The Indian rupee closed at a record low at 96.79 on Wednesday as the uncertainty over the West Asia war continues. The currency dipped to an intraday low of 96.97 before recovering slightly, ending 25 paise lower than the previous close, according to Bloomberg.
With oil prices hovering around $110 per barrel and US Treasury yields rising, the rupee remained under significant pressure, currency dealers said. Following increased expectations of rate hikes, the 10-year US Treasury yield is trading at a one-year high of 4.65%.
The rupee has weakened 6.4% since the outbreak of the war in late February, taking the year-to-date depreciation in 2026 to 7.7%.
Oil Supply Pressures
“Oil prices are signaling a near-tight supply situation, and global yields are rising—so there’s no reason for the rupee to remain strong. It is bound to come under pressure,” said Anindya Banerjee, head of currency and commodity research at Kotak Securities. He added that 98.5-99 will act as a major resistance level, with support currently at 96.
Currency dealers said that the Reserve Bank of India (RBI) stepped in aggressively through dollar sales to support the currency and contained the depreciation.
Over the past few days, US market has been increasingly pricing in interest rate hikes, pushing yields higher. This environment typically dampens capital flows and puts additional pressure on emerging market currencies, said a dealer at a foreign bank.
Imported Inflation Risk
“The RBI will not use its reserves extensively to support the depreciating currency. The other remaining option is a rate hike—which could now come as early as June, earlier than previously expected. This is especially likely given rising concerns about imported inflation. For instance, Indonesia hiked rates by 50 bps today (Wednesday),” said Anitha Rangan, chief economist at RBL Bank. She believes that a rate hike can only put a brake on the rupee depreciation now.
