The Indian rupee declined to a fresh record low of ₹95.96 against the US dollar during Thursday's trading session, marking its fourth consecutive session of losses as persistent importer hedging demand outweighed support from government policy measures. According to The Hindu BusinessLine, the currency hit a record intraday low of ₹95.96 per USD before closing at ₹95.64, down from ₹95.66 on Wednesday. Since the West Asia conflict began on February 28, the rupee has declined by 4.6%, according to Bloomberg data. The latest decline represents sustained pressure on the domestic currency amid elevated crude oil prices and continued geopolitical tensions in West Asia. Market participants said that as early as Thursday the rupee could test the psychologically crucial ₹100 per dollar level, with traders noting that the rupee recovered partially towards the end of trade after the Reserve Bank of India stepped in through dollar sales, with the intervention aimed more at curbing volatility than preventing depreciation. Brent crude, the global oil benchmark, was trading higher at about $105.95 per barrel, up more than 45% from before the Iran war began, amid increasing uncertainty about resolution of the West Asia war and opening of the arterial Strait of Hormuz. Crude oil is currently trading in the $100–$104 per barrel range, reflecting a sustained geopolitical risk premium from the ongoing US-Iran conflict and Strait of Hormuz disruptions. For USDINR, 94.20 continues to remain a strong positional base, while levels around 96.50/96.80 remain open to be tested if crude prices stay elevated and global dollar strength continues.
Oil marketing companies announced a ₹3-per litre hike in petrol and diesel prices, reflecting the reality of Brent crude oil holding the $105-110 per barrel mark. Petrol price in New Delhi will now be ₹97.77 per litre, while diesel price will be ₹90.67 per litre. Similarly, petrol prices in Mumbai, now, stand at ₹106.68 per litre, while diesel price is ₹93.14 per litre. Every ₹1/litre rise in petrol and diesel prices in India is estimated to add nearly 4-6 basis points to headline CPI inflation over time. Diesel, in particular, plays the role of the silent heavyweight villain, as it powers the backbone of India's supply chain ecosystem. An ₹5–10/litre rise in fuel prices can potentially add nearly 0.20 per cent - 0.30 per cent to CPI-based inflation over the following months. Diesel inflation never arrives solo — it travels through transportation, logistics, manufacturing, agriculture, and eventually food and core inflation, turning a simple pump-price hike into a full economy-wide inflation ripple.
India's wholesale price inflation jumped to 8.30% on year in April from 3.88% in March, hitting the highest level in 42 months, according to The Economic Times. This dramatic surge in inflation is expected to significantly impact monetary policy decisions and economic outlook. Government data showed wholesale inflation quickened to a three-and-a-half-year high in April, one of the first clues of the impact the energy shock has had on India's economy. Markets will focus on the interest rate trajectory now as the inflation data raises concerns about sustained price pressures. From a macro perspective, crude oil and gold remain India's two largest imports by value, and a sustained ~50% rise in crude prices materially worsens external balances. Every USD 10/bbl increase in crude is estimated to add ~45 bps to CPI inflation and widen the current account deficit by 30–40 bps. The good news is that India is not facing a full-blown crisis right now, with CareEdge expecting the rupee to average around ₹92–93 per dollar if crude oil averages $90 per barrel in FY27.
The rupee's decline has been exacerbated by significant foreign capital outflows, with foreign portfolio investors (FPIs) pulling out nearly ₹1.8 trillion from Indian equities in FY26, the highest outflow in 34 years, according to data from NSDL. So far in FY27 (till 14 May), they have sold equities worth ₹89,007 crore, compared with just ₹250 crore in the year-ago period. As per Mint, one of the reasons why the rupee was weak even before the US-Iran war was because we kept our rates too low, said Anant Narayan, former whole-time member of India's market regulator SEBI. In 2025, the Reserve Bank of India cut the repo rate by 125 basis points to 5.25%, with the last 25-bps reduction delivered in December. The debate over whether rates should rise again has intensified as elevated crude oil prices threaten inflation and put pressure on the rupee ahead of the RBI's monetary policy meeting in early June. On Thursday, a Mint poll of 10 economists, banks and brokerages showed the rupee is expected to end the year at 96-98 per dollar, with most forecasting a 3-4% depreciation in FY27 if crude prices remain elevated.
The rupee has now weakened more than 6% against the US dollar since the West Asia conflict began, making it Asia's worst-performing currency in 2026 so far, according to The Hindu BusinessLine. Amit Pabari, MD of CR Forex Advisors, noted that the rupee has now weakened more than 6% against the US dollar since the West Asia conflict began, making it Asia's worst-performing currency in 2026 so far. India spent a record $84 billion on gold and silver imports in FY26, compared to just $35.5 billion a decade ago. From jewellery showrooms to fuel stations, every imported commodity is now carrying a heavier price tag — and the rupee is feeling the weight of it. India imports more than 85 per cent of its crude oil requirements, making every sharp rise in oil prices a direct pressure point for the external account. Historically, every $10/barrel rise in crude oil prices has the potential to inflate India's annual import bill by nearly $15-18 billion. The rupee has closed at record lows in each of the four trading sessions in the current week, with the currency hitting a record intraday low of ₹95.96 per USD.
