The rupee fell to a fresh low of 92.30 against the dollar on Wednesday, weighed down by escalating geopolitical tensions in West Asia that led to a surge in crude oil prices, stoking inflation concerns.
The local currency recouped some losses by the end of trade to settle at 92.15 per dollar, down 0.71 per cent over the previous close, after the Reserve Bank of India intervened via dollar sales, said dealers. They said the central bank stepped up sales after the rupee breached the 92 mark — a level it has protected so far.
This was the Indian unit’s fourth sharpest fall in the current financial year, during which the currency has fallen 7.25 per cent. In 2026, the Indian unit has fallen 2.46 per cent.
The rupee was pressured by a rise in Brent crude prices, which extended gains for a fourth straight session, while global equities declined as investors assessed the risk of a sustained surge in oil prices.
Brent crude rose to $82.97 per barrel against the previous day’s $78.81 per barrel. The dollar index also rose to 98.96 from 98.22. It measures the strength of the greenback against a basket of six major currencies.
“The rupee’s fall was driven by the sharp rise in crude oil prices and a broader shortage of dollar liquidity in global markets amid the escalating conflict involving Iran, the US, and Israel,” said Anindya Banerjee, head of currency and commodity research, Kotak Securities.
“We expect the RBI to intervene periodically to contain excessive volatility and prevent a disorderly depreciation in the rupee. However, as long as crude oil prices remain elevated, the rupee could continue to face depreciation pressures,” he said, adding that the rupee is likely to trade in the range of 91–93 in the coming days.
India’s balance of payments deficit, which rose to $24.4 billion during the October–December quarter as compared to a surplus of $4.5 billion in the same period of the previous year, is likely to weigh on the currency in the coming days.
“With the current oil levels, our BOP/CAD are bound to deteriorate unless the Iran war ends quickly enough. FPIs have been sellers and dollar buyers since the end of February 2026, and the situation has aggravated in March after the war,” said Anil Bhansali, executive director and head of treasury, Finrex Treasury Advisors.
Market participants said the key variable to monitor is the status of the Strait of Hormuz, a vital conduit for global crude shipments. Prolonged disruptions along this route could lift oil prices further, adding to external pressures and potentially driving the dollar–rupee pair higher.
On the other hand, a swift de-escalation in tensions and the resumption of normal shipping traffic through Hormuz may help temper crude prices, offering some respite to the rupee.
Government bond yields inched higher in early trade to 6.73 per cent as traders cut losses tracking the weakening of the local currency. However, the central bank bought bonds in the latter half of the day, leading to a fall in yields, dealers said.
The yield on the benchmark 10-year government bond surged during early trade but recovered losses after the central bank conducted an on-screen open market operation to buy bonds. The 10-year bond yield settled 1 basis point lower than the previous day’s close of 6.68 per cent.
“Most participants cut their losses, but towards the end of the session, RBI purchased a lot, both in the bond market as well as in the foreign exchange market,” said a dealer at a primary dealership.
The central bank had bought Rs 2,815 crore worth of government bonds in the secondary market on February 18, latest data showed. In the week ended January 23, the RBI had bought Rs 12,655 crore worth of bonds in the secondary market.