Fresh low! Rupee extends slide, hits 94.56 per US dollar for first time

The Indian rupee dropped to a fresh all-time low past the 94-per-dollar threshold on Friday, March 27, driven by concerns that the energy supply crisis triggered by the Middle East conflict will persist, intensifying the strain on energy-importing nations, including India.

The rupee decreased to 94.56 against the dollar, down 0.5% for the day surpassing its prior record low of 93.98 reached earlier this week. Since the onset of the conflict late last month, the domestic unit has fallen approximately 3.5%.

The rupee fell by 20 paise, ending at an all-time low of 93.96 against the US dollar on Wednesday. On Thursday, the stock, forex, commodity, and bullion markets were closed in observance of Ram Navami.

The potential for a prolonged energy crisis has kept oil prices above $100 per barrel, putting pressure on global stock markets and causing bond yields to rise.

Additionally, US President Donald Trump contributed to the confusion with mixed messages. On one side, he indicated that he would suspend attacks on Iran’s energy sectors for ten days at Tehran’s request, implying that negotiations were “progressing well.”

Conversely, he also cautioned of heightened pressure if Iran failed to reach an agreement. In the meantime, Iran dismissed a US proposal, labelling it as “one-sided and unfair.”

This ongoing back-and-forth has led to caution in the markets. Consequently, trust in a swift resolution has diminished, and this uncertainty is once again impacting emerging market currencies, including the rupee.

Another element impacting the rupee is the dollar's stability. As uncertainties about a short-term solution increased, the dollar index rose to approximately 99.9, remaining slightly below the critical 100 threshold. Consequently, when the dollar maintains its strength, currencies such as the rupee tend to experience pressure.

One favourable note amid all the concerns, as highlighted by experts, is that Iran has stated it will allow vessels from five allied nations — including India — to pass through the Strait of Hormuz. Along with India, other countries such as Russia, China, Pakistan, and Iraq have been provided safe passage.

This alleviates the immediate threat of a supply disruption for India, which relies heavily on oil imports. While it doesn't address the broader issue, it does provide some short-term comfort to the rupee.

Rupee outlook

According to Amit Pabari, MD, Research Team, CR Forex Advisors, right now, the market is caught between hope and hesitation. While the global impact of the conflict suggests there is increasing pressure for de-escalation, the path to that outcome remains unclear.

If tensions ease meaningfully, the rupee could recover around Re 1 to ₹1.5, according to experts, but until there is clarity, volatility is likely to persist.

“Technically, the 94.00–94.20 zone is expected to act as a strong psychological resistance, where central bank presence is likely. On the downside, 92.80–93.00 is emerging as a key support zone,” said Pabari.

Commenting on the rupee outlook, Harshal Dasani, Business Head, INVasset PMS, said that if 95 is breached decisively, the focus will quickly shift to whether the RBI treats it as a volatility event or as a level that needs active defence.

According to Dasani, the bigger risk is not the number itself, but the message behind it: that oil, geopolitics and dollar strength are starting to reinforce each other. In that environment, sectors dependent on imported inputs, fuel, or external borrowing would remain under pressure, while exporters and select defensives could relatively outperform.

“The currency market would then become a key transmission channel for inflation and earnings risk, making rupee stability just as important as equity market stability,” added Dasani.

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