The rupee remained under pressure last week, declining nearly 1 per cent to close at 96.53 against the dollar on Tuesday. During the session, the local currency slipped to a fresh record low of 96.61, extending its weak run in 2026 to about 7.5 per cent.
Persistent foreign outflows continue to weigh on the rupee. According to NSDL data, net FPI (Foreign Portfolio Investors) outflows stood at about $842 million over the past week, taking the total outflows to $1.99 billion in May and $22.2 billion so far in 2026.
India’s external position has also turned less supportive. The country’s trade deficit widened to $28.38 billion in April, compared with $20.67 billion in March, indicating elevated import demand, particularly amid high crude oil prices.
Global factors have further strengthened the dollar. The US 10-year Treasury yield climbed to a one-year high of 4.63 per cent early this week, reinforcing expectations that the Federal Reserve may not have room to cut interest rates anytime soon. This has supported the dollar and added pressure on emerging market currencies, including the rupee.
Geopolitical tensions involving Iran continue to keep markets on edge. Although US President Donald Trump said a planned strike on Iran has been temporarily deferred to allow diplomacy, uncertainty persists as negotiations remain fragile.
Meanwhile, Brent crude futures gained nearly 8 per cent last week and continue to trade around $110/barrel. While India’s crude basket has eased from April’s $114.48/barrel to $107.3/barrel in May, prolonged elevated prices could continue to strain the rupee by increasing import costs and widening the trade imbalance.
Chart
After hitting a fresh all-time low of 96.61 on Tuesday, the rupee recovered marginally to close at 96.53. However, the price action indicates that the downtrend remains intact, with no meaningful signs of a relief rally yet.
As things stand, the likelihood of further weakness remains high. The nearest support levels are seen at 96.80 and 97.
On the other hand, if the local currency recovers from the current level, it could face resistance at 96.25 and then at 96. Given the prevailing sentiment and broader trend, a sustained move above 96 appears unlikely for now.
Renewed strength in the dollar over the past week has added further pressure on the rupee. Notably, even when the greenback was largely flat earlier, the Indian currency continued to weaken, highlighting the underlying fragility in the rupee.
The dollar index, currently trading around 99.20, appears to have regained momentum and could rise further towards 100 and 100.40 in the near term. Such a move may drag the rupee quickly towards the 97 mark.
Only a decline in the dollar index below 97.50 could offer some breathing space for the rupee. However, at the moment, such a scenario appears less likely.
Outlook
Both fundamentals and technical indicators continue to point towards weakness in the rupee. Given the sustained foreign outflows, elevated crude oil prices and strengthening dollar, the ongoing downtrend is likely to drag the local currency towards 97 in the near term. Any recovery, if at all, is likely to remain limited unless the dollar index softens meaningfully.
Published on May 19, 2026