The rupee plunged to a historic low on March 27, breaching the 94 mark against the dollar, as the deepening West Asia conflict rattled currency markets and heightened concerns over India’s external balances.
The sharp fall has put the rupee on course for its steepest annual decline since the 2013 ‘taper tantrum’, with pressure mounting from surging crude prices and global risk aversion.
The rupee weakened to 94.29 per dollar (₹94.29), surpassing its previous record low of 93.98 earlier this week. Since the outbreak of the Middle East war last month, the currency has depreciated about 3.5 percent, while losses for the current financial year have crossed 10 percent.
The ongoing conflict has triggered one of the most severe energy supply disruptions in decades, driving up oil prices and constraining exports from the region. The spillover effects are being felt across sectors, from cooking gas to petrochemicals, raising inflation risks and complicating India’s growth outlook.
Market sentiment remained fragile despite a temporary easing of geopolitical tensions after US President Donald Trump extended his deadline for potential military action against Iran. However, reports suggesting a possible increase in US troop deployment kept investors cautious.
Analysts have lowered India’s growth projections and expect the rupee to remain under pressure if the conflict persists. Some market participants anticipate that the Reserve Bank of India may have limited room to support the currency aggressively, given the need to conserve foreign exchange reserves and manage bond yields.
Global brokerage Bernstein is understood to see a realistic possibility of the rupee weakening towards 98 per dollar (₹98), driven largely by concerns over India’s current account deficit. .