The rupee on Monday suffered its biggest single-day decline in nearly one-and-a-half months and closed at a record low as proposals floated by the US to end the West Asia war did not find favour with Iran, leading to spike in crude oil prices and exacerbating FPI-related dollar outflows from domestic equities.

Moreover, Prime Minister Narendra Modi’s weekend speech about the need to conserve foreign exchange through austerity measures such as reducing petrol and diesel consumption by reluing more public transport, reducing or postponing gold purchases for a year and avoiding unnecessary overseas travel.

The rupee closed at an all-time low of 95.31 per US dollar, down 85 paise, against last Friday’s close of 94.46.

Crude oil prices

Benchmark Brent crude oil spiked about 4 per cent to about $103 per barrel in the wake of US and Iran rejecting each others proposal to end the West Asia war.

FPIs sold equities worth about $844 million on Monday, triggering dollar demand for repatriation purposes.

Amit Pabari, MD, CR Forex Advisors, observed that today’s sharp depreciation in the Indian Rupee was largely driven by a combination of external shocks and domestic sentiment concerns.

“The primary trigger was the collapse of US-Iran peace talks, which pushed Brent crude prices sharply higher above $103/barrel. As India remains heavily dependent on oil imports, any spike in crude immediately worsens dollar demand and puts pressure on the Rupee,” he said.

Moreover, Prime Minister Modi’s appeal to reduce gold purchases and discretionary foreign travel to conserve foreign exchange reserves signaled growing concern around India’s external balances,

Pabari said markets interpreted this as an indication that the trade deficit and BoP pressures may intensify if oil prices remain elevated.

To support the Rupee, he suggested that the RBI and Government may consider a mix of liquidity measures and structural initiatives, including incentivising FCNR deposits and potentially launching an NRI bond scheme; and temporary tightening of outward remittance norms for non-essential spending under the Liberalised Remittance Scheme (LRS).

Encouraging PSUs and large corporates to raise foreign currency borrowings instead of buying dollars directly from the spot market can also improve domestic dollar liquidity conditions.

Pabari said a similar approach is already visible with State Bank of India, whose board is considering raising up to $2 billion through overseas bond issuances.

Dollar swap window

Further, RBI can also consider opening a special dollar swap window for oil marketing companies (OMCs), whose daily dollar demand of nearly $250–300 million often creates significant pressure in the spot market.

From a structural perspective, accelerating FDI approvals, easing investment compliance norms, and rationalising the tax framework for foreign investors will be critical in ensuring sustained long-term capital inflows, especially at a time when India is benefiting from inclusion in major global bond indices, Pabari said.

Dilip Parmar, Senior Research Analyst, HDFC Securities, said the rupee started the week on weak note, closing at a record low level as geopolitical volatility intensified.

“The primary driver of the slide was the breakdown in peace negotiations between the U.S. and Iran, which triggered a rally in crude oil prices and bolstered the safe-haven appeal of the greenback.

“Domestic sentiment was further weighed down by Prime Minister Modi’s “Nation First” austerity appeal, which urged citizens to reduce fuel consumption and defer non-essential foreign travel to preserve foreign exchange reserves,” Parmar said.

He assessed that from a technical standpoint, the USDINR pair has resistance at 95.45 and 95.80, while support shifted to 94.70.

Published on May 11, 2026