The rupee fell to a record low on Friday on concerns that the Iran war-induced surge in oil prices could disrupt the South Asian nation’s growth-inflation dynamics and dent capital flows, with traders also pointing to elevated offshore dollar bids.
The rupee weakened to 92.4750 per dollar, eclipsing its previous all-time low of 92.3575 hit on Thursday. It closed at 92.4550, down 0.7% on the week.
Likely intervention helped limit the currency’s losses, traders said.
Investors are bracing for a prolonged conflict as the Middle East war nears the two-week mark, keeping energy prices elevated. The conflict has also prompted foreign investors to sell Indian equities worth nearly $5 billion so far this month.
India’s benchmark equity index Nifty 50 has slipped into correction territory since the U.S. and Israel launched strikes on Iran on February 28. The index fell 2% on Friday.
A prolonged Middle East conflict could significantly worsen the rupee’s outlook, analysts said, warning that persistently high energy prices may push the currency beyond 95 per dollar.
Separately, India intends to hold off on signing a trade deal with the United States for several months, taking a wait-and-watch approach as U.S. tariff policies evolve, Reuters reported on Friday.
OFFSHORE PRESSURE
Traders have also flagged growing pressure on the rupee from the non-deliverable forwards market, which was reflected in a persistent arbitrage between offshore and local markets on Friday.
A near-tenor dollar-rupee volatility skew rose this week to its highest level since November 2022, signalling heightened appetite to wager against the rupee.
“Risk of sharp widening in (India’s) current account deficit amid already-weak capital inflows is a concern this time,” economists at Standard Chartered said in a note.
“We think INR has to be the shock absorber to limit the impact on the economy,” they added.
Published on March 13, 2026
