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What is the story about?
The Indian rupee extended losses sharply on Monday (May 11), sliding 139 paise to 94.90 against the US dollar in early trade, as a spike in crude oil prices and renewed geopolitical tensions in the West East triggered broad risk aversion across markets.
At the interbank forex market, the currency opened at 94.97/$, before briefly edging to 94.90/$, compared with Friday’s (May 8's) close of 93.51/$. On May 8, the rupee had ended at 94.48/$ after a volatile session, highlighting sustained pressure on the domestic unit.
The downturn intensified after US President Donald Trump rejected Iran’s response to a US peace proposal, calling it “totally unacceptable”. The statement dampened hopes of de-escalation and reignited concerns over prolonged instability in energy markets.
Iranian media reports said Tehran is pushing for an end to hostilities, lifting of sanctions, reparations, and recognition of its control over the Strait of Hormuz — a key global oil transit route. Traders said uncertainty around maritime flows kept energy markets volatile.
Brent crude later surged over 4% to $105.5 per barrel, while the dollar index rose to 98.20, adding pressure on emerging market currencies.
Forex traders said a stronger US dollar and sustained foreign portfolio investor (FPI) selling added to the strain. Foreign institutional investors offloaded equities worth ₹4,110.60 crore on Friday (May 8).
“Following the rejection of Iran’s proposal, oil moved higher, the dollar strengthened and risk assets turned weaker,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
He noted that RBI presence near the 94.70/$ level on Friday helped cushion the currency and limit deeper losses at the close.
On the macro front, India’s 10-year bond yield climbed to 7% from 6.98%, reflecting concerns over inflation and fiscal strain from elevated energy prices.
Prime Minister Narendra Modi on Sunday (May 10) urged fuel conservation and encouraged work-from-home practices to curb energy use and foreign exchange outgo amid high oil prices.
India’s forex reserves dropped by $7.794 billion to $690.693 billion in the week ended May 1, after a previous weekly decline of $4.82 billion, according to RBI data.
Outlook: Pressure persists, RBI seen limiting sharp swings
A recent Reuters poll of currency analysts projected the rupee to trade around current levels near 95/$ over the next year, even as the currency has weakened nearly 5% so far in 2026.
Analysts said aggressive RBI intervention has so far slowed the pace of depreciation, although it has reportedly pushed the central bank’s short dollar forward position beyond $100 billion.
Anil Bhansali, Head of Treasury at Finrex Treasury Advisors, said authorities would likely attempt to delay any move toward the 100/$ level because of its political and economic sensitivity.
However, some economists warned that sustained foreign fund outflows and elevated oil prices could continue to pressure the currency. Apoorva Javadekar, Chief Economist at Muthoot Fincorp, remains among the more bearish voices, projecting the rupee could weaken to 99.50/$ over the next 12 months.
-With agencies inputs
At the interbank forex market, the currency opened at 94.97/$, before briefly edging to 94.90/$, compared with Friday’s (May 8's) close of 93.51/$. On May 8, the rupee had ended at 94.48/$ after a volatile session, highlighting sustained pressure on the domestic unit.
The downturn intensified after US President Donald Trump rejected Iran’s response to a US peace proposal, calling it “totally unacceptable”. The statement dampened hopes of de-escalation and reignited concerns over prolonged instability in energy markets.
Iranian media reports said Tehran is pushing for an end to hostilities, lifting of sanctions, reparations, and recognition of its control over the Strait of Hormuz — a key global oil transit route. Traders said uncertainty around maritime flows kept energy markets volatile.
Brent crude later surged over 4% to $105.5 per barrel, while the dollar index rose to 98.20, adding pressure on emerging market currencies.
Forex traders said a stronger US dollar and sustained foreign portfolio investor (FPI) selling added to the strain. Foreign institutional investors offloaded equities worth ₹4,110.60 crore on Friday (May 8).
“Following the rejection of Iran’s proposal, oil moved higher, the dollar strengthened and risk assets turned weaker,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
He noted that RBI presence near the 94.70/$ level on Friday helped cushion the currency and limit deeper losses at the close.
On the macro front, India’s 10-year bond yield climbed to 7% from 6.98%, reflecting concerns over inflation and fiscal strain from elevated energy prices.
Prime Minister Narendra Modi on Sunday (May 10) urged fuel conservation and encouraged work-from-home practices to curb energy use and foreign exchange outgo amid high oil prices.
India’s forex reserves dropped by $7.794 billion to $690.693 billion in the week ended May 1, after a previous weekly decline of $4.82 billion, according to RBI data.
Outlook: Pressure persists, RBI seen limiting sharp swings
A recent Reuters poll of currency analysts projected the rupee to trade around current levels near 95/$ over the next year, even as the currency has weakened nearly 5% so far in 2026.
Analysts said aggressive RBI intervention has so far slowed the pace of depreciation, although it has reportedly pushed the central bank’s short dollar forward position beyond $100 billion.
Anil Bhansali, Head of Treasury at Finrex Treasury Advisors, said authorities would likely attempt to delay any move toward the 100/$ level because of its political and economic sensitivity.
However, some economists warned that sustained foreign fund outflows and elevated oil prices could continue to pressure the currency. Apoorva Javadekar, Chief Economist at Muthoot Fincorp, remains among the more bearish voices, projecting the rupee could weaken to 99.50/$ over the next 12 months.
-With agencies inputs
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