The Indian rupee plunged to a 12-month low of 83.28 against the US dollar on Monday amid rising oil prices and uncertainty in global markets due to the ongoing Israel-Hamas war.
The RBI has been intervening periodically to sell dollars in the market to prevent the rupee from going into a free fall, according to traders.
The benchmark Brent crude was hovering at close to $91 a barrel after having jumped nearly 6 per cent on Friday.
While Israel is poised to carry out its ground attack in Gaza, there are fears that the tensions may escalate into a wider geopolitical crisis with the US and Iran getting involved. This could lead to a disruption in the flow of oil from the Middle East region.
The US has already moved two aircraft carriers into the Mediterranean Sea, while Iran has issued statements in support of Hamas while criticising Israel.
Oil prices soared nearly 30 per cent in the three months to September, the biggest third-quarter gain in almost two decades.
With rising crude oil prices in the international market pushing up the demand for dollars, the Indian rupee has slumped to record lows below 83 against the US greenback.
India's current account deficit (CAD) jumped seven-fold to $9.2 billion in the April-June quarter compared to the corresponding figure of $1.3 billion in the preceding quarter, according to the latest RBI data released last week.
The continuing surge in oil prices and slowing exports due to a decline in demand in global markets, which is expected to widen further, will bring the rupee under further pressure.
CAD for April-June quarter of 2023-24 was 1.1 per cent of the GDP.
According to Emkay Global Financial Services lead economist Madhavi Arora, the July-September quarter will see a "substantial widening of CAD" to 2.4 per cent of the GDP on account of higher oil prices, higher core imports and further slowing of services exports.
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