The Rupee’s weakness also comes in the backdrop of the US Dollar (USD) gaining strength against other currencies as global investors are piling into Dollar assets due to risk-off sentiments
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The Rupee continued to feel the reverberations of the war in West Asia, weakening 120 paise against the US Dollar in the last two trading sessions amid concerns over the negative impact that the spike in global crude oil prices could have on India’s current account balance and inflation.
The rupee on Wednesday sank 68 paise to close at an all-time low of 92.15 per US Dollar (USD). This came on top of the 52-paise decline in rupee against the US dollar on Monday.
The Rupee’s previous all-time closing low was 91.96 per dollar on January 29..
Dollar strength
The Rupee’s weakness also comes in the backdrop of the US Dollar gaining strength against other currencies as global investors are piling into Dollar assets due to risk-off sentiments in the midst of geopolitical tensions arising from the attack by the US-Israel combine on Iran and retaliatory strikes by the latter.
V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank, noted that the fallout of the ongoing West Asia war is that the Rupee continues to be under pressure, with a strong Dollar, FPI outflows from the domestic equity markets and rising crude oil prices vitiating market sentiments.
He said the central bank likely intervened at the 92.25-92.30 level, which strengthened the Rupee to 92.05 before it closed at a record low.
Reddy opined that if the war prolongs, there could be implications for the current account balance, with the possibility of the deficit widening due to higher crude oil prices and remittances from the Gulf Co-operation Council countries getting impacted. This, in turn, can pressure the Rupee.
Nomura assessed that every 10 per cent oil price change worsens India’s Current Account by 0.4 percentage points. In India, it expects a higher import bill and risk-aversion driven portfolio outflows to increase BOP (balance of payments) funding pressure in the near term, while higher oil prices will reinforce the RBI’s on-hold stance and can add to fiscal risks.
According to Nomura Economists Sonal Varma and Aurodeep Nandi, India’s major external sector risk, though, is not from its current account, but from the capital account, where a sharp drop in foreign investment flows is leading to a large balance of payments deficit in FY26. A combination of a widening current account deficit and FII outflows due to global risk aversion could accentuate rupee weakness, they said.
Oil Impact
Anindya Banerjee, Head Currency and Commodity Research, Kotak Securities, USDINR has surged to a fresh all-time high near 92.30 in the spot market, driven by the sharp rise in crude oil prices and a broader shortage of dollar liquidity in global markets amid the escalating conflict involving Iran, the US, and Israel.
“We expect the RBI to intervene periodically to contain excessive volatility and prevent a disorderly depreciation in the rupee. However, as long as crude oil prices remain elevated, the rupee could continue to face depreciation pressures,” he said.
Banerjee underscored that the key variable to monitor now is the status of the Strait of Hormuz, a critical artery for global oil shipments. The longer disruptions persist, the higher oil prices are likely to move, which in turn could push USDINR further upward.
Conversely, any quick de-escalation in the conflict and restoration of normal shipping flows through Hormuz could help stabilise crude prices and provide some relief to the rupee.
Published on March 4, 2026
