The Indian rupee closed at a historic low of 95.09 against the US dollar on Monday, declining 18 paise from its previous close. The depreciation was driven by robust dollar demand from corporates and a surge in global crude oil prices, which dampened market sentiment.
Market Pressures and Global Factors
Crude oil prices climbed to $110 per barrel, exerting additional strain on oil-importing economies like India. Other oil-sensitive Asian currencies also weakened against the dollar. According to a Reuters report, authorities are considering measures to attract dollar inflows and bolster foreign exchange reserves. Proposed steps include incentivizing foreign currency deposits and easing tax conditions for overseas bond investors.
During the trading session, the rupee opened stronger in the interbank market but gradually weakened due to importer hedging, maturing contracts, modest portfolio inflows, and domestic political developments. Global factors continued to dominate currency markets as the US dollar strengthened amid risk aversion linked to geopolitical tensions. The dollar index edged higher as ongoing conflict in West Asia and uncertainty around key shipping routes kept financial markets cautious. Reports of military activity in strategic waterways added to volatility.
Capital Outflows and Global Currency Movements
Persistent foreign capital outflows have also weighed on the rupee, with net selling of approximately $20 billion in both equities and bonds during 2026. In global currency markets, the euro and pound weakened slightly against the dollar, while the yen showed volatility amid expectations of possible intervention. Policy tightening expectations in Australia weighed modestly on its currency.
Domestic equities, however, ended higher, with benchmark indices posting moderate gains on improved sentiment over the BJP's victory in state elections. In forex markets, geopolitical factors had a more dominant impact than political developments.
