Rupee breaches 96/$ mark for the first time

The rupee has closed at all-time closing lows in each of the five trading sessions this week

The rupee on Friday breached the 96 to the dollar mark for the first time, as US President Donald Trump’s latest social media post warning that the “war (West Asia) is to be continued” pushed crude oil prices up.

Further, continuous sales by FPIs in the domestic equity markets pressured the Indian currency.

However, the rupee closed a shade below the 96 mark, as RBI intervened in the market via dollar sales by State-owned banks.

The Indian unit hit record intraday as well, closing lows of 96.14 and 95.9650 (down about 20 paise against the previous close of 95.7625), respectively.

The rupee has closed at all-time closing lows in each of the five trading sessions this week. It has ended the week about 1.57 per cent weaker (or down about 149 paise) against last Friday’s close of 94.48.

Anatomy of the fall

Rising crude oil price (Brent is trading at around $108 per barrel level) can have a debilitating impact on the rupee. India imports almost 90 per cent of its crude oil requirement. Spike in crude oil prices leads to more dollar outflows, thereby depreciating the rupee.

With US assets turning safe haven amid the West Asia conflict, FPIs are selling their equity holdings in emerging markets, including India. This is increasing the demand for dollars for repatriation purposes, putting pressure on the local currencies.

Abhishek Goenka, Founder, IFA Global said: “It’s a one-sided market. Exporters are reluctant to hedge. Market participants are broadly divided into 2 camps as of now – those who are long dollar/rupee and those expecting some measures from RBI or a sudden reversal and are on the sidelines. It’s very difficult to time that reversal. There are very few who are thinking shorting dollar/rupee at this point.

“This sentiment is reflected in price action. There is incessant pressure on the rupee. Absolutely no respite. The only thing holding it is RBI supply. If they step off, dollar/rupee will fly.”

Ambit Capital, in a note, said the current rupee depreciation (12 per cent year-on-year) erodes the yield differential (255 basis points difference in 10 year G-Sec yield vs US 10-year Treasury), making fixed income arbitrage opportunities between India and developed markets like the US less attractive after accounting for currency risk.

Published on May 15, 2026