Rupee has fallen 7% so far in CY26, the highest in four years

The rupee depreciated 7.04%, trading at ₹96.3 a dollar levels as the war between Iran and the U.S. accelerated global crude oil prices, in calendar year 2026.

The domestic currency has been depreciating even before the war on account of constant equity sales by foreign institutional investors. The pace of depreciation was however slow, with the rupee becoming cheaper with respect to the U.S. dollar by just a little over ₹1 between January 1 and February 28. The depreciation quickened to 5.01% between March 2 and May 21, during which the war led to a spike in crude oil prices.

To put this data in perspective, the full year deprecation rates were 4.9% and 2.9% in 2025 and 2024 respectively.

The 7% depreciation year to date, is the steepest since 2022, when rupee value had dropped by 11% after appreciating by a marginal 0.09% in 2021.

The rupee depreciation was not as volatile as now, between 2023-2024 when Shaktikanta Das helmed the Reserve Bank of India. While the currency was relatively more stable, economists say that defending the rupee at ₹83 a dollar was one of the reasons behind the sudden depreciation before the war but after the FII outflow.

Experts say that the rupee is expected to depreciate further and touch ₹100 a dollar in the current scenario.

“We have lifted our USD/INR forecasts into a 95-100 range for the rest of 2026. Our previous expectation for a 90-95 range assumed a short Iran conflict ending the Strait of Hormuz chokepoint and lowering oil prices, paving the way for two Fed rate cuts in 2H 2026,” according to a report by UBS. 

A rising USD/INR rate is expected to increase the current account deficit as the imports get dearer over and above the already skyrocketing imported crude oil prices.

“India’s current account deficit faces more severe pressure than those of Indonesia and the Philippines. U.S. President Donald Trump’s global tariffs damage Indian exports, while a weaker rupee amplifies a higher war-related oil import bill and discourages investor equity inflows,” UBS said.