Rupee Crashes to Historic Low, Crosses 96 Against Dollar

The Indian rupee touched an all-time low of 95.96 against the US dollar on Thursday battered by sky-high crude oil prices, relentless foreign fund exits, and a shocking surge in wholesale inflation. The currency recovered slightly after reports of a possible tax cut for foreign bond investors but the relief was short-lived.

Rupee Hits Uncharted Territory Sinks to 95.96 per Dollar

India’s rupee plunged to a historic low of 95.96 against the US dollar on Thursday its worst-ever level. The currency ended the day at 95.77, down from Wednesday’s close of 95.71. Just a day earlier, it had already etched a record at 95.7950. The relentless slide is testing the nerves of traders, policymakers, and ordinary Indians alike as the cost of nearly everything tied to oil keeps climbing.

The twin blow of surging crude prices and persistent capital outflows has pushed Asia’s third-largest economy to the edge. India imports roughly 90% of its oil and about half of its gas needs making it dangerously exposed every time energy markets spiral out of control.

Iran War Lights the Fuse on Oil Markets

The ongoing Iran conflict has sent crude prices through the roof and India is feeling the heat more than most. Brent crude futures hit $105.95 per barrel, a jump of more than 45% since the war began. Supply disruptions linked to the conflict have squeezed global energy markets and India, with its massive import dependence, is caught squarely in the crossfire.

The months-long war has not just rattled oil markets it has also unsettled global investors, pushing them toward safe-haven dollar assets and away from emerging economies like India.

Importers and NDF Positions Pulled Rupee Down Hard

Dealers on the ground said heavy demand for dollars from importers combined with the unwinding of offshore non-deliverable forward (NDF) positions dragged the rupee to its intraday bottom of 95.96. The Reserve Bank of India stepped in near that level, selling dollars to steady the currency.

“The rupee was under pressure because of importer demand for dollar, and maturing of positions in NDF,” said a dealer at a state-owned bank. “The news of tax cut led to discovery towards 95.50 per dollar,” he added.

Bond Tax Cut Rumour Gives Brief Relief

The rupee clawed back some losses during the session after Bloomberg News reported that India is considering a significant cut in taxes paid by foreign investors on domestic bonds. The government is reportedly mulling this move on the recommendation of the Reserve Bank of India to align India’s policies with global norms and pull in fresh dollar inflows.

“The market was watching the Donald Trump-Xi Jinping Summit when the news came that the Indian government is considering a significant reduction in taxes paid by foreign investors on the Indian bonds, as authorities sought to align policies with global norms and attract inflows,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

The benchmark 10-year government bond yield dipped 3 basis points to 7.02% on the tax-cut buzz a signal that bond markets welcomed the possibility of fresh foreign money flowing in.

Also Read | India’s Retail Inflation Climbs to 3.48% in April; Rising Food Prices Fuel the Heat

WPI Inflation Shock Kills the Recovery

Any optimism was quickly snuffed out. Data released on Thursday showed India’s wholesale price index (WPI) inflation soared to 8.3% in April far above market estimates of around 4.4%. That number rattled investors and pushed the rupee back down almost instantly.

“However, as India’s wholesale inflation rose to 8.3 per cent, and this news also came simultaneously, the rupee fell from 95.58 to 95.75 levels almost immediately,” Bhansali added.

Bank of Baroda chief economist Madan Sabnavis linked the WPI surge directly to the war. “The first sign of the impact of (the US-Iran) war on the Indian economy has been seen in the WPI inflation number for April, which came at 8.3 per cent. This is a direct result of the global developments that have manifested on the oil front,” he said. “While WPI inflation is not a target for the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC), it is known that with a lag, these prices also get transmitted to the Consumer Price Index (CPI) component through higher input costs,” he added.

Fuel Price Hike Likely Coming in May

India has not yet raised retail petrol and diesel prices but that window may be closing fast. Analysts at Barclays believe a “INR5/litre hike for both petrol and diesel is imminent in May, as crude oil prices remain elevated.” A move like that on top of already stretched household budgets could add fresh inflationary pressure across the economy.

Also Read | India Raises Petrol and Diesel Prices by ₹3

Foreign Investors Pulling Out Reserves Under Strain

The rupee’s pain is also being magnified by a steady exodus of foreign portfolio investors. Foreign funds pulled out $19 billion in March and April alone taking cumulative withdrawals in 2026 to around $20.6 billion. That figure already surpasses total outflows for the entire year of 2025.

Meanwhile, India’s foreign exchange reserves which once peaked at $728.5 billion have fallen sharply as the RBI spent heavily defending the rupee in spot and forward markets. Despite that, the central bank maintains its reserves are comfortable enough to cover 11 months of imports.

The RBI has already taken several steps to rein in the pressure capping banks’ net open onshore positions at $100 million, banning banks from offering non-deliverable derivatives to residents, and nudging oil companies to reduce spot dollar purchases. Yet the pressure keeps building and the market is watching closely for the next move.