Rupee Under Pressure: Is 95/$ The New Normal? Experts Weigh In

The Indian rupee has come under sharp pressure, breaching the 94.00 mark and slipping to a record low of 94.84 against the US dollar on Friday. The primary driver behind this move is the surge in crude oil prices, which have climbed back above $100 per barrel, experts say.

At the core of this pressure is the ongoing Iran-related conflict and, more importantly, the uncertainty around its resolution.

“Mixed signals from US President Donald Trump have added to market unease. While he indicated a temporary pause in attacks on Iran's energy infrastructure and suggested that negotiations were progressing well, he simultaneously warned of increased pressure if Iran does not comply with US demands,” said Amit Pabari, MD at CR Forex.

Iran, on its part, Pabari says has rejected the proposal as one-sided. Furthermore, persistent foreign institutional investor (FII) outflows—amounting to nearly $13 billion since the onset of the conflict, have further intensified pressure on the currency.

According to Kunal Sodhani, head of treasury, Shinhan Bank India, the Reserve Bank of India's (RBI) growing use of the forward market to manage rupee volatility is increasingly shaping the currency's medium-term trajectory.

“By building a large net short dollar position—estimated by market participants to be moving toward the $100 billion mark—the RBI has effectively deferred, rather than eliminated, depreciation pressures,” Sodhani says.

While such interventions help stabilise the rupee in the near term by easing immediate dollar demand and preserving headline foreign exchange reserves, they create a future overhang as these contracts mature and require delivery or rollover, he said. This has already manifested in elevated forward premiums and tighter liquidity conditions in swap markets, signalling underlying dollar demand.

Rupee Outlook

Sodhani says the Indian rupee may continue to weaken in a calibrated manner, with levels around over 95 per US dollar appearing increasingly likely, especially if external pressures such as elevated crude prices, sustained dollar strength, and portfolio outflows persist.

Pabari, meanwhile, says from a technical perspective, the breach of 94.00 is significant and reinforces the base case that the rupee is likely to remain under pressure, especially if the conflict escalates further. The 95.00 level now emerges as a key psychological resistance, while immediate support is placed in the 93.80–94.00 zone. 

However, there is also a possibility of a reversal of around Rs 1-1.5 if geopolitical tensions de-escalate or crude oil prices ease.

ALSO READ: India's Forex Reserves Drop $11.4 Billion To $698 Billion: RBI Data

Bond Yields

India's 10-year G-Sec yields on Friday also moved higher quite significantly. The 10-year G-sec has closed around 6.94%, up from 6.88% on Wednesday and nearly 20 basis points (bps) higher since March 20. While this is not an all-time high, it is among the highest levels recorded in several months and the speed of this rise is gaining market attention.

“We are also seeing a clear shift in SDLs (state development loan) auction today, with several states borrowing at above 8% levels, confirming that the entire yield curve has moved higher. There have been partial acceptances and selective demand, showing that investors are now demanding higher returns before lending,” said Venkatakrishnan Srinivasan, founder at Rockfort Fincap LLP.

“The key point is that this is largely driven by imported risks rather than domestic factors. The ongoing US–Iran–Israel conflict has pushed oil prices above $100, increasing inflation concerns and putting pressure on the rupee, while global yields remain elevated. The recent excise duty cut on fuel may give temporary relief to consumers, but from a bond market perspective, it raises concerns around fiscal deficit and higher borrowing. Also, markets are aware that fuel price adjustments can be delayed around elections, so there is an expectation that price hikes may come through later, which keeps inflation concerns alive,” he said.

Going ahead, 7% yield on the 10-year government bond is now the key level to watch, experts say and if that level breaches, yields can move toward 7.20–7.25%, while around 6.85% may act as near-term support.

Lastly, India's forex reserves fell by $11.41 billion week-on-week as on March 20, data by the RBI showed. Gold reserves fell by $13.49 billion, while foreign currency assets rose by $2.12 billion.

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