The Indian rupee fell to a record low on Tuesday as a fragile ceasefire in the Middle East faced renewed tension following attacks by the U.S. and Iran, which intensified the struggle for control over the Strait of Hormuz, a crucial route for global energy supplies. The currency declined to 95.4325 per dollar, marking a decrease of 0.4% for the day and surpassing its previous all-time low of 95.33 set last Thursday. It managed to limit losses, closing at 95.28.
Traders observed state-run banks offering dollars close to the rupee’s record low, which they believed was likely conducted on behalf of the Reserve Bank of India (RBI) to prevent the currency from sliding past the significant psychological mark of 95.50.
Other oil-sensitive Asian currencies, including the Indonesian rupiah and the Philippine peso, also experienced downward pressure on Tuesday.
The price of Brent crude oil surged from approximately $70 to nearly $115 per barrel following the outbreak of conflict between the U.S. and Iran in late February, which has substantially deteriorated the rupee’s outlook. The increase in energy prices has raised concerns regarding India’s external financial balances and inflation, leading economists to adjust projections for the current account deficit, reduce growth forecasts, raise inflation estimates, and project a significantly weaker rupee.
Analysts at MUFG predict that the currency will likely trade within the 95-96 range under a gradual de-escalation scenario in the conflict. However, they caution that it could decline to 97-98, or even further, in the event of prolonged conflict. On Tuesday, India’s benchmark Nifty 50 index fell by 0.3%, while the yield on the 10-year benchmark bond slightly increased to 7.02%.
In response to the situation, the Reserve Bank of India is reportedly exploring methods to increase dollar inflows to strengthen its foreign exchange reserves and mitigate pressure on the rupee. This consideration follows the central bank’s crackdown on arbitrage trades that contributed to currency volatility. Heavily involved in both the spot and forward foreign exchange markets, the RBI’s interventions have led to declining foreign exchange reserves, along with a surge in short dollar forward commitments reaching record levels above $100 billion.
Market participants anticipate continued intervention from the central bank to manage excessive volatility.
Additionally, other central banks have begun intervening in foreign exchange markets. The Bank of Japan is believed to have stepped in to support the yen, while Indonesia’s central bank announced it would take consistent measures to protect the rupiah following its own record low. Governments across Asia, the primary region for oil imports, are also looking for alternatives and strategies to shield their economies from the adverse effects of the energy crisis instigated by the Iranian conflict.
Published on May 5, 2026.
