The Indian rupee has fallen to a record low as a deadlock in US-Iran peace talks kept oil prices elevated, fuelling worries of a global inflation surge that has ramped up bets on rate hikes, lifting bond yields and weighing on equities, Reuters reports.

The Indian rupee fell to 96.96 per dollar, breaching its all-time low of 96.6150 hit in the previous session. The currency is down 6pc since the Iran war began in late February.

Higher energy prices and weak capital flows, further strained by rising bond yields, have left India facing the prospect of a steep balance of payments (BoP) deficit for the current fiscal year.

While a weaker rupee can serve as an automatic adjustment mechanism by raising the cost of imports and making exports cheaper, persistent depreciation can turn into a self-fulfilling loop and erode returns for foreign investors.

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