MUMBAI: The rupee, which has been bleeding since October 2024, ended FY26 on a bloody note, losing 9.5% at 94.83 after breaching the 95-mark on the last trading day of the year, making it the sharpest fall against the greenback in as many as 14 years and becoming the worst Asian currency for the second year on the trot.
Last financial year also, the rupee was the worst Asian currency, losing nearly over 2.5% and the third worst in the world after the Turkish lira and the Argentinian peso, which both lost over 45% each. The rupee opened FY26 at 86.60 on April 2, 2025 and ended the year at 94.83 on March 31, at the record closing low after plumbing to 95.24 intraday on the last trading day of the fiscal.
The currency lost as much as 9.55% in the year, which is the sharpest yearly plunge for it since FY11, driven by a confluence of global economic pressures and geopolitical events, prompting intervention from the Reserve Bank. In FY12, the unit had declined by 12.4% against the dollar when the current account deficit had widened to 4.2% after the US Fed began to unwind its quantitative easing.
It may be noted that the rupee was at 58.58 to the dollar on May 26, 2014, when Prime Minister Narendra Modi, who promised one rupee for a dollar during his campaign, took office. Between May 26, 2014 and March 30, 2026, the rupee lost as much as 61.6% against the dollar.
Persistent foreign fund outflows -- FIIs pulled out $14 billion in March and at least $36 billion in FY26 from the domestic equities -- elevated crude prices which crossed $120 a barrel during the year after Iran came under attack, and a strengthening dollar globally contributed to the rupee depreciation.
March alone saw the rupee losing 5.5% weighed down by the Iran war and the resultant spike in crude prices. This deep plunge comes despite the Reserve Bank of India intervening by selling $55.073 billion and introducing regulatory measures to curb speculation. Ironically, the harshest measure announced last Friday had no tangible impact on speculators as the rupee closed at a new record low a day after the central bank capped the daily open position in the NDF market at $100 million, effective April 10.
Such exposure with banks is estimated at around $40 billion which if the regulator doesn’t change by offering a longer period to unwind will lead to at least a Rs 4000 crore loss for banks, according to a Jefferies analysis.
Many see the rupee breaching 98 if the war lasts for a month or more and are projecting it to trade in the 92-97 range in FY27, influenced by oil prices, capital flows, and global interest rates.
Other Asian currencies have also seen a sharp depreciation against the US dollar, with the yen falling by 6%, the Philippine peso by 5.74%, and the Korean won by 2.88% since April 1, according to market participants.
The initial depreciation of the currency in FY26 was triggered after the US imposed tariffs on India, which led to a sharp surge in demand for dollars.
The situation was further worsened by the war on Iran, which pushed crude oil prices significantly higher, intensifying pressure on the rupee.
The tariffs also mounted pressure on domestic equities and debt markets, leading to sustained foreign capital outflows.