till we have clarity on a resolution for the situation in the Middle East,” said Ashhish Vaidya, head of treasury, DBS Bank Ltd in Mumbai. “I expect the central bank to step in and smoothen out the volatility.”