The Indian rupee has continued to weaken under pressure from rising global crude oil prices, with its exchange rate against the US dollar recently touching record lows. On Thursday, the rupee fell to its weakest level in history, reaching 95.33 per dollar. Although it has since recovered marginally, it remains above the 94-mark per dollar in the Indian market.
The depreciation has coincided with a sharp rise in global oil prices. On the same day, Brent crude reached its highest level since 2022, climbing to USD 126 per barrel. As India is heavily dependent on imported energy, the surge in oil prices has intensified concerns over inflationary pressures and growth stability, while also affecting capital inflows.
Exchange rate and oil price movement
| Indicator | Latest / Peak Level | Previous Level |
|---|---|---|
| USD/INR exchange rate | Above 94 | 95.33 (record low) |
| Brent crude oil price | USD 126 per barrel | USD 72 per barrel (February) |
| Foreign portfolio outflow (April) | USD 750 crore withdrawal | — |
| Total FY outflow | Over USD 2,000 crore | — |
| Estimated rupee depreciation (2026 YTD) | ~6% | ~5% in 2025 |
The rupee’s decline is not an isolated event. It has been on a downward trajectory for an extended period, driven in part by sustained foreign portfolio outflows from Indian equity markets. The weakening of the currency has also breached what market participants previously regarded as a psychological threshold of 90 per US dollar.
Market participants are increasingly concerned about further depreciation, with some anticipating the possibility of the rupee moving towards the 100-per-dollar level if current trends persist.
In response to volatility, the Reserve Bank of India (RBI) introduced accommodative policy measures late last month, which briefly supported the rupee. However, recent losses have largely offset those gains, renewing expectations of further policy interventions.
According to Kotak Securities’ Head of Commodity and Currency Research, Anindya Banerjee, the current movement reflects a cyclical market reaction. He noted that higher crude oil prices have reduced foreign institutional inflows, while simultaneously increasing demand for US dollars from importers, thereby placing additional pressure on the rupee and RBI’s stabilisation efforts.
Banerjee added that foreign investors withdrew approximately USD 750 crore from Indian markets in April alone, contributing to total outflows exceeding USD 2,000 crore in the previous financial year (April 1 to March 31). During the same period, oil import costs have risen sharply, with Brent crude increasing from USD 72 per barrel in February to around USD 108 in recent readings, further widening India’s trade deficit.
He also stated that RBI continues to intervene in currency markets, primarily aiming to reduce volatility rather than target a specific exchange rate. The use of foreign exchange reserves has helped slow the pace of depreciation rather than reverse it.
Banerjee identified USD 96 as the next key resistance level for the rupee. A sustained breach could open the path towards 97, particularly if Brent crude remains above USD 115 and geopolitical tensions affecting energy routes persist.
He further highlighted the importance of the 94.50–94.80 range, noting that importers may increase dollar demand within this band. A decline below 94.50, however, would likely require a significant fall in oil prices, which currently appears dependent on broader geopolitical developments.
Banerjee also pointed out that broader conditions in the Strait of Hormuz remain a critical factor influencing Asian currencies, including the rupee. Stability in this region, he suggested, would be necessary to ease persistent external pressures.
Weakest currency position in Asia
Official Indian data indicates that the rupee depreciated by approximately 5 per cent in 2025, making it the weakest performing Asian currency during that period. The decline has extended beyond the US dollar, with the rupee also weakening against other major global currencies including the British pound, euro, Japanese yen, and Chinese yuan, according to Business Standard.
The currency’s performance has been influenced by broader external sector pressures, including trade tensions with the United States, volatility in capital flows, and disruptions in global energy supply chains. Although some trade-related uncertainties eased following adjustments to US tariffs on Indian goods—from as high as 50 per cent down to 18 per cent—the rupee’s downward trend has continued.