It’s almost free-fall for the Indian rupee. Continuing with its losing streak, the currency hit yet another record low for a sixth consecutive session against the US dollar on Tuesday. The currency, which had started the trade on a weak footing, fell to an all-time low of 96.61 per dollar in the intra-day session before paring some losses and closing at 96.53 against the greenback, down 0.2% from its previous close.
Elevated crude prices, surging US Treasury yields, and continuous foreign investor outflow, primarily caused by the stretched West Asia conflict, which began in late February, added to the downside for the currency. The Indian rupee has fallen by over 6% since the beginning of the war, and by more than 7% on a year-to-date basis.
Experts highlighted that 97-98 Vs US dollar are the next levels to watch out for.
Rupee’s weakness alarming
Market participants have cited worries over the currency’s free fall, adding that the central bank continues to step in, but the declines are very sharp. “The situation is very alarming. RBI is working valiantly, but nobody knows what will happen next,” said Jamal Mecklai, Managing Director of Mecklai Financial Services.
The market veteran added that the root fundamental issues pushing the currency down still haven’t been solved.
Since the beginning of tensions in the Middle East, crude prices have surged by more than 40%. The global benchmark, Brent crude, was quoted at the $110 per barrel level, while US benchmark West Texas Intermediate was trading around the $108 per barrel mark.
FPIs remain net sellers for over six years
The outflow of foreign equities remains a crucial factor adding to the downside for the rupee. FIIs have been net sellers in domestic equities in the cash markets so far this year. They have pulled out $2.6 billion from Indian markets.
“When capital leaves in waves, currencies rarely stand still — and the rupee is bearing that full weight,” said Amit Pabari, Managing Director at CR Forex Advisors.
US-Iran standstill: Oil prices likely to stay at elevated levels
Market participants have cited that the lack of progress between the US and Iran has raised concerns over oil prices, which are expected to trade at elevated levels. “The market is not expecting oil to cool,” said Anil Kumar Bhansali, Head of Treasury at Finrex Advisors.
The surge in oil prices has also raised expectations of a ballooning current account deficit, as brokerages and analysts forecast CAD to widen between 2.3% and 3% of GDP for FY27 from 0.9% in FY26.
Near-term outlook remains weak
Currency market experts have said that the next psychological level for the Indian rupee remains 97 per dollar, and the currency may even breach the 98 mark against the greenback if the chokepoint, the Strait of Hormuz, remains closed.
