Mumbai: The Indian rupee is sliding from one record low to another, but economists say assigning a precise trajectory to the currency has become increasingly difficult amid the US-Iran war and the resultant crude oil shock.
On Wednesday, the Indian currency hit another all-time low of 95.80 per US dollar before closing at 95.66 against its previous close of 95.68, according to data provided by Bloomberg. While the Reserve Bank of India’s (RBI) intervention trimmed some losses on Tuesday, traders believe the central bank is not intervening as much in the currency market.
A Mint poll of 10 banks, brokerages and economists showed the Indian rupee is expected to weaken further through the year, with most forecasts for end-2026 clustering in the 96-98 per dollar range.
Amid heightened volatility, only five respondents were willing to offer a near-term forecast, projecting the currency in a broad range of 94.5-96.5 against the US dollar over the next two weeks to one month.
Most economists expect the rupee to depreciate 3-4% in the current financial year if crude prices remain elevated.
“Currently, it seems that the rupee is trying to head towards 96.5 levels. I will not even rule out 97-odd levels,” said Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services. For the financial year-end, “I would take an average of around 94.50-95.00 because even if the rupee goes to 97 or 98 levels through the year, it will not sustain.” His assumptions are based on the Indian crude basket averaging $80-90 per barrel in FY27.
Crude spike has heightened concerns around India’s current account deficit, imported inflation and foreign exchange reserves. Brent crude June futures have surged nearly 3.3% to $121.90 a barrel after briefly touching $126, compared with about $70 before the West Asia conflict began on 28 February, amid fears of .
“Rupee’s behaviour is all news-driven now,” Bhansali said. “Had it not been for the RBI intervention so far, the rupee would have been at 98 or 99 by now,” he said, adding that crude price rise has created genuine demand for the dollar.
The RBI’s foreign exchange reserves have fallen to $690 billion as of 1 May, as against $728 billion as of 27 February, before the US-Iran war started, according to RBI data.
“The RBI is also more tolerant towards a weaker rupee, especially given elevated oil prices and also as the capital inflows have been very weak,” said Anubhuti Sahay, head of economic research at Bank, which sees the rupee at 96 by December 2026 but flagged risks of further weakness.
expects the rupee to remain in the 94.50-95.50 range in the near term, before weakening to 97-98 by December-end.
“A depreciation of 3-4% this year is likely,” Madan Sabnavis, chief economist at Bank of Baroda said, assuming crude averages $100-120 per barrel.
While HDFC Bank pegged the near-term range at 94.50-96.50 and expects the rupee at 95-97 over the longer term, Crisil Ratings expects the rupee to eventually recover some lost ground once volatility eases.
“Whenever there is sharp weakness, it is also followed by appreciation,” D.K. Joshi, chief economist at Crisil Ratings said. He sees the rupee strengthening to 93.5 by March 2027 if the West Asia war eases and capital inflows return.
Several economists warned that oil remains the single biggest variable driving currency forecasts. In the April monetary policy announcement, the central bank had projected crude oil at $85 for FY27.
The RBI’s recent tightening of net open position norms helped the rupee appreciate about 2%, but sentiment towards the unit remains negative.
“…burning FX reserves will not solve anything. What we need is capital flows, so the government needs to come up with some scheme that they came up with during the taper tantrum such as some bond flows or something that will change the narrative,” Bhansali said.
Foreign portfolio investors pulled out nearly ₹1.8 trillion from Indian equities in FY26, the highest annual outflow in 34 years. So far in FY27, FPIs have sold Indian equities worth ₹84,282 crore, according to National Securities Depository Ltd data.
“The foreign sentiment for India has been negated for some time,” a senior treasury official at private sector bank said on a condition of anonymity. “There is no reason why people should invest in India because neither the equity markets nor your FX is delivering. Why will anyone look at this? It’s not that people are negative about India but India doesn’t come into their realms of thoughts at all.”
“Unless something changes, there is no reason for capital to come in. See, current account deficit, all that will get managed but it’s the capital account where the problem is,” the treasury official added.