SUMMARY
Monday saw a significant decline in the value of the Indian rupee, which for the first time fell below 95 against the US dollar. The currency experienced a historic moment when it hit a record low of 95.22. This puts the rupee on track for its worst fiscal-year performance in over a decade.
Both domestic and international tensions are contributing factors to the decline. The escalating conflict in West Asia, particularly with Iran, is the primary cause. The closure of the Strait of Hormuz has pushed Brent crude oil prices above $115 per barrel. Over 80% of India's oil is imported. The nation needs more dollars to pay for imports as oil prices rise. As a result, the rupee depreciates, and demand for the dollar rises.
Global uncertainty has grown at the same time. Money is being transferred by investors to safer assets. The US dollar is seen as a safe haven during such times. As a result, the dollar has increased against most currencies, including the rupee.
The significant outflow of foreign money is another important factor. Foreign Institutional Investors (FIIs) have pulled out their money from India. It is estimated that they have withdrawn over ₹ 111,377.35 crore from the markets in March itself.
Additionally, India's trade balance has gotten worse. The current account deficit has increased due to rising oil prices and declining global export demand. As a result, the rupee is more susceptible to shocks from outside sources.
Despite the fall, there have been some efforts to control the situation. The Reserve Bank of India (RBI) has stepped in to stabilise the currency. By the end of each day, banks must now cap their net open position at $100 million.
The instruction was issued on March 27, 2026, and applies specifically to positions in the onshore deliverable foreign exchange market, with compliance required by April 10, 2026. Additionally, the RBI has been involved in the currency markets, stepping in when necessary to stop excessive volatility.
Even with these measures, the rupee remains under pressure. Global events, particularly those pertaining to oil prices and geopolitical tensions, will have a significant impact on the outlook. For the time being, the breach of the 95 mark highlights the fragile state of the currency.
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