The Indian rupee fell to a
record low on Wednesday as stalled U.S.-Iran peace talks kept
oil prices elevated, driving global bond yields higher and
hurting equities amid fears of further central bank rate hikes.
The rupee slid to 96.96 per dollar, breaching its
previous record low of 96.6150 hit in the prior session, and
ended the day at 96.82. The currency has fallen over 6 per cent since
the Iran war began in late February.
Global bond markets extended their selloff as investors
increased bets that the Federal Reserve may need to raise
interest rates further in 2026.
Oil prices eased but stayed near $110 a barrel after U.S.
President Donald Trump said he may still strike Iran, a day
after delaying an imminent attack to allow more talks with
Tehran.
Higher energy prices and weak capital flows, compounded by
rising bond yields, have raised fears of a steep balance of
payments deficit for India this fiscal year.
“No convincing resolution to the conflict is in sight yet.
This exogenous energy shock has upset the macro-apple cart and
kept the rupee under pressure,” analysts at DBS said in a note.
They have revised their forecast range for the rupee to a
weaker 95-100 band for the remainder of 2026, compared with
90-95 earlier.
On the day, dollar sales by state-run banks – most likely
on behalf of the Reserve Bank of India – helped limit the
rupee’s fall, traders said
“There is constant (dollar) buying from clients while
meaningful dollar supply is only coming from the RBI, keeping
INR dependent on interventions,” a trader at private bank said.
Signs of strain on account of the Iran war have emerged
elsewhere in the region as well. The central bank of Indonesia
hiked rates by a larger-than-expected 50 bps to support the
rupiah which, like the rupee, has hit a series of record lows in
recent days.
Published on May 20, 2026
