The Indian rupee slipped to a fresh low of 96.36 against the dollar on Monday as concerns over an escalating conflict in West Asia rattled global markets. The domestic currency fell 39 paise, or 0.41 per cent, from the previous close.
Meanwhile, the benchmark 10-year government bond yield surged 7 basis points to 7.13 per cent, its highest level since April 2.
Over the past week, the rupee has weakened nearly 2%, taking its depreciation in calendar year 2026 to 7.2%. The rupee continues to remain Asia’s worst-performing currency.
“Talks between the US and China produced no positive outcome, and US 10-year yields have topped 4.6 per cent, which is a clear market warning. Global inflation expectations are rising, and crude oil is around $110 per barrel, all of which offer no support for the rupee,” said Ritesh Bhansali, deputy chief executive officer, Mecklai Financial Services.
He added that unless the Reserve Bank of India (RBI) or the government takes concrete steps to attract capital inflows, the rupee could weaken further to 97.5–98 against the dollar over the next quarter.
On Sunday, US President Donald Trump renewed threats against Iran as talks aimed at easing tensions between the two nations continued to stall. This came after a drone attack on the UAE’s nuclear power plant raised concerns over a wider regional escalation.
“Though not aggressive, the RBI was defending certain levels to support the currency. In the absence of that, the depreciation would have been much sharper,” said a dealer at a private sector bank.
Amit Pabari, managing director at CR Forex Advisors, said strong demand for the dollar is likely to keep the rupee under pressure until the US-Iran conflict eases.
“The bias remains towards further weakness, likely taking the rupee to around 96.5–97 in the near term. Any de-escalation or measures from the government and RBI could reverse the trend, allowing the currency to appreciate by ₹1–1.50,” he said.
Bond yields rise
Heightened inflation concerns and expectations of possible rate hikes pushed domestic bond yields higher.
“US Treasury yields climbed sharply, pushing up domestic yields, while higher crude prices added further pressure. Markets have also begun betting on earlier rate hikes amid inflation concerns arising from rising fuel prices,” said Gopal Tripathi, treasury head at Jana Small Finance Bank.
US 10-year Treasury yields rose to as high as 4.63 per cent on Monday, their highest level in more than a year.