Indian Rupee Hits Record Low Amid Global Tensions and Oil Price Spikes

The Indian rupee depreciated to a record low of Rs 93.49 to the dollar on March 20, surpassing its previous record low of Rs 92.63 per dollar. The currency has lost nearly 80 paise during the day, making it one of the largest intra-day losses in recent months.

Causes of Rupee's Underperformance

The spike in Brent crude oil prices has emerged as one of the sole reasons for the rupee's constant underperformance. Since the start of the US-Israel-Iran war in late February, the currency has fallen nearly 2 percent. Brent crude prices have jumped more than 40 percent, while tensions in the region show no signs of stopping. As a result, the Indian crude oil basket has surged to $146 per barrel now, compared to $69 per barrel in February 2026.

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RBI Intervention

The Reserve Bank of India (RBI) has been intervening in both the spot and offshore non-deliverable forwards (NDF) markets to prevent a sharp fall of the rupee. According to a forex trader, the RBI may have sold in the quantum of about $3 billion - $4 billion during the day, mostly in the NDF market.

Impact on Forex Reserves

India's forex reserves fell to $716 billion in the week ending March 6, from $728.49 billion in the previous week. The net short dollar position of the RBI has swelled to nearly $100 billion from $67.8 billion in January, indicating that the RBI is likely selling dollars in the forwards market to contain excessive volatility.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Inflation and Macroeconomic Fundamentals

Inflation for February rose to 3.21 percent in February 2026 from 2.74 percent in January, well within the RBI's mandate of between 2 percent and 6 percent. Crisil Intelligence expects inflation to rise to 4.3 percent in fiscal year 2027.

Resistance Level

A key resistance level of Rs 93.50 - Rs 93.60 will be watched by traders in the coming days, as long as the RBI swoops in to curb excess choppiness in the currency. The RBI may not be aggressive in its approach for now, but may allow the gradual depreciation of the rupee.