MUMBAI: The Indian rupee fell to a record low on Wednesday as stalled U.S.-Iran peace talks kept oil prices elevated, driving global bond yields higher and hurting equities amid fears of further central bank rate hikes.
The Indian rupee slid to 96.96 per dollar, breaching its previous record low of 96.6150 hit in the prior session, and ended the day at 96.82. The currency has fallen over 6% since the Iran war began in late February.
Global bond markets extended their selloff as investors increased bets that the Federal Reserve may need to raise interest rates further in 2026.
Oil prices eased but stayed near $110 a barrel after U.S. President Donald Trump said he may still strike Iran, a day after delaying an imminent attack to allow more talks with Tehran.
Higher energy prices and weak capital flows, compounded by rising bond yields, have raised fears of a steep balance of payments deficit for India this fiscal year.
“No convincing resolution to the conflict is in sight yet. This exogenous energy shock has upset the macro-apple cart and kept the rupee under pressure,” analysts at DBS said in a note.
They have revised their forecast range for the rupee to a weaker 95-100 band for the remainder of 2026, compared with 90-95 earlier.
On the day, dollar sales by state-run banks – most likely on behalf of the Reserve Bank of India – helped limit the rupee’s fall, traders said.
“There is constant (dollar) buying from clients while meaningful dollar supply is only coming from the RBI, keeping INR dependent on interventions,” a trader at private bank said.
Signs of strain on account of the Iran war have emerged elsewhere in the region as well. The central bank of Indonesia hiked rates by a larger-than-expected 50 bps to support the rupiah which, like the rupee, has hit a series of record lows in recent days.
