The Indian rupee fell to a historic low against the US dollar on Tuesday as rising oil prices, foreign investor withdrawals and weak market sentiment intensified pressure on India’s economy. The rupee opened at 95.50 per dollar before slipping further to 95.6250, surpassing the previous record low reached last week and extending losses since the Iran conflict began to more than five percent.
The sharp decline followed a massive 46 percent increase in Brent crude prices triggered by the ongoing Iran conflict, which heavily impacted currencies of oil-importing nations. Alongside the Indian rupee, the Philippine peso and Indonesian rupiah also faced severe pressure. Analysts said India’s heavy dependence on imported oil made the rupee particularly vulnerable to prolonged energy price shocks and growing concerns over widening external deficits.
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Meanwhile, the Reserve Bank of India reportedly intervened in currency markets to slow the rupee’s rapid fall. However, analysts warned that sustained high oil prices could continue weakening the currency in coming months. Since the start of the year, the rupee has already lost 6.5 percent of its value, making it the worst-performing currency among major Asian economies during the current period.
At the same time, foreign investors continued pulling money out of Indian financial markets amid fears of economic instability and prolonged geopolitical uncertainty. More than $20 billion has reportedly exited Indian equities since the conflict began, while overseas investors sold nearly $900 million in a single trading session on Monday. Economists believe weaker capital inflows combined with higher import costs could significantly widen India’s current account deficit.
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Furthermore, concerns are growing that India may face a third consecutive balance of payments deficit during the current fiscal year. Financial institutions have already lowered growth forecasts, increased inflation estimates and revised rupee projections downward. ANZ Bank recently cut its December rupee target to 97.5, while analysts at Fitch Ratings warned the currency could slide toward 100 if the Iran conflict intensifies further.
In response to mounting economic pressure, Narendra Modi urged citizens to reduce fuel consumption, unnecessary travel and imports to conserve foreign exchange reserves. Economists said policymakers may soon consider stricter measures, including limiting non-essential imports, tightening outward remittances, encouraging foreign currency deposits and increasing domestic fuel prices. Analysts believe these steps could help stabilize reserves and reduce pressure on the rupee during ongoing global uncertainty.