India’s Rupee Drops to Record Low as Crude Surge Deepens Worries

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(Bloomberg) — India’s rupee slid to a record low as crude prices continued their relentless surge, deepening worries about the nation’s external deficit.

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The currency fell as much as 0.4% to 95.2663 per dollar on Thursday, breaching its previous low of 95.1250 hit in late March. The rupee has now erased all gains fueled by the central bank’s crackdown on speculative bets. The 10-year bond yield surged seven basis points to 7.06%.

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“The currency’s poor fundamentals have now come back into play, with the rise in oil prices and foreign investors continuing to shun India’s equity market,” said David Forrester, senior strategist for foreign-exchange at Credit Agricole CIB in Singapore.

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The Reserve Bank of India took bold steps recently to stamp out speculation, yet the gains that followed have proved short-lived. With the US-Iran war — now entering a third month — keeping oil prices elevated, and capital inflows muted, economists are widening their estimates of the nation’s balance of payment deficit.

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Kotak Mahindra Bank pegs the gap at $50 billion this fiscal year, versus deficits of $39 billion and $5 billion in the previous two years. IDFC First Bank sees it widening to $40 billion—$50 billion from an estimated $35 billion in the prior period.

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“The fundamental balance of payments picture continues to look weak, so the pressure on the rupee may persist,” said Rahul Bajoria, head of India economics research at BofA Securities India. “The RBI’s steps do provide relief, but we do not know if their efficacy will remain the same over a longer period.”

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This would be a record third straight financial year that the balance of payments — the broadest gauge of money flowing in and out of the economy — remains in deficit.

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Brent rallied to a wartime high after Axios reported that US President Donald Trump is set to receive a briefing on new military options for action in Iran, signaling the potential for fresh escalation in the Middle East.

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The energy shock has coincided with global funds dumping local stocks, citing high valuations and limited artificial intelligence-linked opportunities. In the first four months of 2026, they pulled nearly $20 billion from equities, exceeding last year’s full-year record outflow. Net foreign direct investment was also negative for six straight months, before rebounding in February.

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Against that backdrop, the RBI has relied on dollar sales as its first line of defense. India’s forex reserves stand at $703 billion, though a negative $78 billion forward book — reflecting future dollar obligations — limits the central bank’s flexibility. On Thursday, the central bank sold dollars to support the rupee, traders said.