Rupee crashes to all-time low of 95.32 per dollar as crude soars to 3-year high above $125

On Thursday, the domestic currency opened at the 95.02 mark per dollar, down 0.2% from its previous close of 94.84 against the greenback. The currency then slipped to a new record low of 95.32 against the dollar surpassing its March’s record low of 95.22 per dollar.

THe Indian rupee fell to a record low on Thursday, as investors fretted over the economic risks confronting India from a resurgence in crude oil prices to 2022 highs, threatening the inflation-economic growth balance for the net energy importer and sapping capital flows.

This marks the currency’s second breach of the 95-level mark. So far this year the currency has fallen by nearly 6%.

Here’s whats driving the fall for currency:

Crude climbs over $126/bbl – weighs on rupee

The weakening of the currency is majorly being driven by the surge in oil prices. Brent crude futures are trading over the $126/bbl mark, at their highest level in over three years. While the US benchmark, West Texas Intermediate, too is quoted high around the $110/bbl level.

The high crude prices weigh on emerging market currencies like the Indian rupee, as oil is predominantly traded in dollars. High crude prices increase the demand for dollars, adding to the downside for the rupee. Other Asian currencies like Indonesian ruipah, Thai Bhat, and Phillippine peso too extended declines.

The stalled shipments through the Strait of Hormuz route have also created an environment of uncertainty, as India, a net oil importer, imports a large chunk of its oil and energy supplies from the Middle East.

“The main effect on the rupee has been from the rising oil prices, which again touched $120 per barrel and looked headed for further upside, as the US continues with its blockade of Iranian ports while Iran does not allow any ship/tanker to pass through the Strait of Hormuz,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors.

Oil pressure adds to import bill

With the dual blockade of the conduit, markets are concerned about when shipments through the route, which carries nearly 20% of global energy flows, will resume.

“Over the past three months, oil alone has added $12–13 billion every month to the import bill. That’s not just a number; that’s pressure — pressure on the trade deficit, pressure on inflation, and ultimately, pressure on the rupee,” said Amit Pabari, Managing Director at CR Forex Advisors.

FPI outflow on rise

Pabari added that foreign investors have already pulled out nearly $20 billion from Indian equities this year, surpassing the $18 billion outflow of 2025. “When money leaves, demand for dollars rises and the rupee feels the pressure,” he said.

As of April 29, FIIs were net sellers of domestic equities worth Rs 2,185.95 crore, according to NSE data.

Rise in dollar index

The US Dollar Index rose after the US Federal Reserve delivered its policy decision, which has been deemed relatively hawkish. The US central bank held rates steady and reinforced a “higher-for-longer” stance.

The index, which measures the strength of the greenback, is trending up on the day. A rise in the dollar index increases demand for the greenback, making it a safe haven for investors, as they tend to shift away from riskier emerging market currencies like the rupee.

Markets also expect a rather hawkish stance from the European Central Bank and the Bank of England. “The tone is likely to stay hawkish, with hints of possible hikes in the coming months,” Pabari added.

RBI is intervening

“The RBI is intervening, and will continue to intervene, but the central bank’s strategy here is volatility management, not level defence, ” said Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities.

He added , “As long as the underlying drivers – Brent above $115 and FII selling pressure – remain in place, the path of least resistance for USDINR is higher.The larger trend remains upward as long as oil continues to rise.” 

Outlook for rupee

“The next important level we are watching is 96, and a sustained break above 96 opens the path to 97 – a level we see as achievable if Brent breaches $125 and the Hormuz situation deteriorates further,” says Banerjee.

He added that on the downside, 94.80 is now a meaningful support zone; stating that anything between 94.50 and 94.80 should see strong dollar buying interest from importers who have been waiting on the sidelines.

“Anything below 94.50 would require a significant drop in oil prices, meaning a diplomatic breakthrough at Hormuz, which is not our base case today.”

Banerjee concluded that rupee, like every other Asian currency right now, is a high-beta play on Hormuz. Until the Strait reopens, the rupee remains under structural pressure.