Indian Rupee Plunges to Record Low Amid Rising Oil Prices and West Asia War

The Indian rupee plunged to a record low of 92.33 – down 59 paise – on Monday as the West Asia war entered its second week, pushing up oil prices sharply higher to nearly $120 per barrel during the day. Rising oil prices led to the decline of almost all Asian currencies. The rupee, which fell 0.64%, was the third worst-performing Asian currency, followed by Philippines Peso and Taiwanese dollar, which declined 0.86% and 0.75%, respectively. The one-year forward premium rose to 2.94%, the highest in two months. With the rupee on boil amid rising crude oil prices, importers rushed to hedge their exposures, while exporters have reduced hedging their exposures to take advantage of a weaker rupee. Though the RBI intervention providing liquidity through its dollar sales on Monday, the intervention was not that aggressive, dealers said. “With crude prices relentlessly rising, the further intervention remains limited. High crude prices would likely drive further rupee depreciation,” said a treasury head at a private bank. According to Madan Sabnavis, chief economist at Bank of Baroda, the USD/INR could drop back below 92 only through the RBI intervention. “With the dollar’s sharp strengthening, the extent of the RBI action remains key. With the RBI intervention, I expect rupee to trade in the range of 91.5–92.5 and in the absence, 92–93 will be the new trading range.” The rupee came back to the 92 level amid the on-going crisis though the Reserve Bank of India’s (RBI) heavy intervention on March 5 pulled it back to 91.60—following a record low of 92.15 on March 4. With falling to another record low, the rupee has depreciated more than 8% in FY26 so far, the highest in three years. A dealer at a state-owned bank said that no one anticipated oil surging to $120 per barrel so soon. He added that traders had expected $100 will provide some cushion, which did not materialise and led to a panic selling in the market. “Even if the situation resolves, some geopolitical premium will stay for oil. I expect oil to settle around $80 for some time, even if prices ease from current highs,” he added. Market participants expect the rupee to touch 93 soon if the crisis persists and oil prices stay elevated. “No one expected this sharp move. Near-term exposures and capital flows are largely hedged, but most trade flows beyond three months remain unhedged, posing pain for importers,” said Anshul Chandak, head of treasury at RBL Bank.