Key Points
- Indian rupee depreciates 10–13 per cent against the US dollar since the Iran war
- Currency trading near 96–97 per dollar, presently
- Foreign portfolio outflows enhance pressure on equity and debt markets
- Analysts say it may cross psychological barrier of 100 with persistent energy strains
ISLAMABAD: India’s rupee crisis deepened in 2026 as persistent capital flight, soaring oil prices and mounting external account pressures drove the currency to historic lows against the US dollar.
The rupee is presently trading at ₹96–₹97 per dollar, after weakening nearly 13 per cent since the Iran war. The consequent geopolitical shocks have rattled global energy markets and tightened external financing conditions.
The currency’s slide has been compounded by sustained foreign portfolio outflows from Indian equity and debt markets. Investors pivot toward higher-yielding dollar assets amid tighter US monetary conditions.
The continuing withdrawals have drained dollar liquidity from domestic markets and amplified downward pressure on the exchange rate.
India’s heavy dependence on imported energy has further intensified the strain. Elevated crude oil prices have sharply widened the trade current account deficit.
Analysts say the Indian imports might not have increased in volume, but the higher energy import bill has widened the trade gap.
There is also a sentimentally rising demand for foreign currency, exposing deeper vulnerabilities in the country’s external financing position.
The Reserve Bank of India has intervened through aggressive dollar sales and liquidity management operations to contain disorderly depreciation.
Market participants, however, say the central bank has merely managed to cushion volatility rather than alter the broader plummeting trajectory of the currency.
Analysts say the rupee is increasingly driven by external shocks and global risk sentiment rather than domestic macroeconomic fundamentals, leaving it vulnerable to further losses if oil prices remain elevated and foreign outflows persist.
The weakening currency is also heightening risks of imported inflation, rising hedging costs for corporations and growing pressure on India’s external repayment obligations in the coming months.
