Rupee Hits New Low Amidst Global Tensions: What’s Next for the Indian Currency?

Rupee's Struggles in the Face of Global Unrest

Mumbai: On Monday, the Indian rupee fell below the 95/USD threshold during intra-day trading, ultimately closing at 94.78 (provisional) against the US dollar. This decline was triggered by escalating tensions in Iran, which unsettled global markets and heightened volatility in the rupee.

Forex analysts noted that the USD/INR exchange rate experienced significant fluctuations, swinging by 165 paise as the crisis in West Asia entered its 31st day, causing unease in energy markets.

The rupee began trading at 93.62 in the interbank foreign exchange market, briefly improving to 93.57 against the dollar, marking a gain of 128 paise from the previous close. This uptick followed the Reserve Bank of India's decision to limit banks' net open positions to USD 100 million overnight.

In a circular issued on March 27, 2026, the RBI mandated that banks comply with this new cap by April 10.

Despite this initial strength, the rupee could not maintain its upward trajectory and hit an all-time intra-day low of 95.22 against the dollar.

By the end of the trading day, the rupee was quoted at 94.78 (provisional), reflecting a slight increase of 7 paise from its previous close of 94.85.

Last Friday, the rupee had plummeted by 89 paise, closing at a record low of 94.85 against the US dollar.

According to Amit Pabari, Managing Director of CR Forex Advisors, the rupee's weakness is largely due to the global situation. The fading hopes for de-escalation between the US and Iran have reignited risk aversion, leading investors to favor safer assets, which in turn strengthens the dollar and weakens currencies like the rupee.

Forex traders indicated that the USD/INR pair is under pressure from a strong dollar index and rising crude oil prices. The demand for safe-haven assets has kept the dollar index above the 100-mark, hindering any significant recovery for the rupee.

Additionally, geopolitical tensions have driven up oil prices, with Brent crude rising due to fears of supply disruptions.

The dollar index, which measures the dollar's strength against a basket of six currencies, was trading 0.15 percent lower at 100.30.

Brent crude, the global oil benchmark, was priced at USD 114.97 per barrel, reflecting a 2.60 percent increase in futures trading.

In the domestic equity market, the Sensex dropped by 1,635.67 points, closing at 71,947.55, while the Nifty fell by 488.20 points to 22,331.40.

Foreign institutional investors sold equities worth Rs 4,367.30 crore on a net basis last Friday, according to exchange data.

Finance Minister Nirmala Sitharaman stated on Monday that India's economic fundamentals remain robust, asserting that the Indian rupee is performing 'absolutely fine' compared to other emerging market currencies.

Since the onset of the West Asia conflict on February 28, 2026, the rupee has depreciated by 4.1 percent, closing at Rs 94.82 per USD on March 27, 2026.

In response to inquiries, Minister of State for Finance Pankaj Chaudhary noted that the rupee's value is determined by market forces and influenced by various factors.

"The government and the RBI are closely monitoring the rupee's value," he added.

The rupee has depreciated nearly 10 percent against the US dollar in the current fiscal year.