The rupee fell to a record low on Thursday, as investors fretted over the economic risks confronting India from a resurgence in crude oil prices to 2022 highs, threatening the inflation-economic growth balance for the net energy importer and sapping capital flows.
The currency fell to 95.3250, down 0.5% on the day, eclipsing its previous all-time low of 95.21 hit in late March.
Oil-sensitive Asian peers such as the Indonesian rupiah, Phillippine peso and Thai baht also weakened on Thursday, after Brent crude oil futures climbed to $126 per barrel, the highest in four years.
The rupee's fall has wiped out gains spurred by the central bank's use of rare currency-supportive regulatory measures late last month, prompting traders and analysts to speculate whether fresh measures could be on the cards.
"While the central bank's measures have helped break the vicious loop of speculative activity piling pressure on the currency, the current account stress is yet to be completely felt," said Dhiraj Nim, an economist and FX strategist at ANZ.
Fundamental strain
The rupee has declined nearly 6% so far in 2026, adding to a similar sized drop from last year, in a period where India's external sector has faced persistent headwinds ranging from trade frictions with the U.S. to weakness in capital flows and most recently, the most severe energy supply disruption in history.
HSBC estimates GDP growth would slow to 6.3% from an expected 7% this year if oil prices average $80 per barrel, and to 6% if prices remain closer to $100.
Persistent weakness in the currency may also drive a negative feedback loop on foreign capital flows by eroding overseas investors' returns while adding to inflationary pressures by lifting import prices, analysts say.
Reflecting that anxiety, foreign investors have offloaded over $20 billion of Indian stocks and bonds over March and April so far, nearly double the $11.8 billion of outflows from the same markets over all of 2025.
The rupee came under additional pressure on Thursday as a hawkish tilt in the U.S. Federal Reserve's policy decision added to the strain from the unabated rally in oil prices.
U.S. President Donald Trump held talks on how to mitigate the impact of a possible months-long U.S. blockade of Iran's ports as the conflict rattles global markets and sparks worries over a global stagflation shock, with energy supply disruptions threatening to concurrently slow growth and lift inflation.
