The rupee weakened to a fresh intraday low of 95.75 against the US dollar on Tuesday, pressured by rising crude oil prices, persistent foreign portfolio investor (FPI) outflows, and strong dollar demand in the domestic market.
The local currency settled at a new closing low of 95.63, down 0.34 per cent from the previous close of 95.31. The rupee, which has depreciated 6.02 per cent so far this calendar year, is the worst-performing Asian currency in 2026. Last year, the currency had fallen 4.74 per cent.
The domestic currency has remained under pressure amid escalating tensions in West Asia, which have pushed up crude oil prices and heightened concerns over India’s current account deficit and imported inflation. The rupee has depreciated nearly 5 per cent since the beginning of the conflict. Only the Philippine peso has fallen more among Asian currencies during this period.
The Reserve Bank of India (RBI) was on Tueaday seen intervening intermittently through PSBs at the 95.50 level in early trade, but later stepped away, allowing the currency to weaken further, dealers said.
“The twin pressure of a higher oil import bill and FPI outflows continues to drive dollar demand and weigh on the rupee. If oil prices continue to rise, the rupee could weaken further, though RBI intervention is expected at elevated levels. Immediate resistance is placed at 96 per dollar, followed by 96.50 per dollar. On the downside, support lies at 95 per dollar and 94.80 per dollar,” said Anindya Banerjee, head of commodity and currency research at Kotak Securities.
“As long as oil prices do not cool off and tensions escalate further, the rupee could see additional pressure. However, a swift resolution in West Asia would likely reverse the downtrend in the rupee against the dollar,” Banerjee added.
Market participants said the RBI had been actively managing volatility in the foreign exchange market over the past few weeks through spot and forward market intervention, but pressure on the currency has intensified due to external developments.
“India’s external vulnerability has been the main reason for the fall in the rupee over the past two years,” said Anil Kumar Bhansali, executive director and head of treasury at Finrex Treasury Advisors.
“The rupee has been protected from a collapse by RBI dollar sales. Else, it would have been closer to 100. We expect the rupee to trade in the range of 95.25 to 96.00 on Wednesday,” he said. In the past two trading sessions, the rupee has fallen 1.2 per cent.
A report by CARE Ratings said the rupee has depreciated around 11 per cent over the past year, with nearly 4.7 per cent of the decline occurring after the onset of the West Asia conflict. The report said weak capital inflows, rising energy prices, and elevated dollar demand have continued to weigh on the domestic currency.
The report added that India’s foreign exchange reserves have declined by nearly $33 billion since the beginning of the conflict due to RBI intervention, though reserves remain at comfortable levels. Total reserves stood at $690.6 billion for the week ended May 1.
Meanwhile, long-term bond yields have also hardened alongside the rupee’s weakness, reflecting concerns over inflation and external stability.
The yield on the benchmark 10-year government bond settled at 7.05 per cent on Tuesday, compared with the previous close of 7.04 per cent. The yield has hardened by 46 basis points so far this calendar year.
Vishal Goenka, co-founder of IndiaBonds, said the rupee and long-tenor government bond yields were “flashing warning signs”, with markets increasingly pricing in the possibility of tighter financial conditions.
Instead of relying solely on monetary policy measures such as higher interest rates, India could consider rationalising taxation on listed bond interest income to deepen domestic participation in bond markets, he said.
Goenka proposed capping tax on listed bond interest income at 20 per cent, arguing that such a move could attract larger household savings into domestic bonds, reduce reliance on foreign capital flows, and lower long-term borrowing costs for companies.