India‘s rupee has dropped to 70.8100 against the US dollar, an all-time low and a more than 10% drop since the start of the year.
DBS Economist Radhika Rao said due to economic instability sparked by trade wars and oil price chaos, “volatility is here to stay”.
Ms Rao said: “Markets get a sense that the authorities are tolerant of a weaker rupee, with little by way of jawboning or verbal intervention.
“With the US Fed expected to gradually tighten policy rates in the rest of 2018 and in 2019, lingering trade war fears and jump in dollar demand domestically.
“Volatility is here to stay.”
And Deutsche Bank Wealth Management’s Tuan Huynh, Chief Investment Officer, also attributed the plummeting rupee to the oil price crisis.
Mr Huynh said: “Weakening has accompanied rising investment concerns about emerging markets more broadly, as well as a widening current account deficit, itself largely the result of higher oil prices.”
India is a net importer of oil and has been hit hard by higher prices across the globe.
Yesterday it was revealed India is set to overtake China as the country with the highest demand for oil in the globe.
A new report by energy consultancy Wood Mackenzie said India’s demand for oil was set to outpace China’s by 2024.
Research director Sushant Gupta said the growing demand would present challenges for India.
He said: “This is clearly an uphill task, unless domestic refiners can commit to their planned capacity additions.
“We think the most likely situation is that India would need between (3.2 million and 4.7 million barrels per day) of new capacity out to 2035 to remain self-sufficient in transport fuels.
“So we are talking about a future capacity which is 1.7 to 2.0 times the current.”
India is scrambling to reduce its reliance on oil, with Prime Minister Narendra Modi demanding the country triple its solar energy output while halving its oil and natural gas imports.