Rupee Nears 97 Against Dollar: What’s Driving the Fall and How India Is Fighting Back

The Indian rupee reached a historic low of 96.90 per US dollar on May 15, 2026, marking an 8% decline since January and making it the weakest major Asian currency this year. The depreciation stems primarily from surging crude oil prices, with Brent crude nearing $110 per barrel amid Iran-related shipping disruptions in the Strait of Hormuz. India, which imports 90% of its crude oil, faces increased dollar demand to pay for imports, exacerbating the rupee’s decline. Capital flight has worsened the crisis, with foreign portfolio investors selling over $22 billion in Indian assets since late February. Exporters delaying dollar conversions while importers rush to hedge further strain forex flows, according to FX strategist Dhiraj Nim of ANZ. The RBI has responded by selling $800 million to $2 billion in dollars daily through state-run banks, with estimates suggesting $5 billion in interventions in early May alone. While these efforts have slowed the decline, the rupee has still fallen for 12 consecutive trading sessions. The Indian government has taken additional measures to protect forex reserves, including doubling import taxes on gold and silver to 15% on May 13. This move targets gold imports, a major drain on reserves, with stricter rules now applying to bullion shipments over 100 kg. Analysts warn that while intervention and policy changes mitigate the crisis, a disorderly collapse remains a risk if pressures persist. Economic uncertainty has also shifted global expectations, with markets now pricing in potential US Federal Reserve rate hikes due to inflation fears tied to higher oil prices. This has made US assets more attractive, accelerating capital outflows from emerging markets like India. The RBI’s interventions and government policies aim to stabilize the rupee, but analysts suggest the long-term solution requires addressing structural imbalances in trade and capital flows.