Rupee posts biggest annual decline in 14 years, tumbles 9.88% in FY26

Mangalore Today News Network

Mumbai, Mar 31, 2026: The Indian rupee weakened by 9.88 per cent against the US dollar in FY26, registering its steepest annual fall in 14 years.

The last comparable decline was in FY12, when the currency had dropped 12.4 per cent amid a widening current account deficit of 4.2 per cent.

In FY26, the rupee’s sharp depreciation was driven by sustained foreign fund outflows, high crude oil prices, and a strong US dollar. Global market volatility and tighter liquidity conditions further added pressure on the currency.

Other Asian currencies also saw notable declines against the dollar, with the Japanese yen falling 6 per cent, the Philippine peso 5.74 per cent, and the South Korean won 2.88 per cent since April 1, according to market participants.

Sunal Sodhani, head of treasury (India) at Shinhan Bank, described FY26 as a “perfect storm” of external shocks, capital outflows, and structural vulnerabilities, noting that the current factors differ significantly from those seen in FY12.

“Unlike FY12, which was largely driven by domestic issues and the taper tantrum, FY26 depreciation is externally driven—by oil prices, geopolitical tensions, capital outflows, and amplified by India’s import dependence,” he said.

The rupee’s initial slide in FY26 followed the imposition of US tariffs on India, which boosted demand for the dollar. The situation worsened with the West Asia conflict pushing crude oil prices higher, intensifying pressure on the currency.

The tariffs also impacted domestic equity and debt markets, triggering sustained foreign capital outflows. The rupee subsequently hit successive record lows, touching an all-time low of 95 against the dollar despite interventions by the Reserve Bank of India (RBI).

To stabilise the currency, the RBI sold $55.073 billion in the spot market till January in FY26 and introduced measures to curb excessive speculation.

In a recent directive, the RBI capped banks’ net open positions in the onshore currency market at $100 million at the end of each trading day, effective April 10. The move is aimed at limiting large, one-sided bets against the rupee.

While the measure briefly supported the currency on Monday, gains were largely reversed due to strong dollar demand from oil companies.

During intra-day trade, the rupee breached the psychological 95 mark but recovered to close 7 paise higher at 94.78 against the dollar.

Forex traders noted high volatility in the USD/INR pair, which swung by 165 paise during the day as the West Asia crisis entered its 31st day, keeping energy markets on edge.

“Rupee rose but fell again due to heavy corporate dollar buying, position squaring in the NDF market, and purchases by nationalised banks and oil companies,” said Anil Kumar Bhansali of Finrex Treasury Advisors LLP.

Experts expect the rupee to trade in a broad range of 92–97 against the US dollar in the near term.

“The outlook hinges on oil prices, capital flows, and global interest rates. The new normal is higher volatility with gradual depreciation rather than stability within a narrow band,” Sodhani added.