The escalating crisis in West Asia continued to pressure the Indian rupee, which breached the 93 mark for the first time on Friday – the worst single-day fall in four years. It fell to a record low of 93.70, down 1.16% from the previous close, as the ongoing war pushed oil prices to $108 per barrel on Friday.
After Friday’s sharp fall, the depreciation in the current financial year reached 9.65%, the worst in 12 years. The rupee has been the worst-performing currency in FY26, followed by Japanese yen and Philipine pesso at 5.46% and 4.76%, respectively.
Strategic Retreat
Currency traders said that the Reserve Bank of India (RBI) refrained from aggressive intervention to defend the rupee, opting instead to permit its depreciation.
“The sharp surge in global crude amid escalating geopolitical tensions has been compounded by India’s crude basket spiking to around $157/bbl on Thursday, significantly amplifying dollar demand from oil marketing companies. This has worsened India’s current account outlook and put structural pressure on the rupee,” said Kunal Sodhani, treasury head at Shinhan Bank.
The currency breached the 93 mark in the offshore forward market on Thursday as oil prices rose to $ 119 per barrel after Iran attacked several Middle East energy facilities. The Indian currency and debt market was closed on Thursday on account of a public holiday.
Oil and Outflows
Along with elevated oil prices, the equity outflows also continue to weigh on the currency. In March so far, foreign investors offloaded equities worth $ 9.6 billion.
Sodhani added that the persistent FII outflows, a broader risk-off environment, and bearish cues from the offshore NDF market have added to depreciation pressures.
“Previously, the RBI had kept the rupee steady at 90.50 through interventions. It’s a smart adjustment to let it ease a bit to 93.70, as overly aggressive action in a prolonged crisis could harm macro stability—especially when every currency is depreciating against the dollar, making resistance limited,” said Guara Sengupta, chief economist at IDFC FIRST Bank.
Sengupta added that India’s import cover stands at 9.8 months currently and it is crucial to prevent it from dropping to the six-month mark, which signals discomfort for markets, especially as the import bill rises with higher commodity prices. Sengupta projected the rupee at 94.50 by June and 95 by December.
According to Anindya Banerjee, head of commodity and currency Research at Kotak Securities, the currency will depend on functionality to the Strait of Hormuz going ahead. “If the Strait of Hormuz remains disrupted, oil prices will stay elevated, putting further pressure on the rupee. On the upside, psychological resistance sits at 94, followed by 95. It won’t breach 93 immediately unless oil price sustains below $100.”
Currency experts said that the RBI’s intervention remains calibrated at curbing volatility rather than rigidly defending any level, thus permitting a gradual currency depreciation.