The rupee had its worst day on Thursday, plumbing a new lifetime low of 95.34, as investors were roiled by Brent crude crossing the $126-a-barrel mark, which also led to a bloodbath in the equities market that plunged 1.6% intraday, as the West Asia crisis deepened with stalled ceasefire talks. At $126 a barrel, crude is trading at the peak it reached in March 2022 when the Russia-Ukraine war began. The rupee closed the day at a new lifetime low of 85.91 per dollar.
The new low is significant as the many measures the Reserve Bank unveiled to contain high volatility in the forex market have not paid off. In March alone, the RBI had sold more than $40 billion to defend the rupee, but without much success.
The US Fed leaving rates unchanged amid strong inflation pressure triggered by high crude prices also led to the rupee’s pain. Since the Iran war began, the rupee has lost more than 4.4% and nearly 6% so far in 2026. The unit closed fiscal 2026 with a deeper 9.9% cut, which came on the back of another 4.5% loss in the previous fiscal.
At the interbank foreign exchange market, the rupee opened at 95.01 against the dollar, then lost 46 paise to touch a record intraday low of 95.34, then recovered to trade at 95.25. The unit had closed at its worst closing low of 84.85 on Wednesday.
Investors fretted over the economic risks confronting the country from a resurgence in crude prices to 2022 highs, threatening the inflation-economic growth balance for the net energy importer and sapping capital flows.
The currency fell to 95.34, down as much as 0.51% on the day, eclipsing its previous all-time low of 95.24 hit on March 30. It subsequently pared losses to last trade at 95.1875.
The rupee fall has wiped out gains spurred by the central bank’s use of rare currency-supportive regulatory measures late last month and early this month, prompting traders and analysts to speculate whether fresh measures could be on the cards.
Analysts said that if depreciation pressures persist, the Reserve Bank may consider measures to curb oil-related dollar demand from the spot currency market, curtail imports of gold, and tighten monetary policy to support the currency.
Persistent weakness in the currency may also drive a negative feedback loop on foreign capital flows by eroding overseas investors’ returns, while adding to inflationary pressures by lifting import prices, analysts say.
Foreign investors have pulled out Rs 1.8 trillion, or $19.8 billion, so far in 2026—most of which happened in March and April—which equals the entire outflow in fiscal 2026, making it the highest sell-off by them in history. In fiscal 2025, their outflow was only $11.8 billion.
At the same time, the Indian rupee hit a record low of 95.33 during the session before recovering slightly to close at 94.91. The currency weakness added to concerns over inflation and capital outflows.
Alexandra Hermann Prasad, lead economist at Oxford Economics, told TNIE that “the combination of the rupee sliding past 85, rising inflation risks, limited room for forex intervention, and fragile investor sentiment should push the RBI back toward conventional rate hikes.”
She also cautioned the central bank against deploying more capital-control-lite measures, saying the recently introduced restrictions may help curb speculative pressure only in the short term, but if they are perceived as heavy-handed or persistent, they risk damaging foreign investor confidence more permanently, and the move may backfire.
“Still, the next move is unlikely to mark the start of an aggressive hiking cycle. Growth risks have also risen, with weaker household confidence, softer business expectations, pressure on remittances, and fiscal space being squeezed by tax cuts and subsidies. So while the rupee move adds urgency to policy tightening, the RBI will probably prefer a limited response rather than sustained hikes,” she said.
On the other hand, Vinod Nair of Geojit Investments said the rupee and market pains are due to global and domestic factors combining to weigh on markets. “Global sentiment deteriorated sharply as US–Iran tensions escalated and major maritime shipping routes faced continued disruption,” he said, adding, “Brent crude crossing the $126-a-barrel mark for the first time in four years intensified inflation concerns and pressured global risk assets.”
Stating that rising oil prices are a key risk for the markets and the rupee, he said, “Rising oil prices weighed on the rupee and revived worries about capital outflows and widening deficits, given the economy’s heavy reliance on crude imports.”